Qualcomm Apple's two major wars have already begun, and they are eyeing the same future

The golden age of smartphones is over, and then what?

For Qualcomm's new CEO Cristiano Amon, who has just been in office for more than half a year, this is a core issue closely related to Qualcomm's future development direction - after all, Qualcomm has been a witness, participant and promoter of the smartphone era in the past decade, and it is also a well-deserved leader and beneficiary.

Qualcomm has enough sense of crisis to grasp its future in the "post-smartphone era".

In fact, as the fourth helmsman since the establishment of Qualcomm, Ammon has served as the president of Qualcomm before becoming CEO, which is equivalent to the second-in-command after the CEO. Prior to that, he joined Qualcomm in 1995 and has held a number of business and technical leadership roles along the way, including overall responsibility for the Qualcomm Snapdragon platform, and later president of Qualcomm's core business unit, QCT (Qualcomm CDMA Technology Division).

It can be said that Ammon accompanied and witnessed Qualcomm's growth, including Qualcomm's golden age of rapid development with the smartphone industry - he has enough experience and vision to build his insight into Qualcomm's development opportunities outside of smartphones.

Recently, Ammon was interviewed by foreign media The Verge, which talked about the relationship with Apple, the development of semiconductor business, the future industrial layout and many other issues, which can help the outside world to understand Qualcomm's latest developments and future development directions, and is also an excellent window for us to take this opportunity to understand the opportunities of the post-smartphone industry. In view of this, AI Business Review has compiled this interview for the benefit of readers, based on full respect for the original intent of the article.

The following is the text of the interview:

Q: Does the chip shortage have any impact on Qualcomm? When is the issue expected to end?

A: Here's the thing: We're facing one of the biggest supply chain crises in the chip space, but there are other reasons behind it. Because the share of the digital economy has increased tremendously, chips are now becoming ubiquitous, as if chips are needed for almost all products now. I'm also in discussions with the Treasury Department that people's consumption behavior during the epidemic seems to be shifting from services to goods, which also includes a large number of products equipped with chips. Therefore, the biggest inspiration for us by the shortage of supply is that chips are becoming more and more important.

As people begin to understand the importance of chip and semiconductor companies in economic development, more and more companies are beginning to build partnerships with semiconductor companies, which is a challenge and an opportunity for me as CEO. We will use our strong engineering capabilities to design products at all available capacities in a short period of time.

Based on our confidence in our own capabilities, we make demands on ourselves, make commitments to the outside world, and strive to expand production capacity. We're actually doing better than other companies, and the supply is increasing. At the start of 2022, some of our capacity expansion plans are beginning to materialize, which will also be reflected in our guidance for the next fiscal quarter. So while the current chip shortage isn't over yet, we're in a better position this year, and by the summer we'll balance supply and demand — and as far as I know, other companies may be in 2023 and beyond.

Q: Is Qualcomm involved or investing in chip manufacturing?

A: We are one of the world's largest fabless companies, we have never had a fab, and since the company's inception, we have outsourced chip manufacturing. We work with TSMC, Samsung, Global Foundries, SMIC, UMC and others. But, just in case of bias, we did make one thing: very complex filters for 5G radio signals, and we made our own filters in Munich and Austria.

However, we do make indirect investments in chip manufacturing. Based on our size, we're happy to invest with our foundry partners to ensure we have the ability to make long-term commitments, some of which are already starting to manifest themselves in the decisions we've made earlier — because we've acted quickly in the supply chain crisis, and some of the effects have already been felt, such as qualcomm gaining a lot of capacity this year.

Q: Did you directly promote TSMC's construction of a factory in the United States?

A: Yes. This is a very important topic for me. I was elected president of the SIA (Semiconductor Industry Association) for the upcoming year. In this capacity, I will work with colleagues at the SIA with two priorities: to ensure that we receive funding from the CHIPS Act, and to receive the enactment of the FABS Act. We strongly advocate the establishment of geographically diversified and resilient supply chains, which are very important for the economy. We now know — whether it's the auto industry or anything else you buy — that chips are very important to the economy as a whole.

