Non-binding deals valued at approximately $12 billion were signed between Qualcomm and three of the biggest smartphone vendors in China as the chipmaker moved to strengthen its ties with Chinese partners. This comes at a time when the chipmaker is involved in a patent disputes with one of its biggest customers, Apple, which if left unresolved amicably could see it lose substantial revenues.
The Chinese smartphone vendors that Qualcomm has formed a partnership with include Vivo Mobile Communication Technology, Oppo Electronics Corp and Xiaomi Corp. Under the deal the three will purchase smartphone components over the coming three years from Qualcomm.
Long business relationships
According to the chief executive officer of Qualcomm, Steve Mollenkopf, the chipmaker had been cooperating with the three device manufacturers for a considerable length of time and the company would continue making investments in the mobile and semi-conductor industry of the world’s second largest economy.
Currently Qualcomm is the biggest maker of mobile chips in the world. But in its most recent quarterly report, the company recorded a 90% fall in profits mainly due to the patent feud with Apple which has seen its chips and licensing business suffer. As the dispute rages Apple has persisted in withholding patent licensing fees owed to Qualcomm for both the iPad and the iPhone. Qualcomm is also under intense pressure from Broadcom, a competitor, which has announced intentions to acquire it at a price of $105 billion.
According to James Yan, Counterpoint Technology Market Research’s research director, the deals that Qualcomm has made with Oppo, Vivo and Xiaomi can assist in relieving the pressure Qualcomm is under and also help in boosting the confidence of investors in the chipmaker. Per Yan most of the smartphone companies in China depend on Qualcomm as their source of high-end chips. Thus, a deepening of the relationships between Qualcomm and the three smartphone makers will be viewed positively by investors of the chipmaker.
The deepening of the ties between the chipmaker and the three Chinese smartphone manufacturers is also likely to extend beyond buying of components.
“In addition to buying chips, the three companies are likely to work more closely with Qualcomm on research and development of new processors by a slate of efforts, such as giving immediate consumer feedback,” said Xiang Ligang, an expert in the telecom sector as well as the chief executive officer of Cctime, an industry website.
The deals were signed during the first state visit of U.S. President Donald Trump to China.