By 2021, 5G smartphone sales are expected to swell to 450 million as the new technology takes off.
The San Diego mobile technology provider has made a big bet on 5G technology. Company executives outlined their expectations for what 5G can do for the Qualcomm financial results at a gathering with Wall Street analysts and investment fund managers Tuesday in New York.
"We think we have a $65 billion serviceable available market today," said Chief Executive Steve Mollenkopf. "In three years, that will be a $100 billion serviceable available market. That is a lot of opportunity for us."
Tuesday's event was Qualcomm's first analysts' day in three years. The company put off the event amid a string of crises in recent years — including a failed hostile takeover bid from rival Broadcom, legal battles with Apple, attacks from global anti-monopoly regulators and the collapse of its transformational acquisition of NXP Semiconductors.
All that — coupled with a saturated smartphone market — have weighed on Qualcomm's revenues and profits. Last year, San Diego's largest public company posted sales of $24.3 billion and earnings of $4.4 billion — below its recent peak in 2015 of $25.3 billion in sales and $5.3 billion in profits.
5G has sparked renewed optimism about the company recently, with its stock price hitting multi-year highs.
Qualcomm is a technology leader in 5G. The networks promise to deliver significantly faster speeds, imperceptible transmission delays and extra capacity to power unlimited data plans to mobile device users.
Much of Qualcomm's potential growth from 5G centers on its semiconductor business, according to executives. The company's highly profitable but maligned patent licensing arm isn't expected to grow much.
Patent royalties have been a lightning rod for the company's recent legal troubles. As a result, the company has worked to stabilize its relationships with smartphone licensees.
It has signed 75 patent licenses for its 5G inventions, including "anchor agreements" with smartphone heavyweights Samsung, Apple and LG.
But Qualcomm didn't raise royalty prices for access to new 5G technologies.
The company forecast royalty revenues will be flat going forward. Last year, patent licenses brought in $4.6 billion in revenue. There is potential growth if Qualcomm can settle an ongoing licensing dispute with China's Huawei, though the company didn't include that possibility in its estimates.
"The way we think about the licensing business is a lot of the hard work is behind us there," said Mollenkopf. "We think that is going to be a good, solid earner for us for a long time."
There is a remaining risk to licensing. The company is appealing a federal judge's antitrust ruling. Oral arguments before the Ninth Circuit Court of Appeals are expected in February or March.
In Qualcomm's chipset business, 5G is likely to provide a bigger spark.
"We have been looking for growth in mobile for a while, and we are very excited by this 5G transition," said Qualcomm President Cristiano Amon. "Basically between 2019 and 2022, we can have compound annual growth rates in the double digits."
Qualcomm already has deals to supply 5G chips to 230 devices, said Amon.
Most of these deals include not only Qualcomm's core 5G modem chips, which link devices and cell towers, but also radio frequency front end semiconductors, which manage airwave signals near antennas.
Boosting the number of chips it supplies to 5G smartphones is key for Qualcomm, which didn't offer radio frequency front end processors for 3G/4G handsets.
"On the mobile handset side, we feel we are in a very strong position with the RF front end and the (modem) chipset opportunity," said Chief Financial Officer Akash Palkhiwala. "And then beyond mobile, we have growth vectors in other markets."
5G aims to push cellular connectivity into new industries, including wireless home Internet, connected smart cities infrastructure, virtual reality gadgets and self-driving cars.
Last year, non-smartphone revenue totaled $3.4 billion for Qualcomm. The company now has 11,000 customers across several industries.
"Our core competency, the technology road map that we have for our cellular business, allows us to go after some adjacent opportunities that really allow us to grow our business," said Mollenkopf.
Qualcomm's shares ended trading down 2.8 percent at $87.96 on the Nasdaq exchange.
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