We need to ensure that our fabs in the U.S. have flexible, geographically diversified investments. This is important. Even when Intel said it wanted to be a foundry, we raised our hands and said, "We're going to work with it," and we're really working together. Most importantly, I really agree with the current discussions between Europe and the United States, where both sides are trying to resolve the same issue and coordinate. I don't think there's a single company or a region that can meet all the demand for semiconductors, but we have to do something now to ensure a resilient supply capacity for decades to come.

Q: As president, as the CEO of Qualcomm, what does this role change mean to you?

A: When I first started as president, I was in charge of the semiconductor business, and in 2018 I started to combine strategy and execution to diversify the company. We will continue to focus on the mobile space, but we also see opportunities in a number of different markets and a vision for the future. My appointment as CEO is actually a consolidation of that vision. Ever since I became CEO, I've been preparing for Investor Day in New York three to four weeks ago.

Qualcomm needs to be re-understood that we cannot be defined by a single end market and a single customer relationship. We now have the relevant technology for many end markets – we are becoming a company that powers the edge. Our potential market can grow sevenfold over the next decade to $700 billion, which is one of the biggest opportunities in the company's history and my responsibility as president and CEO. I feel a great responsibility on my shoulders, but I am excited about this opportunity.

To achieve this vision, we need to do it bigger and faster; that is, take advantage of the technology roadmap and quickly invest in the technologies that we need to execute on in this vision. For example, after 15 days as CEO, I needed to file a competitive public tender for arriver assets for ADAS, and as soon as I was appointed CEO, I acquired a company called Nuvia because we wanted to have the best CPU team on the market. We believe we did.

Q: What does Qualcomm's current size and organizational structure look like?

A: We have about 50,000 people, most of them in the United States, but there are also other places. For example, with more than 10,000 employees in India and thousands in China, South Korea, Japan and Europe, it is a global company and very diverse. Our real focus areas are modems, wireless, high-performance computing, and low-power device technologies, and we're building bases based on the distribution of talent.

Most of our employees are engineers, so the company has a very strong engineering culture. That's why we have so many important patents – we're not only focused on implementing new standards, we're also focused on creating them, and we want to really do basic research. For example, we not only let the Snapdragon chip power the mobile device, but also put it into a Mars rover and send it to Mars.

Within the corporate structure, our engineers are divided into mobile, automotive, RF, and a broad IoT business covering consumers, networks, and enterprises.

Q: How far will Qualcomm's investment in technology go?

A: We usually invest for ten years.

For example, we talked about the connection between physical and digital spaces very early on, and we started talking about AR and VR when they weren't popular. Some of the bets we've made over a decade have spawned incredible technologies that have made Meta's Oculus Quest and Microsoft HoloLens possible, and now people are talking about digital twins and metaversms again. In fact, we're the one that connects the digital world to the physical world, and we've been doing it for a decade. Plus, from the moment we finished 5G, we began working on 6G.

Another trend is the sweeping transition between mobile devices and PCs – how PCs become communication devices, and we're considering creating 100% cloud-connected smart devices for digital transformation. The same is true of artificial intelligence, the artificial intelligence we see in the data center today is just the tip of the iceberg, and when artificial intelligence is introduced to the terminal device, it will be another order of magnitude.

Of course, some of our investments have also failed, which is normal in the tech industry. We used to think that TV would merge with mobile devices, but now that TV is still streaming video, it's too early to think about it – so we quit the TV business and waited for the next opportunity. Here's another good example: we're developing data centers using ARM technology prematurely. While we do have some assets, we're focused on the future of the data center — edge mobility. As a result, we're delivering high-performance computing for data center inference at the edge, and everything happens at the edge rather than the data center.

Q: Apple has run the Mac on the M1, Qualcomm has also made corresponding moves, how is the competition between the two sides?

