Qualcomm's Value Chain Strategy

Qualcomm is at the right time at the right place, or so one may think. The company is the inventor, the initiator, and the executer of the CDMA technology in an era in which mobile communication is growing exponentially (Figure 1). Nevertheless, being a monopoly of IP has its dangers.

Over the years Qualcomm has strategically pursued different entities in the wireless communication world. First, the Network operators were sought after (e.g PacTel deal, later known as Verizon). Qualcomm’s CDMA highest leverage was the efficient utilization of available spectrum (x8 to x15 improvements). The mobile world is structured so the operators expensively purchase federal permission to the use of spectrum width, the CMDA solution would therefore appeal to them. The Network operators could benefit both from the higher spectrum efficiency and from enhanced services, which can lead to user migration as well as extra charges potential.

Second and third, came the infrastructure vendors (e.g. Korean Infrastructure manufacturers deal) and device vendors (e.g. Nokia or joint venture with Sony), both entities signing deals as a tactic of Qualcomm’s clever IP model together with market influence. Meaning, no company wanted to be unprepared, or overly paying, when the time came to use the CDMA technology. The Qualcomm IP structure incentivized the infrastructure leaders to engage with Qualcomm. And the device manufacturers were also influenced by consumers’ needs, which were becoming more demanding towards higher wireless data performance. The chipset vendors were a (deliberate) result of the eco-system created by the former three. As Qualcomm’s direct competitors, the mobile chipset vendors now had to provide a CDMA solution to their customers as well. For that, they had to license CDMA IP from Qualcomm (therefore, Qualcomm rivals were, in many cases, also its customers). And lastly, Qualcomm was seeking for ways to address end-users, merely as part of a strategic quest to create more data traffic on the grid and increase the need for a better performing network (3G), and as a result, the need for CDMA.

Qualcomm attempts to increase customer-perceived value and to optimize the efficiency of the mobile industry value chain. Over time, Qualcomm’s changes its form of participation in the value chain. It starts by being a theoretical efficiency-enhancing technology promoter, through a technology lobbyist both domestically and internationally, through a huge B2B chipset provider, a royalty behemoth, a creative-strategic entity to increase data usage, to maybe, a wireless technology cellular player against other technologies that may replace CDMA (Table 1).

Initially, Qualcomm saw the potential of its technology and positioned itself as a horizontally integrated chipset provider for the infrastructure vendors and the mobile devices vendors (with “fabless” outsourced manufacturing and supplying to OEMs). Qualcomm