Qualcomm Remains Focused on Diversification Into Automotive and Data Center Processors

We expect Qualcomm’s chip business (QCT) and licensing business (QTL) to continue to generate healthy cash flow and reinforce the company’s narrow moat rating, as Qualcomm should remain an industry leader in chipsets and IP for 5G. Apple’s decision to build its own baseband chips, or modems, to displace Qualcomm will be a medium- to long-term headwind, but not a death blow, especially as Qualcomm is poised to grow in automotive and Internet of Things semis. In licensing, Qualcomm has withstood a host of government inquiries and customer pushback, and we think QTL will maintain a hearty stream of high-margin royalty revenue over time.