Qualcomm has long sought to gain traction with automakers as an avenue toward diversifying its business beyond the maturing smartphone market.
This week, the mobile technology firm — and San Diego's largest publicly traded company — laid out the milestones of its efforts so far, including a pipeline of orders from car makers that's reached $30 billion.
That's up from $19 billion in July.
"In a matter of two months, we added $11 billion to the pipeline," said Chief Executive Cristiano Amon. "The digital transformation of automotive is happening at an unprecedented pace, and it's happening in a number of areas."
At Qualcomm's inaugural Automotive Investor Day, company executives spotlighted how changes in the auto industry, including the new architectures required for electric vehicles, open the door to adoption of technologies ranging from advanced connectivity to machine vision to energy-efficient computing horsepower.
Qualcomm estimates its revenue potential per vehicle ranges from $200 for lower priced models to up to $3,000 on premium cars that use its full ADAS (Advanced Driver Assistance Systems) technology stack.
The company also detailed how it calculates the $30 billion backlog: First by securing a design win at a locked price, coupled with the estimated number of vehicles that the carmaker expects to produce over the life of the award.
Because autos are complex, it usually takes three to four years for Qualcomm's products to end up in a vehicle after a design win. The lifecycle of the award is typically seven to eight years.
In the short term, Qualcomm forecasts automotive revenue of $1.3 billion for its fiscal year ending Sept. 25 — a 30 percent increase over the prior year.
That's expected to grow to more than $4 billion by fiscal 2026 and exceed $9 billion by fiscal 2031. The company is working with 59 automakers globally, including BMW, Honda, Mercedes and Jeep/Fiat parent Stellantis.
Given current inflation and global economic uncertainty, investors are likely to remain focused on Qualcomm's much larger smartphone business in the near term, said Matthew Ramsey, an analyst with Cowen Research.
But he added that Qualcomm's auto business is "underappreciated" by investors despite its growing order book.
"In our view, Qualcomm is well positioned to sustain growth momentum as the company continues to diversity revenue beyond handsets to power the connected intelligent edge," said Ramsey.
Qualcomm's auto products span connectivity, the digital cockpit and ADAS — which can range from automatic braking/lane drift correction to hands-off-the-wheel autonomous driving.
Today, connectivity products drive Qualcomm's sales in automotive. It has been supplying cellular modems to carmakers since 2002 with General Motors' OnStar system. It also provides Wi-Fi and Bluetooth processors to vehicles.
"We are now in our 10th generation of (cellular) modem for the car," said Nakul Duggal, general manager and senior vice president of Qualcomm's automotive business. "We have shipped over 400 million Wi-Fi and Bluetooth products into automotive."
The company has expanded that connectivity technology. It now includes power line communications for electric vehicle charging; Cellular Vehicle to Everything chips that provide direct links between cars, bicyclists, pedestrians and streetlights/infrastructure; and advanced position/location technology.
"There is no one else who has that portfolio," said Akash Palkhiwala, Qualcomm's chief financial officer.
The company also provides digital cockpit hardware, software and services, which includes advanced digital instrument cluster; navigation/infotainment; smart mirrors; in-vehicle voice assistants; rear-seat entertainment; adaption to suit each driver and passenger; and car to cloud services/software updates. That business is expected to expand this year, with Mercedes-Benz using the technology in certain models in 2023.
And finally, there's ADAS. The company's Snapdragon Ride hardware and software platform connects sensors and information stored locally or in the cloud to create a vision system for the range of assisted driving/self-driver capabilities.
"Qualcomm estimates its total addressable market at $100 billion by 2030, broken down into $16 billion for connectivity, $25 billion in digital cockpit and $59 billion for ADAS/Autonomous Driving systems," said Melissa Fairchild, an analyst with Raymond James, in a research report. " We came away increasingly encouraged by the company's positioning in the market, reinforced by an accelerating design pipeline."
