Former Chief Executive Officer, Qualcomm
Qualcomm CEO Says the Relationship With Apple Is Good
Nov.19 -- Qualcomm Inc. Chief Executive Officer Steve Mollenkopf says the company still has a good relationship with Apple. He also says the business is strong in China. He spoke to Bloomberg's Caroline Hyde in New York.
About Steven Mollenkopf
In 2018, Mollenkopf expressed disappointment over the termination of Qualcomm's deal to acquire NXP Semiconductors, but noted that the company had grown its non-mobile revenue to $5 billion, a 70% increase since the deal was signed. He stated that Qualcomm did not see a change in China's posture toward the company despite the deal's failure, and described the business environment there as "very friendly" and "very constructive." Throughout 2019 and 2020, Mollenkopf described 5G as a fundamental technology change comparable to electricity or water, and cited an IHS study estimating it would generate $13.2 trillion in economic value by 2035. He said that 5G would disrupt industries including healthcare, energy, retail, and manufacturing. Mollenkopf also stated that he did not expect a separation of international 5G standards, saying it was not in the interest of companies like Qualcomm and Huawei to create such a divide. He characterized Qualcomm as the world's leading wireless technology innovator, citing $61 billion in R&D investment over 35 years.
Transcript (18 segments)
✨ AI-enhanced transcript with speaker attribution
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Interviewer0:00
For the past three years you haven't been having analyst calls or Investor Days to a certain degree because there's been so much else that you've been potentially distracted by. But clearly you haven't lost focus in terms of driving the technology. The issues, for example, with Apple, the litigation issues, after all that tension is put to one side, how is your relationship with Apple?
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Steven Mollenkopf0:20
I think it's good. I mean, it's really focused on the things that the two companies naturally do well together, which is work on products. And you know, when you get engineers talking to engineers, things work out pretty well, and that's where we are today.
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Interviewer0:33
So the 5G relationship can be a real springboard for you, do you think?
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Steven Mollenkopf0:36
I think so. I think, you know, the hallmark of our company, and really if you look at what 30,000 people do every day, is work on products. And when the engagement with a partner, whomever that partner would be, that's a very natural relationship for us. And since everyone's so interested in driving 5G and it's a long roadmap to do that, there's a lot of natural discussions going on in the product area. And that's a very comfortable place, I think, for both companies to be in.
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Interviewer1:03
What about the discomfort of the fact that they've bought the Intel modem chip part of the business? How long do you think this partnership will last between Qualcomm and Apple?
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Steven Mollenkopf1:10
You know, I think a long time. I mean, if you think about it, we were not unaccustomed to dealing with or working with a customer that maybe has multiple sources of supply, some of them could be internal. But what we find is that if we're competing, let's say, in the areas that we're very good at, and certainly we're very good at the modem, we figure out a way to continue to expand our business or continue our business. If that's been true for a decade or decade plus for us, and I don't think it'll be any different here.
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Interviewer1:38
What about the competition coming from China and, in particular, Huawei is becoming more self-sufficient? They're able to perhaps gain market share over there. You have a relationship with Xiaomi. How is that relationship and how is it with partners in China at the moment?
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Steven Mollenkopf1:49
You know, our business is actually quite strong. It's really driven by the same things that we talked about already—5G and all of these same kind of worldwide expansion of the opportunity of cellular. Of course, we have a very strong business in China, a lot of partners including Xiaomi that we sell to, and it continues to be a big, big opportunity and a big business for us. And I would say in some ways actually insulated from some of the trade discussions. If you look, there's a lot of expansion happening worldwide with 5G. In China, Qualcomm is a big piece of that, and it's a real kind of classic story of if you have technology that people want or need and you're the strongest partner or a strong partner, you have the ability to figure out ways that you can win-win. That's certainly been the case for us.
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Interviewer2:40
So you don't feel the business has been curtailed at all?
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Steven Mollenkopf2:42
We've had a little bit of the change in, I would say, the structure of the Chinese market as the Huawei handset business has really retrenched into China. It's changed the share a bit. And actually, what people have done in reaction is they said, well, what I'm going to do is I'm going to accelerate my 5G plans and I'm not going to spend so much time on 4G. And so what's really happened is it's accelerated the intensity of the 5G rollout, and not just at the high end—it's actually come down into several tiers below the premium tier. We're spending a lot of time getting the Chinese partners successful.
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Interviewer3:19
Do you think China is ahead of the US in terms of 5G?
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Steven Mollenkopf3:22
Well, I would say not from the technology perspective. And from behind the scenes, as we're all working together to make 5G, if China and the United States don't work together to make 5G an international standard, then you'll really miss an opportunity worldwide. And you're not seeing that—you're seeing people cooperate in terms of the technology. That's the standards body. But if you look at the deployment, the speed at which base stations are rolling out, China is actually going quite fast. I made some comments about how there were going to be 130,000 base stations by the end of the year and a million next year in China alone. Those are tremendously large numbers if you put it in comparison to what you see in the United States. But that doesn't mean the United States isn't going quickly as well. It's just that you're seeing, for the first time in cellular, China and the United States launching in the same calendar year. They used to be separated by two years or five years depending on the generation. But now everyone worldwide is trying to figure out how to get to 5G quickly, and that's been good for us.
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Interviewer4:18
What about Qualcomm's revenue? We've had years of negative revenue growth. Is 2020 the turning point for you?
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Steven Mollenkopf4:27
We think it's going to be a good year for both top line and the bottom line, really driven by this 5G and a lot of things that people already know about our business. They'll just see them happen throughout the year, and we're pleased to have that opportunity.
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Interviewer4:40
What don't we know about your business?
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Steven Mollenkopf4:42
I think what people don't realize is the opportunity that we have outside of the handset space. We have a tremendous technology pipeline as a result of being strong in the smartphone space, and it ends up that that technology is really valuable for us to disrupt these big industries that are being disrupted by 5G. So it's a great opportunity to have, to figure out how we leverage that technology pipeline into these new industries. And I think as people learn about that and they see kind of what we see, they'll be very excited about it.
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Interviewer5:20
Do you care about the share price?
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Steven Mollenkopf5:21
Well, I'm very happy where it is. You know, it always feels better to have it up, but you have to always be paying attention to the fundamentals of how the business continues to go. And sometimes it's reflected in the share price, sometimes it's not. Of course, we just finished a large buyback—one of the largest in probably corporate history. We bought back 20-plus percent of our shares because we thought that they were undervalued, and it seems like that's going to turn out to be a good investment. And you know, we keep driving 5G, we keep driving these opportunities, and we hope it's going to be reflected in the share price.