Wireless equipment companies, who have end-market licensing agreements across multiple vendors, will benefit from the continued growth of the smartphone industry in the wireless space, says Kulbinder Garcha, Managing Director at Credit Suisse.
“Smartphone volumes last year were 450 million units; they grew 55%, but we don’t think they have maxed out yet. We think that industry will continue to grow from these levels over the next two to three years and that it will will more or less double by 2015, reaching 1 billion units,” he said.
Garcha favors Qualcomm Inc. (QCOM) because the company gets paid by end licensing and through its chipset business, which is 40% 3G WCDMA chipset share. He says on the licensing side, QCOM collects royalties for nearly every 3G device, smartphone and tablet sold in the world, so the growth in the end market drives Qualcomm’s licensing business.
“What that basically means, we think, is that no matter who is gaining share, whether it’s an Apple or whether it’s a RIM, whether it’s an Android vendor or someone else, Qualcomm will collect their royalty because they own the core I.P. along with two or three other companies in the world around which is designed as to how wireless standards operate,” Garcha said.
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