Qualcomm Bets on AI Chips to Reduce Smartphone Dependence Amid Intensifying Competition

Qualcomm is aggressively ramping up its bet on artificial intelligence chips to less­en its dep­endence on the smartphone bus­i­ness that has tra­di­tion­al­ly formed the backbone of its revenue and prof­it­a­bil­i­ty. The push ref­lects a deep tra­ver­sal across the semi­con­duc­tor in­dus­try, where AI has emerged as the most signif­icant grow­th op­por­tu­ni­ty of the past few dec­ades – from da­ta cen­ters and personal computers to cars and in­dus­tri­al sys­tems, chips equipped with AI are in high demand, and they don’t just come with the tra­di­tion­al semi­con­duc­tor mak­ers’ usual lines of pro­duct. (reuters.com) Qualcomm finds diversification ever more cru­cial. Though still the king of smart­phone processors and wireless com­mu­ni­cations technology, global smart­phone sales are not what they used to be; in­vestors are hop­ing to find new sources of revenue growth that complement-or one day re­place-handset sales.

AI looks like one of them.

Qualcomm is hop­ing that its chips can run advanced AI apps di­rect­ly on devices instead of in the cloud. This ap­proach, which it calls edge AI, may reduce lag­ging time, enhanc­e priv­a­cy, lower oper­a­ting costs and let apps run with or without con­stant Internet ac­cess. (reuters.com) The company targets multiple mar­kets at once. Qualcomm'sSnapdragon X processor is aimed at laptops with built-in smart­phone chips capable of performing various tasks locally. The company is alsoprovidingchipsforautomotive appli­ca­tions, includ­ing advanced drive-assist systems and next-gen­er­a­tion autonomous driv­ing sys­tems.

Qualcomm is also seek­ing to build a foot­hold in the Internet of Things ( IoT ) and indus­tri­al automation markets. (reuters.com) But Qualcomm’s competition is in­creas­ingly intense, not least from chip rival Nvid­i­a ( NVIDIA -1.91%), which dominates the market for chips used in data center AI hardware; AMD (AMD-4.97%), which is step­ping up its AI efforts; and Intel (INTC-0.22%), which is try­ing to regain its foot­ing in the AI computing race; major tech giantsGoogle (GOOG-1.51%), Amazon (AMZN-1.41%), Micros­oft (MSFT 0.49%)and Meta (META 2.15%)are all de­vel­op­ing custom AI chips. (reuters.com) The biggest issue: The AI mar­ket it­self is evolv­ing rapid­ly.

Many observers are focused on AI in da­ta centers where the mar­ket has received sub­stan­tial invest­ment and at­ten­tion from semi­con­ductor makers. But Qualcomm bets that on- device AI will emerge as a massive market in the years ahead. The com­pany’s suc­cess hinges on whether con­sumers and bus­i­ness­es begin us­ing AI apps that benefit from lo­cal processing ra­ther than the power of clouds.

In addi­tion, industry ana­lysts sayQualcomm could bene­fit from having long exper­i­ence creating ef­fi­cient process­ors to run mobile apps: AI needs en­ergy efficiency in a variety of hardware where that’s important, from your smart­phone to your car to smart home ap­pli­ca­tions. (reuters.com) Moreover, Qualcomm’s bet on the de­cent­ral­i­zation of compu­ting aligns with where the industry is headed. In the long term, it is expected that AI sys­tems would be powered both in the cloud and at the edge. And with enough suc­cess, Qual­comm could even play a role.

And from a market perspec­tive, Qualcomm is present everywhere, especially in edge devices.

For inves­tors, Qualcomm's approach represents a high risk and a potentially large payoff opportunity. If it works, the company could be one of the lead­ing providers of on-device AI hardware of the fu­ture. And, ultimately, how Qualcomm per­forms over the next dec­ade will be determined by how successfully it is able to tran­si­tion to being a more than just a smart phone-centric chip maker.