In 2024, mobile phone mobile processors will enter the 3nm battle, including Apple's A18 pro, MediaTek's Dimensity 9400, and Qualcomm's Snapdragon 8 Gen 4 and other products will use 3nm process to improve computing and power consumption. And in order to further compete with the other two competitors, there is now news that Qualcomm is revising the design of the Snapdragon 8 Gen 4.
According to market sources, Qualcomm is currently redesigning the Snapdragon 8 Gen 4 processor with a new target frequency of 4.26GHz, a change that is mainly in response to Apple's A18 processor and the MediaTek Dimensity 9400, which continues to use an all-core design. Sources point out that Qualcomm remains optimistic about the redesigned processors, believing that the Snapdragon 8 Gen 4 is indeed expected to reach the target frequencies thanks to TSMC's 3nm N3E process technology.
Some market participants pointed out that the original Qualcomm Snapdragon 8 Gen 4 does not support the Scalable Matrix Extension (SME) function, but considering that Apple has adopted the ARMv9 architecture and supports the Scalable Matrix Extension technology, and Qualcomm competitors lack relevant features, the new target frequency of 4.26GHz of the Qualcomm Snapdragon 8 Gen 4 processor may be to make up for the performance gap, however, Qualcomm's design will require phone makers to adopt a larger heatsink area in order for the Snapdragon 8 Gen 4 to continue to run at high performance.
According to the current news, Qualcomm's Snapdragon 8 Gen 4 is expected to be unveiled at the Qualcomm Records Summit in the traditional year, while Apple's A18 pro processor is expected to be launched at the autumn conference along with the new iPhone 16 pro. The release schedule of the MediaTek Dimensity 9400 has not yet been determined, but it may be unveiled before the release of Qualcomm's Snapdragon 8 Gen 4, further winning the favor of non-Apple mobile phone manufacturers.
AI lights up Qualcomm's smartphone business prospects
After Apple's latest earnings report, investors are increasingly looking forward to such a device. The company's earnings report showed a noticeably weaker iPhone revenue in the March quarter, but that was expected, and Apple mitigated the impact of the news with a large share buyback. Apple CEO Tim Cook also took the opportunity to further promote Apple's interest in generative AI, which has strengthened analysts' belief that an AI-enabled iPhone is on the horizon.
In a report to clients, Melius Research's Ben Reitzes predicts that "the AI-driven iPhone supercycle is likely to arrive in 2025." On Friday, Apple's shares jumped 6%, their biggest one-day gain in 18 months.
This follows Qualcomm's better one-day performance. iPhones and many other wireless devices use modem chips produced by the company. Qualcomm's shares jumped nearly 10% on Thursday after it reported earnings for the fiscal quarter ending in March, which showed chip sales benefited from AI-enabled Android phones, such as Samsung's latest Galaxy series, which went on sale in January.
This year, more and more smartphones and PCs with AI processors and functions embedded in the hardware have entered the market. This kind of device-side AI has the advantages of faster processing and higher privacy of AI tasks, because these tasks require less data to be transferred back and forth in the cloud.
Samsung's Galaxy S24 offers features such as real-time translation and image search. The market has responded well, with sales in the first three weeks of the S24 phone being launched up 8% compared to last year's previous-generation Galaxy series over the same time period, according to Counterpoint Research.
Given Apple's marketing prowess, the launch of AI-enabled iPhones is likely to further drive the growth of the on-device AI market. Even considering the long-standing animosity between Apple and Qualcomm, this is a big plus for Qualcomm. Qualcomm has long dominated the market for modem chips, also known as basebands, which are responsible for connecting devices to carrier networks. Qualcomm's Snapdragon CPU is also the main computing chip for many Android phones, including Samsung's latest offerings. In addition, the company has a growing business in RF (Radio Frequency) chips that work with baseband to filter out interference and enhance signal strength.
For smartphones that handle the daunting AI algorithms on their devices, the ability of these components to work together closely while saving power has become critical. This will play to Qualcomm's strengths, especially when it comes to wireless components, which the company has long excelled in. "If AI is processed in a mobile phone, the compute chip and memory consume more power," said Matt Ramsay, an analyst at TD Cowen. "If you want the same battery life, where do you get your power budget from? The answer is modems, RFs, and screens. ”
This could even help extend the life of Qualcomm's controversial business with Apple, which has long worked to remove Qualcomm's chips from its devices. Apple's failure to develop its own modem prompted the two companies to extend their partnership last year. Qualcomm's RF chips are also believed to be used in iPhones that will be launched this year, after chipmaker Skyworks told investors on a quarterly conference call last week that the company had lost the business. UBS analyst Tim Arcuri said in a note to clients: "It's fair to say that the longer Apple hasn't developed a modem, the greater Qualcomm's advantage will be, as AI requires tighter modem/RF integration to keep battery life under control." ”
Qualcomm will also make a big splash in AI-enabled PCs, with a slew of them expected to hit the market later this year. For Qualcomm, as long as its share of the PC space grows, it's entirely positive, and the company currently has little business in this area. Microsoft's Build conference later this month is expected to showcase a number of new AI-enabled laptops, including those powered by Qualcomm's Snapdragon processors.
For smartphones and PCs, two fundamentally mature markets, it remains to be seen whether end-of-device AI can actually deliver much-needed sales growth. But unlike many other chip stocks, Qualcomm's current valuation doesn't reflect much on the AI theme. According to FactSet, the stock closed at a pro forma price-to-earnings ratio of about 17 times last Friday, which is 39% lower than the PHLX Semiconductor Index. PHLX Semiconductor Index is trading at its highest forward price-to-earnings ratio of 28.3x in nearly a decade. By making smartphones smarter, thereby helping to sell more smartphones, this trend could be a big help for Qualcomm.
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