Acquired · Nov 15Qualcomm
Patented CDMA in 1986, then sold its hardware units and kept chips and licensing. Chips bring in $37 billion of $44 billion in revenue, licensing earns a 69% margin against 34% for chips, and Apple is now building its own modems.
Tips
- Qualcomm patented CDMA in 1986, betting Moore's Law would make it feasible▶ 1:05:20US patent 4,991,307 became one of the most valuable patents in history.
- Qualcomm built joint ventures for base stations and handsets so carriers could adopt CDMA▶ 1:27:10By 1996 revenue had grown from $383 million in 1995 to $814 million.
- Qualcomm sold its base station and handset businesses to keep only chips and licensing▶ 1:34:40Qualcomm stock rose about 26x in 2000, the best performer of that year.
- Qualcomm designed chips but outsourced fabrication, capturing the high-value ends of the smile▶ 1:31:30About 37 billion of its roughly 44 billion in revenue now comes from semiconductors, and it is the largest fabless chip company.
- Qualcomm confirmed with Washington that the US standard was not mandatory before betting on CDMA▶ 1:14:00The US process left room for a second standard, and CDMA was officially adopted in 1993 after half the industry had signed.
- Qualcomm pitched carriers on unit economics: 3 to 5x more subscribers on the same spectrum▶ 1:17:10Pacific Telesis put up $1 million for a prototype in 1989, and 9x and Ameritech signed in 1990.
- Qualcomm demoed CDMA in San Diego and then New York to answer doubters▶ 1:22:40The demo handset looked like a mini fridge with a handset on it.
- Qualcomm went to clean-slate countries like South Korea where the government mandated CDMA▶ 1:23:45CDMA took 57% of US 2G share and 100% in South Korea.
- Qualcomm gave up half its equity to merge with Omnet to fund Omnitracs▶ 1:02:00Omnitracs did $32 million in revenue in its first year, 1989, and roughly doubled yearly for five years.
- Irwin Jacobs and Andrew Viterbi bootstrapped Qualcomm with consulting while they waited for CDMA▶ 47:10A Hughes satellite proposal led to their CDMA application of spread spectrum.
- Qualcomm evangelized and created its own competitors so customers would trust CDMA▶ 2:17:30
- Qualcomm patents the core technology and keeps other knowledge as trade secrets▶ 2:18:00
- Generational shifts let Qualcomm reuse its patent playbook with new patents each generation▶ 1:42:30Qualcomm pivoted from fighting OFDM to joining it for 4G.
- Irwin Jacobs's hotel management year taught him business and shaped his path▶ 22:10He finished his MIT PhD in 3 years under Claude Shannon.
- Qualcomm charged Apple excessive royalties and rivals sued, which cost it leverage▶ 1:48:40Apple paid about $4.5 billion for a six-year license in the 2019 settlement, and Qualcomm expects almost zero Apple chip revenue after 2023.
- Qualcomm's Mirasol display bet cost a two billion dollar fab with no customers▶ 1:45:55The fab cost about $2 billion and had zero customers.
