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Here’s What’s Driving Qualcomm Stock

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Qualcomm’s key segments

In this series, we’ll be looking at Qualcomm (QCOM), a major semiconductor company. The US semiconductors and semiconductor equipment industry have risen 2%, 4% and 7% in the past one month, three months, and YTD (year-to-date), respectively.

Qualcomm’s Code-Division Multiple Access (or CDMA) technology formed 74% of its revenue in fiscal 2017 and the first quarter of 2018. Qualcomm Technology Licensing’s revenue contribution decreased from 29% in fiscal 2017 to 24% in the first quarter of 2018. Its unique selling point is its smartphone chips and modem technology, which is available for a fee-based license to other OEMs (original equipment manufacturers). Qualcomm is also exploring newer territories such as IoT (Internet of Things), servers, laptops, and automotive.

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Qualcomm’s involvement with China

Qualcomm generated 98% of its revenue from non-US regions in fiscal 2017. China (including Hong Kong) contributed 65% of its revenue. That’s more than semiconductor companies Intel (INTC) at 40%, Nvidia (NVDA) at 56%, and Advanced Micro Devices (AMD) at 33% in the same period.

R&D (research and development) formed 25% of the company’s revenue in fiscal 2017 against 22% and 27% in fiscal 2016 and fiscal 2015, respectively.

Summarizing the events of H1 2018

The first half of fiscal 2018 has been very eventful for Qualcomm, ranging from partnerships, product launches and initiatives in AI, automotive innovations, and server and PC processor markets. There’s an ongoing license dispute with Apple (AAPL) and royalty rate disputes by customers. Qualcomm is focusing on AR (augmented reality) and VR (virtual reality) markets.

The company narrowed its market force for its data center business, which is dominated by Intel. It’s facing competition from Intel in its licensing business, driven especially by 5G (fifth-generation) competition. Qualcomm was rescued from a risky takeover by Broadcom (AVGO). However, it missed out on the acquisition of NXP Semiconductors (NXPI), which was an attempt to capitalize on the booming automotive semiconductor market. That was followed by its financial results for the fiscal third quarter of 2018 and a stock buyback plan.

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