1/26/2019

Technology-enabled Innovation:
Qualcomm as an Example

Kevin Zhu
PhD, Stanford University
Professor, Rady School of Management
University of California, San Diego
https://rady.ucsd.edu/people/faculty/zhu/

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Business Model:
Capture value from innovations in the face of competition

QCOM Increased R&D
R&D

Manufacturer Operator
New Ideas
Revenue Revenue

Integrate

Chip Sales
Innovate Manufacturer
Operators Subscribers
s
Licenses

Devices Devices/Services
Intellectua
l Property

Platform Leadership

How Intel, Microsoft, Cisco, and NTT DoCoMo

Drive Industry Innovation?

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Qualcomm as a Platform Leader

Government

May also control standard

to influence the market
CDMA IP Licensing

Infrastructures
Equipment Wireless End
Manufacturers Operators Users
Handsets

Chipsets Sales

© Kevin Zhu
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Platform Leadership at Qualcomm

• BrewFest, Prediction Markets
Scope • R&D & IP, Innovation is core

Product • Very open, license are non exclusive of standards

Architecture • Modular technology, Core pieces

Relationships with
• Nokia, Texas Instruments, Operators, etc.
external • Complement & compete simultaneously
complementors
• 3G vs 4G, internal conflicts of interest
Internal • Well communicated corporate strategy
Organization • Organizational culture and processes for multiple technology
dev.

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Platform Leadership
Examples of platform-type products …

Characteristics
 component in a broader system (product)
 standards wars: compatible vs. competing standards
 Network effects
 …

© Kevin Zhu
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Standards War
Facing an established standard (e.g. GSM),
what are the major factors that would determine
the adoption of a new rival standard such as
CDMA?
Network effects
Installed base
Switching costs
Path dependent

© Kevin Zhu
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Global Expansion
 What are the key characteristics of emerging
markets that you would encounter when
expanding to developing countries?

© Kevin Zhu
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Global Expansion
 Key characteristics of emerging markets
 low income, lack of middle class  sensitive
demand elasticity
 product designs
 local alliances
 infrastructure
 legal environment, IP protection
 government intervention/regulation vs. free
markets
© Kevin Zhu
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Revenue  in the US, South Korea and China
Millions
50% $12,000
Revenue
US
South Korea
$10,000
40% China

$8,000

30%

$6,000

20%

$4,000

10%
$2,000

0% $0
2002 2003 2004 2005 2006 2007 2008 2009

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Qualcomm in China

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China Update
 China wireless market became largest in the world by subscribers in 2002
 Total GSM+CDMA subscribers 601M, PHS subscribers 78M
 About 7M new addition each month
 China Unicom’s CDMA network has achieved limited success so far
 6% of total mobile users, or about 40M
 China Mobile dominating in economy of scale, marketing and financial strength
 market share: CM ~70%, CU ~30%
 GSM enjoys more variety and lower cost in its handset portfolio
600,000

90915
PHS
91127 11%
500,000
39,948
37,605
CDMA
85,327
6%
400,000
65,220 33,502

28,363
300,000 37,340
19,058
13,140 454,648 GSM
423,477
200,000 7,580 83%
359,926
5,080 306,424
445
249,635
100,000 220 1,450
199,036
750 144,777
13,230 10 40
23,850
110
42,550
85,040 Market Share by Technology
-
- June 2008
97

98

99

00

01

02

03

04

05

06

7
00
19

19

19

20

20

20

20

20

20

20

.2
Source: MIIT & Carrier’s Report
ay
M
GSM CDMA PHS

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Qualcomm China’s Strategy: Insights
• Just licensing the platform to an emerging market
is not enough!

1. Make sure partners are strong in existing industry

2. Encourage device manufacturers to design innovative
product, drive prices down
3. Incentivize software development using platform to
reach critical mass

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Disruptive Technologies on the Horizon? 

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Qualcomm S-Curves
270
“Might as well JUMP!”
240

210 3G
Subscribers (millions)

(IS-2000)
180 4G,
2G
Mobile TV,
150 (IS-95)
Healthcare
120

90

60

30

1995 1997 1999 2001 2003 2005 2007 2008

Year

Source: http://www.cdg.org © Kevin Zhu

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Kodak’s Struggle with

Technology Shifts

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Disruptive Technologies
 4G, 5G….?
 metro-area WiFi or WiMax to CDMA?
 VoIP to 4G?
 Cloud computing & thin clients to smart
phones?
 Other newer technologies…

© Kevin Zhu
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Given these threats, what would

you do?
How to deal with substitute threats

How to maintain its future vitality?

© Kevin Zhu
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Qualcomm’s future bets

 Jump s-curves = cutting edge of technology
 IP portfolio  technology licensing model
 New consumer applications
 Eco-system for new technology
 Integrate vertically

 Future outlook
 Mobile TV
 4G Technology & Wireless Healthcare

 Strategic elements
 Future survival
 Growth

© Kevin Zhu
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Wireless Healthcare Concepts

Wireless Network + Internet

Health Data

Alert/Configure
Device Healthcare Operator

Heart Rate

Blood Pressure  LifeComm – Healthcare focused Mobile Virtual Network

Operator (MVNO)
Blood Glucose
 Applications and services for wellness, fitness, and health
Blood Oxygen maintenance
 Handsets to communicate with medical devices
Temperature
 Connectivity to healthcare operator
 Emergency alert services
 “Wireless band-aids” – monitor physiological parameters
 Mobile Healthcare
 Pacemakers
 Electrocardiograms
 Blood glucose meters
© Kevin Zhu
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Trend and hope of the future

Health/Life Wireless
Sci Technology

Consumer Devices

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Assessment …
Wireless health can achieve all these things…
if you have a …

standard
&
platform leader!

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2net: first step toward 
Standards in Healthcare

Video on Qaulcomm Life

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Qualcomm as platform
enabler

Data from sensors

Transmission to
Connect to 3rd
Secure Cloud
Party Platform

Data Received, Stored

and/or Forwarded to
Authorized User

2Net Hub

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Key Future Strategic Elements

 Invest in developing new technologies and related IPRs
 Technology changes
 Avoid Kodak syndrome

 Acquisition and growth mentality

 Cash = $7B+ with zero debt
 Acquisition of Flarion: 4G solution

 New markets, new products

 Wireless Content, Network Operations (MediaFLO), Wireless
Healthcare (MVNO)
 Share in GSM dominated markets like Europe and Middle East for
3G

 Develop Brand image

 “Qualcomm inside”

© Kevin Zhu
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Key Success Factors

Strategic
Business Model
Technological  • License of 
Platform IP and chip sales

Human 
Emerging 
Market Capital
CDMA
Technologies

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© Kevin Zhu
All Rights Reserved.

Do not copy, distribute, modify any of

the materials without author’s
permission.

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