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The Secret Behind Qualcomm's Margins? Patents

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Re: The Secret Behind Qualcomm's Margins? Patents

#91
post #18
post #15

Earlier quoted context omitted.

In fact they have the opposite effect on smaller players. The big players all have a few thousand (junk) patents and they make deals with each other to exclude the smaller players, who can't afford to file thousands of patents to join the club.

Or worse, a small player developing something and then finding out after the fact that a junk patent prevents them from even selling the thing to begin with.

See, this to me is the stupidest part of the whole system. Its essentially saying that 'first movers advantage' of an idea is something that can be protected for the life of a patent.

You can be tripped over by patents you don't even know existed in unrelated fields, owned by people who didnt even work with the patent. So stupid.

Re: The Secret Behind Qualcomm's Margins? Patents

#92
post #11
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 they had amortisation assets with the Xilinx acquisition. Otherwise they are doing in the industry standard 20% margin if I remember correctly.

Intel has been burning their cash to try and catch up in both Foundry and CPU business.

Probably better if those % were Non-GAAP numbers. But that is another debate.

Re: The Secret Behind Qualcomm's Margins? Patents

#93
post #58

In the west, Qualcomm won. There's basically no one else even trying to make medium or high end chips. The patent encumbrance seems total. Even the mega giant Apple is reportedly just giving up on trying. And at huge real world impact, as well as market drive. Apple designs tend to use a third or more of their phone motherboard's real estate supporting Qualcomm's forest of different parts required for cellular. It's…

I'd count Taiwanese MediaTek as "western", maybe at least half

Mediatek took more market share from Qualcomm every single year and yet somehow the narrative is still Qualcomm has a monopoly.

Re: The Secret Behind Qualcomm's Margins? Patents

#94

> Qualcomm’s licensing business is best-in-class and an example many companies can learn from. The last thing this world needs is more Qualcomm. I'd rather see the entire patent system go down in flames than this utter crap continuing. Qualcomm has been a vampire on technology for years now, it's time for this company to end once and for all. We have to get technology under the people's control again - it is ridiculo…

> it is ridiculous and stifling progress that governments legally prescribe standards that are not open to everyone to implement Standards-essential patents are required to be licensed this way. It's called "RAND licensing": reasonable and non-discriminatory. Everyone who participates in, say, ISO or the ITU, is required to fill out a form documenting if they own part of the standard and what terms they agree to lice…

Thank you for your very thorough response to my rant, appreciate the insight - particularly the explanation why it is so rare to see mobile data modems in laptops (which to be honest leaves me even more enraged at the patent model).

However, I do disagree on some points:

> They pay the people doing research for the standards on a "for exposure" basis[3]: they get their patented inventions in the standard, and as payment for their work, they get to charge a $2/unit royalty on every user, which they can then pour into research that yields more patents.

The problem at the core IMHO is that Western nations removed themselves from R&D financing following the end of the Cold War, and instead large corporations and foreign nations moved in that had other interests in mind than the common good.

> Every time they try someone says "I own this, here's your royalty bearing RAND license", and the standard is dead in the water.

There used to be at least three competing patent pools for h264 and HEVC (until Velos Media disbanded). That even the largest commercial standardization enterprises like MPEG could not make sure that there was at least exactly one consolidated license shop just shows to me how nuts the entire patent situation has become.

> But at the same time, cellular radio technology is quite possibly the worst thing to leave to amateur[5] software development. There's a lot of very expensive lab tests you need to do to make sure the technology works, to ensure hundreds of devices can communicate with the towers without jamming each other, and to ensure each one of those devices isn't pumping the user with shittons of radiation. There's a lot of boring research and regulation needed to make radio work at all, it's not something that can be hacked together in a weekend and collaborated on over time.

Actually it can. Fabrice Bellard (yes, the same person as ffmpeg and qemu...) wrote an entire 4G/5G tower implementation that he currently sells via his own company, there's a FOSS project implementing the core services for a 5G network [2] and I think Osmocom has also made some progress in getting some sort of client side support.

Yes, the interop and jamming concerns are still valid, but those with enough brains to work in this field in the first place generally tend to know WTF they're doing - and commercial efforts definitely have the resources to properly work without endangering anyone.

