Winning the Mobile 5G Race Is Just the Ticket for Qualcomm Stock

Qualcomm stock - Winning the Mobile 5G Race Is Just the Ticket for Qualcomm Stock

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Good news for smartphone owners who’ve been patiently waiting for ultra-high-speed 5G connectivity next year is your year. Qualcomm (NASDAQ:QCOM) unveiled its new Snapdragon 855 chip earlier this week, built from the ground up with 5G wireless broadband in mind. This could mean big things for Qualcomm stock.

Samsung has already said some of its phones sold by Verizon Communications (NYSE:VZ) would be 5G ready and available during the first half of 2019.

Heavy-duty smartphone users along with technophiles are already salivating, knowing it’s going to mean a huge leap in the functionality or mobility without even fully knowing how. Current and prospective owner of Qualcomm stock, however, have just as much of a reason to start licking their chops.

5G is (Almost) Here

Qualcomm’s processors and chipsets are already found in the majority of smartphones, making it unsurprising it was the first to come up with a commercially viable 5G platform.

And yet, its 5G capabilities may be the least impressive aspect of the 855 chipset.

The latest iteration of the Snapdragon series will also offer “up to three times the AI performance compared to the previous generation mobile platform,”empowering smartphones to seamlessly handle tougher tasks like fingerprint reading, augmented reality and better image recognition.

The most brand-loyal of smartphone owners, however, won’t be enjoying blazing 5G speeds in 2019, however. Apple (NASDAQ:AAPL) says it doesn’t intend to offer a 5G-capable device until 2020.

The ongoing legal battle between Qualcomm and Apple isn’t being blamed for Apple’s decision to tap Intel (NASDAQ:INTC) as a supplier of 5G modems for iPhones. But, it would be naive to think that litigation hasn’t steered Apple toward alternatives. Qualcomm used to be a key supplier of iPhone components, but dropped it as its modem maker earlier this year as the legal wrangling came to a head.

In the meantime Intel has abandoned its plans to launch its 5G XMM 8060 modem and chips in early 2019, likely knowing it wouldn’t compete well with Qualcomm’s new tech. Rather, Intel is rushing the development of its next-generation XMM 8160, aiming to have a commercial-ready product by the end of 2019 for new smartphones sold in 2020.

The XMM 8160 does have an edge. That is, it will be the first modem to support 4G, 3G and even 2G connections with just one modem. It remains to be seen, however, if the market needs such a multi-purpose device.

Though 5G service isn’t everywhere, phone makers are more than capable of manufacturing the appropriate devices for particular areas. In this race, being first means much more.

And Qualcomm is clearly in the lead.

It’s also noteworthy to Qualcomm stock holders that the company has already been selected as the 5G chipset supplier for roughly 20 consumer technology makers, including Netgear (NASDAQ:NTGR), Motorola and Xiaomi in addition to Samsung. To date, Intel doesn’t appear to have as many interested buyers in its 5G solutions.

Looking Ahead for Qualcomm Stock

As for the impact the advent of 5G will have on Qualcomm stock, it’s not entirely clear. If anything though, the market is likely underestimating its upside.

Prior evolutions of wireless broadband speeds have been relatively impressive, but not game-changing. The U.S. rollout of 3G connectivity was a significant leap from 2G, and the introduction of 4G in 2010 was a big improvement on 3G speeds.

Smartphones weren’t the norm for the better part of wireless broadband’s existence, and even when Apple kicked off that race with its first iPhone in 2007, neither the devices nor the connection speeds were revolutionary.

That’s not the case with 5G, however. The new technology will allow users to do things that simply haven’t been possible before, with 5G connections clocked at 50 to 100 times the data speeds 4G typically offers. The Internet of Things is one of those new possibilities, but hardly the only one.

With smartphones now as powerful and as fast as a traditional computers, BDO believes 5G connections could facilitate $1.2 trillion worth of long-term consumer benefits. Research outfit IHS Markit reckons 5G will facilitate $12.3 trillion worth of global economic productivity by 2035.

Most observers don’t realize it yet, but once 5G and the new Snapdragon chip fully demonstrate what’s possible next year, demand for Qualcomm’s tech could soar.

Meanwhile, Intel isn’t well positioned to capture much of this burgeoning market, reportedly being about half a year behind Qualcomm in terms of getting a 5G modem ready for mass production. That’s a long, long time in the world of technology development, which provides some much-needed bullish news for Qualcomm stock.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.

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