Kagan: Why Qualcomm is important to USA in 5G race

The 5G wireless race is on and there is a debate raging over whether the USA or China will lead. Current leaders are companies like Qualcomm and Huawei. Many say China based Huawei has the early lead. Qualcomm is the American company and technology leader. I have been studying this issue and the answer is clear as mud.

I have visited with senior executives of both Qualcomm and Huawei and while both face challenges, they also have growth opportunities globally.

Qualcomm vs. Huawei in competitive 5G marketplace

Qualcomm is a high-quality, very large and very successful American wireless leader over the last several decades. They offer chip technology to every handset maker as well as technology to wireless network builders around the world.

This is similar to what Huawei does, however this Chinese company has been under enormous and growing pressure from the US Government. Something that hinders it’s growth and is spreading globally.

Huawei HarmonyOS and Mate X folding smartphone

Because they can no longer work with US suppliers or use US technology, they can no longer use Google Android. So, they have developed their own HarmonyOS to replace it. The big question is will this be successful?

Their Mate X folding smartphone looks interesting as well. The folding screen smartphone is a new segment, however because of the ban, the US market may not see that either.

When I was recently at a small Huawei event in Washington DC, I had the chance to play with some of their new smartphones. While HarmonyOS could be successful, only Apple iPhone and Google Android have really succeeded in the marketplace to date.

Qualcomm 5G wireless racing on all cylinders with network and smartphone

After a period of uncertainty, Qualcomm seems to be hitting on all cylinders, especially in the last few quarters. If this continues, this will mean an incredible growth opportunity for Qualcomm going forward.

I get the sense that 2020 will be a banner year for both 5G and for Qualcomm in the various levels they participate in with the wireless transition. It is a massive upgrade that every network and handset maker will have to participate in during the next several years and real the action will start in 2020.

Understanding different slices of 5G pie

There several different slices of the 5G pie.

First, is the foundational layer. This means network technology. That’s the world where Qualcomm competes.

There are different players on this network side including Huawei, who also competes in other sectors as well, like smartphones. Qualcomm is number one and Huawei is a close second place.

There are also other competitors including Ericsson, Nokia and a few hundred others worldwide. The top 10 companies cover roughly 80 – 90 percent of this sector. Qualcomm and Huawei are the largest competitors.

Second, based on that network technology standard, you build your hardware. That means chipsets, handsets like smartphones and tablets, and base stations. These are three separate hardware pillars which sit on top of the foundation.

Third, carrier services ride on top of these hardware pillars. These are what AT&T Mobility, Verizon Wireless, T-Mobile and Sprint sell to the marketplace in the United States.

Fourth and last slice of the pie is what the vast majority of people think of as 5G. The finished product which is a combination of three different levels. So, as you can see, there are many slices to this pie.

Patent quality is much more important than quantity

Patents are one way we can evaluate leadership. However, we must not just count how many patents a company has. More importantly, we must consider how important those patents are to the changing industry.

Huawei has 1,500 patents in 5g. Ericsson and Nokia have roughly 1,200. Qualcomm has 1,000. All sound impressive. How many patents a company has is admirable but does not define a leader.

Meaningful patents are more important than simple number of patents.

This is the problem with the way various company’s market today. In some cases, they focus on the number of patents, as if all patents are equal in importance to the changing industry. They say a company with 1,000 patents is more important than a company with 100 patents.

That’s simply not true. Not all patents are created equal. Some are based on past technology. Some are simply not as important as others.

If the company with 100 patents creates a better industry with better products and better user experience, then they are obviously the industry leader, no matter how many patents they hold. The reverse can also be true for companies with the most patents.

If a patent is not core to the network, and is even outdated, it is quite often peripheral. In other words, it’s good for the number count, but not important as a leadership builder. Yet, that’s not the way it’s positioned in the marketplace with marketing and public relations.

That’s why it’s important to understand the quality of a patent is much more important than the mere quantity of patents a company holds.

Example, in this case Qualcomm has more of the most important patents, while Huawei has more patents in general.

Great news for USA in 5G wireless race

The 5G wireless growth story is just getting started and will last for years to come. Next year in 2020 we will see the 5G growth wave accelerate.

In this world, there are dozens of smaller competitors. The largest are companies like Qualcomm and Huawei. And as you can see, there are loads of growth opportunities ahead for both of them.

I really don’t think it matters which country is first to 5G. Every country is moving in the same direction for growth and success. There will be leaders and followers, but all will be important in their own country.

While the Qualcomm path is clearing, the Huawei path is getting messy with the ban. So, this is both great news for Qualcomm and for the USA since they are a US company competing in this international 5G contest.

Let’s revisit this topic from time to time. It will be interesting to watch this industry and the key players over the next few years. Watch who’s winning and who’s losing and why. Watch all the growth opportunities and challenges and how they are dealt with. So, stay tuned.

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