Qualcomm is paving the way for more attainable 5G phones (QCOM)

Last week at the Internationale Funkausstellung (IFA) tech trade show in Berlin, Qualcomm announced plans to add 5G modems to its midrange Snapdragon 6 and 7 series chipsets.

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While Qualcomm already has high-end 5G chipsets, the X50 and X55, its newly announced offering should be an attractive offering for smartphone vendors hoping to introduce lower-priced 5G phones. The new chipsets, beginning with the 7 series, are slated to be included in phones launching in 2020. Twelve OEMs have plans to launch phones with the 7 series chipset, including Oppo, Realme, Redmi, Vivo, Motorola, HMD Global, and LG Electronics.

Here's what it means: Qualcomm's new chipsets will enable more affordable 5G smartphones to come to market in 2020.

Qualcomm's integration of a 5G modem into its midrange chipsets will enable device vendors to make cheaper 5G-enabled phones. Ensuring consumers have access to 5G phones at a range of price points is important to spur uptake of the next-generation standard, as it makes the devices more attainable for a larger pool of customers — Qualcomm believes the new 5G chipsets could expand 5G accessibility for over 2 billion smartphone users globally.

Current 5G smartphones are expensive and can set consumers back over $1,000 — Samsung's Galaxy S10 5G costs $1,299, for instance. We believe original equipment manufacturers (OEMs) including Oppo, Vivo, and Motorola that have already committed to using the 7 series chipset will likely release devices that will retail for less than the price of Samsung's flagship 5G phone, as their current flagship LTE smartphones cost less than Samsung's.

The bigger picture: Qualcomm's move to cater to midrange phones is necessary for helping the company maintain its leading market position.

While Qualcomm is already the world's largest supplier of mobile phone chips, servicing all segments of the market should be beneficial to maintaining its dominance in the 5G era. Qualcomm is a leader in the smartphone chipset market, and its designs are used by the world's leading smartphone vendors including Apple, Samsung, and Huawei.

The introduction of a high-end 5G modem for midrange devices will enable Qualcomm to stay at the forefront of the market as rivals introduce their own tiers of 5G chips. Last week Samsung unveiled its new Exynos 980 5G chipset intended for midrange phones. And rival chipmaker MediaTek launched a 5G chipset for sub-6 GHz networks in May 2019 that we predicted would also enable lower-cost 5G devices.

Qualcomm's decision to enable its chipsets to use both mmWave and sub-6 GHz 5G bands gives it an advantage over Mediatek as its chips can be used effectively in more localities. For instance, in the US, Verizon's and AT&T's early mobile 5G services rely heavily on mmWave spectrum.

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