The telling thing for me is that there is virtually only Qualcomm and Mediatek around who sell high performance modems, in addition to Samsung who mostly keep their stuff reserved for their own phones. Where's Apple? Where's Broadcom? Where's anyone to compete with Qualcomm's extortion tactics and Mediatek's IMHO embarassing code quality (just look at one of their Android BSP packages and the kernel patches they do)? For me, this state of the market shows that there is something seriously broken, and given that Apple has more cash on hand than entire countries' GDP and some of the most capable semiconductor engineers in the world managing to kick the arses of behemoths like Intel, the only explanation is the patent minefield.

And I'd like to address this as well:

> Which has resulted in a number of "ubiquitous" OpenGL extensions that aren't in the standard solely because they cost money to license, but can be accessed through de-facto standard extension names

Yet another very fine example how the patent system that was supposed to further innovation actually stifles it.

The system is completely broken.

[1] https://bellard.org/lte/

[2] https://open5gs.org/

Re: The Secret Behind Qualcomm's Margins? Patents

#95
post #11
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?

Intel’s business model is heavily based on reinvesting almost all profits into research on a node that’s 3-5 years out.

They’ve been betting the farm on delivering the highest performance chips on the market for the last 25 years.

For many years, they were unopposed technically. Now, though, their technological advantage is starting to erode.

Intel is in deep shit as a business. How much runway they have is anyone’s guess. But they’re in trouble.

Re: The Secret Behind Qualcomm's Margins? Patents

#97
The chip is the most important part of a computer, but most chip companies do not capture much of the value created with the computer. An OEM pays about as much for an intel i3 chip as they pay of a windows license, and intel actually has to produce the chip.

This is why Apple has been so successful with Apple Silicon: Apple is able to capture way more of the value created with Apple devices, which is why they're able to invest more in chips then Intel/AMD and yes, even Qualcomm.

Re: The Secret Behind Qualcomm's Margins? Patents

#98
post #11
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?

Margins are not determined by how many companies sell certain products, but rather by willing the individual buyer is to consider different products. Both Apple and Microsoft can charge high prices for MacOS and Windows, because most Mac and Windows users will not consider another OS. But most people who currently use a laptop with an Intel chip will consider a laptop with an AMD chip, and vice versa, even speaking of an Intel user or an AMD user feels wrong.

Re: The Secret Behind Qualcomm's Margins? Patents

#99
post #11

Earlier quoted context omitted.

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?

Margins are not determined by how many companies sell certain products, but rather by willing the individual buyer is to consider different products. Both Apple and Microsoft can charge high prices for MacOS and Windows, because most Mac and Windows users will not consider another OS. But most people who currently use a laptop with an Intel chip will consider a laptop with an AMD chip, and vice versa, even speaking o…

> Margins are not determined by how many companies sell certain products

Rule 1: Margins are as large as a company can get away with them being

Rule 2: The primary thing that brings down prices (thereby shifting consumer demand) is another company competing offering lower prices

Rule 3: Fewer companies are able to maintain a unified front of higher-than-required margins for longer, owing to fewer individuals needing to agree to make the prsioner's-dilemma-esque status quo hold. Any one of them can take business from the others by lowering their prices, but at the cost of reduced margins for everyone (including themselves).

Margin pricing in general is "sticky". When it goes down, its difficult for it to rise. That's why companies jump on inflation as an excuse to raise prices - usually much more than inflation. Similarly, see power prices in Europe after ukraine war - record profits despite attributing price rise to rising supply chain costs.

Yes, this doesn't follow your economics 101. This is economics 102.

As soon as there is an "excuse", companies make massive profits and margins rise. This will also cut into demand as price-sensitive consumers drop out. This is seen as fine. Sometimes, it is better to make more money from less work than grow less efficiently.

Re: The Secret Behind Qualcomm's Margins? Patents

#100

Earlier quoted context omitted.

Margins are not determined by how many companies sell certain products, but rather by willing the individual buyer is to consider different products. Both Apple and Microsoft can charge high prices for MacOS and Windows, because most Mac and Windows users will not consider another OS. But most people who currently use a laptop with an Intel chip will consider a laptop with an AMD chip, and vice versa, even speaking o…

> Margins are not determined by how many companies sell certain products Rule 1: Margins are as large as a company can get away with them being Rule 2: The primary thing that brings down prices (thereby shifting consumer demand) is another company competing offering lower prices Rule 3: Fewer companies are able to maintain a unified front of higher-than-required margins for longer, owing to fewer individuals needing…

My economics 101? Your comment is a random rant that doesn't engage with my comment or with the broader discussion.
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