A: Our investment in the PC space has long been underway because we believe that the PC as a connected device with high-performance connectivity is a necessity. However, with our partnership with Microsoft, big changes need to be made – especially the Windows ecosystem needs to make massive changes to the software ecosystem and ARM already established on x86. Today's Windows can support emulation of 64-bit applications on ARM, but it still doesn't have the full power of Windows — which has an impact on our shipments. Our expectation was that it would take generations to build an ecosystem around ARM. But Apple gave us an incredible opportunity — it was so loud that now all developers say they'll start with ARM, like Adobe.

In addition, we have the convenience that with the arrival of the epidemic, the entire application ecosystem has begun to change from PC architecture to mobile architecture, so I think the inflection point is coming.

The transition from PC to ARM is inevitable, and 5G will also be combined with PCs. If you're a mobile worker, you might need a huge workstation for computer-aided design, but you're not going to put it in a backpack and instead have to do it on the cloud using 5G. Enterprises are moving to the cloud, people are collaborating with tools like Teams and Zoom, and game streaming is coming — a shift that's inevitable.

In terms of performance, we're competing with Apple, so we acquired Nuvia: we think it's the best CPU team, and you should expect Qualcomm's goal to be ahead of the curve in performance. Our first product will be available in samples next year, and it will be commercialized in 2023.

Q: Why was the Snapdragon 888 renamed Snapdragon Gen 1?

A: Quite simply, Snapdragon has become synonymous with a great Android experience, with 80% awareness of the Snapdragon brand in the Chinese market, and the Snapdragon 8 Series being the flagship by default. So we decided to simplify the branding and the next generation would be named snapdragon 8 Gen 2.

Q: What layout and goals does Qualcomm have in terms of GPUs?

A: We have been developing GPUs for the mobile phone field and are moving into the automotive field. We will enter new end markets: automotive, digital chassis. We are entering the PC market, with the first PC chip with new graphics technology coming out in 2022 for upcoming devices in 2023.

Q: For Qualcomm, what stage has 5G developed?

A: The problem with 5G is that it will take some time to build infrastructure. We're doing better in terms of equipment, but in terms of infrastructure, we have to make the network more dense. The number of operators investing in 5G around the world is increasing, just a little more time.

Qualcomm is "quality communications" – that's what we call it. We have been a leader in every generation of wireless technology. It's no coincidence: we invest, we have one of the best teams, and we always raise the bar. As long as wireless communication remains important, Qualcomm will always have room.

Q: In the U.S. Modem market, who are Qualcomm's competitors?

A: Apple says it will develop its own modem. Let's assume that the iPhone will launch with its own modem in 2023, and then Qualcomm will only supply 20% of these modems.

Some entry-level prepaid mobile phones in the United States do not use Qualcomm modems. Carriers in the U.S. will test all phones to make sure they meet the latest standards and are compatible with the network. Therefore, I think U.S. carriers always choose the modem with the best performance. When you go to emerging markets, sometimes OEMs control the channel; there's a channel that sells consumer electronics and the carrier can't control it.

Q: Mobile phones are probably the biggest tech market ever, is there another market like that? Does AR/VR count?

A: Of course there is another market. Outside of mobile phones, Qualcomm's current story is very different. The technology we're developing for the mobile phone market is transforming cars and PCs, as well as VR/AR devices, as well as home WiFi access points, and smart IoT devices, which are reflected in Qualcomm's future plans, and are more than just a plan.

In fact, we already have more than $10 billion in non-mobile phone revenue in our earnings report. The segment now accounts for 38 percent of Qualcomm's revenue. It shows that not only is there an opportunity, but this growth is already happening at scale, and I think we have a lot of opportunities, probably as big as mobile phones.

A more futuristic but eventual example might be AR. As AR becomes more ubiquitous, I can see that we will be buying a pair of glasses that will serve as a companion for your phone for some time. This will last for a long time until the glasses become independent. I think augmented reality glasses can become as important as phones and will start to be people's companions.