The growth of the smartphone category is causing intense competition among operating systems, handset makers and the chipmakers that supply them.
Paul Jacobs, chief executive of Qualcomm, the biggest wireless chipmaker, sees that competition intensifying over the next year in smartphones and other handsets, which will translate into lower prices.
“If I look at the chip business, I definitely see some of our competitors who are sort of down and are getting a little bit more desperate, and I think we’re going to see a pretty competitive market over the next year,” he told me, before Qualcomm’s fourth-quarter earnings call on Wednesday.
Qualcomm’s competitors include Texas Instruments, Samsung, Broadcom, Freescale and, shortly, Intel with its Atom processor.
Average selling prices (ASPs) for handsets using Qualcomm’s CDMA technology were $200 in its fiscal year ending in September. It expects ASPs to fall around 6 per cent in the current year to $189 as 3G operators expand in emerging markets and offer cheaper devices.
ASPs for the chipsets inside the handsets will also fall. They usually decline around 3 per cent each year, but Qualcomm expects the figure to be “substantially higher” in 2010.
It has been preparing for a possible price war by cutting its costs and investing in research that leads to integrated chipsets, where more technologies can be crammed on a single chip.
This appeals to customers, who pay more for the chips but need fewer of them, and Qualcomm, which can maintain its gross margins by being the single chip solution of choice.
If the chipmaker sees 2009 as the year of the smartphone, it views 2010 as the year when smartbooks – a category somewhere between smartphones and netbooks – will take off.
Qualcomm stands to benefit from wider adoption of its Snapdragon 1GHz microprocessor, which is already appearing in high-end smartphones like Sony Ericsson’s X10.
“We expect that the first smartbooks will be announced before the end of this year,” Steve Mollenkopf, head of Qualcomm CDMA Technologies, told the earnings call.
“2010 [is] expected to be the year that Snapdragon-powered smartbooks ramp [to] volume production.”
