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The Secret Behind Qualcomm's Margins? Patents

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Re: The Secret Behind Qualcomm's Margins? Patents

#21

Post by gota »

whynot-123 wrote: post #4

I question who this article is for - having worked at Qualcomm, they beat you over the head on how their business is built on patents and how they were going to go belly up some 20 years ago had they not pivoted to this model. I can't imagine a single analyst or anyone interested in the company not aware of their business model in the same way it doesn't take long to figure out that Apple is in the business of sellin…

Do you recall what kind of bonuses they award to patent authors, if any?

Seems like the message behind 'this is core to our business' is easily communicated with financial incentives backing that up.

Re: The Secret Behind Qualcomm's Margins? Patents

#22

Post by FredPret »

axlee wrote: post #11
FredPret wrote: post #7

Qualcomm does have a nice margin (20%) [ https://valustox.com/QCOM ] but this is roughly in line with other big co's in the industry. Motorola makes 18% [ https://valustox.com/MSI ] Broadcom, Nvidia, and even Texas Instruments are around 40%! [ https://valustox.com/AVGO , https://valustox.com/NVDA , https://valustox.com/TXN ]. Intel and AMD bring up the rear with 1.8% and 0.5%. [ https://valustox.com/INTC , https://v…

It's so weird that an oligopolistic industry with the largest barriers to entry (your average CPU factory will cost $5/10+ billions, and that's just the factory) have the lowest margin, by far. Why is that so?

It might be that that's not as high of a barrier to entry as it seems. It would cost much more than that to replicate the engineering quality that goes into the Apple system of products for instance.

Re: The Secret Behind Qualcomm's Margins? Patents

#23

Post by CobrastanJorji »

mushufasa wrote: post #2

This is the patent system working as intended. Protection for technology development. You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario. I think the bigger problem with the patent system is the patent trolls. Please someone solve that problem.

I'm really interested in the "does it limit innovation" question. Is this a case where Qualcomm is really innovating and coming up with novel ideas, or are they just some of the first people to encounter particular problems and are simply solving them in fairly obvious ways that would occur to anyone else who encountered those problems? And if it's the latter, is it that they are doing those investigations because of the potential for patents? Would the pace of innovation be slower if those incentives didn't exist, or would they be faster because everybody else independently figuring those things out later wouldn't need to pay Qualcomm for decades? Is there some sort form of technology economy scholarship that could answer those questions?

If I had to guess, I'd guess that Qualcomm's patents over stuff like Wi-Fi and CDMA were probably more harmful than beneficial, but I'd love to know how one would analyze that.

Re: The Secret Behind Qualcomm's Margins? Patents

#24

Post by AmericanChopper »

avidiax wrote: post #6
mushufasa wrote: post #2

This is the patent system working as intended. Protection for technology development. You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario. I think the bigger problem with the patent system is the patent trolls. Please someone solve that problem.

Unless I misunderstand, they are codifying their patents into open standards like 5G. So you can't implement 5G without their patents. Add that to encouraging complexity (10,000+ pages of spec to do something outwardly similar to WiFi), and they have a really effective moat around an "open" standard. The entire protocol space is somewhat arbitrary. This is a bit like patenting a strategy in a board game you created,…

Getting your patents into standards is the fundamental business model of many patent holders. Not just for big business either, I’m friends with a bunch of PhDs/researchers who all have patents in their respective fields, they all know that they’ll only get paid for the patents that end up in standards, and devote a non-trivial amount of effort to pursuing that outcome.

Re: The Secret Behind Qualcomm's Margins? Patents

#25

Post by Guvante »

axlee wrote: post #11
FredPret wrote: post #7

Qualcomm does have a nice margin (20%) [ https://valustox.com/QCOM ] but this is roughly in line with other big co's in the industry. Motorola makes 18% [ https://valustox.com/MSI ] Broadcom, Nvidia, and even Texas Instruments are around 40%! [ https://valustox.com/AVGO , https://valustox.com/NVDA , https://valustox.com/TXN ]. Intel and AMD bring up the rear with 1.8% and 0.5%. [ https://valustox.com/INTC , https://v…

It's so weird that an oligopolistic industry with the largest barriers to entry (your average CPU factory will cost $5/10+ billions, and that's just the factory) have the lowest margin, by far. Why is that so?

They made a ton of money not long ago. 30% in 2021 eye balling it.

But all those factories have to be paid for no matter income.

So if income goes down your profit margin goes to terrible.

Re: The Secret Behind Qualcomm's Margins? Patents

#26

Post by ChainOfFools »

FredPret wrote: post #7

Qualcomm does have a nice margin (20%) [ https://valustox.com/QCOM ] but this is roughly in line with other big co's in the industry. Motorola makes 18% [ https://valustox.com/MSI ] Broadcom, Nvidia, and even Texas Instruments are around 40%! [ https://valustox.com/AVGO , https://valustox.com/NVDA , https://valustox.com/TXN ]. Intel and AMD bring up the rear with 1.8% and 0.5%. [ https://valustox.com/INTC , https://v…

Do you happen to know if it has always been this way, or is this the result of a gradual squeeze to a limit due to megahertz wars, increasingly shortened product cycles, and each companies product line structured in a way that tends to cannibalize their own sales before creating fresh profit.

And the decreasing return, in practical terms, for their customer base when upgrading since most basic computation tasks have long been solved and it's only exotic high-end workloads (plus constant bloat scaling factor that is largely a consequence of the added performance, rather than it's target) that benefit from added performance.

In short, was Intel making percent, or even single digit margins back in the 80s or even early '90s?

Re: The Secret Behind Qualcomm's Margins? Patents

#27

Post by Scoundreller »

axlee wrote: post #11
FredPret wrote: post #7

Qualcomm does have a nice margin (20%) [ https://valustox.com/QCOM ] but this is roughly in line with other big co's in the industry. Motorola makes 18% [ https://valustox.com/MSI ] Broadcom, Nvidia, and even Texas Instruments are around 40%! [ https://valustox.com/AVGO , https://valustox.com/NVDA , https://valustox.com/TXN ]. Intel and AMD bring up the rear with 1.8% and 0.5%. [ https://valustox.com/INTC , https://v…

It's so weird that an oligopolistic industry with the largest barriers to entry (your average CPU factory will cost $5/10+ billions, and that's just the factory) have the lowest margin, by far. Why is that so?

AMD is fabless since 2008/2009 (and sold its last stake in the subsidiary in 2012):

https://en.m.wikipedia.org/wiki/GlobalFoundries

Re: The Secret Behind Qualcomm's Margins? Patents

#28

Post by ryandrake »

mushufasa wrote: post #2

This is the patent system working as intended. Protection for technology development. You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario. I think the bigger problem with the patent system is the patent trolls. Please someone solve that problem.

> You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario.

Who is the "smaller player" in this scenario? $150 billion QCOM?

Re: The Secret Behind Qualcomm's Margins? Patents

#29

Post by Scoundreller »

whynot-123 wrote: post #4

I question who this article is for - having worked at Qualcomm, they beat you over the head on how their business is built on patents and how they were going to go belly up some 20 years ago had they not pivoted to this model. I can't imagine a single analyst or anyone interested in the company not aware of their business model in the same way it doesn't take long to figure out that Apple is in the business of sellin…

When was that? They had naming rights to a Major League Baseball & football stadium from ‘97 to 2017. Maybe good for recruitment but seemingly pointless on the consumer side to maintain the contract:

https://en.m.wikipedia.org/wiki/San_Diego_Stadium

But I get it that in sports, sometimes the big cheques are written because you can.

Re: The Secret Behind Qualcomm's Margins? Patents

#30

Post by scrlk »

avidiax wrote: post #6
mushufasa wrote: post #2

This is the patent system working as intended. Protection for technology development. You may say it limits innovation. But it also protects smaller players from investing in innovation, by de-risking that a big customer might copy them and destroy their business. Which is mostly this scenario. I think the bigger problem with the patent system is the patent trolls. Please someone solve that problem.

Unless I misunderstand, they are codifying their patents into open standards like 5G. So you can't implement 5G without their patents. Add that to encouraging complexity (10,000+ pages of spec to do something outwardly similar to WiFi), and they have a really effective moat around an "open" standard. The entire protocol space is somewhat arbitrary. This is a bit like patenting a strategy in a board game you created,…

Are the 5G patents licenced under fair, reasonable, and non-discriminatory (FRAND) terms?
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