The rise of the mobile chip giant Qualcomm (Part 2)

The previous article showed the creation of the mobile chip giant Qualcomm from the perspective of Jacob's career development. The valuable wealth and experience gained at Linkabit gave Dr. Jacob a long-term vision. He resolutely plunged into CDMA technology and tried every means to promote it vigorously. This article tells the difficult journey of CDMA's emergence and the main features of Qualcomm's business that have long made it a brilliant company today. Qualcomm not only pioneered a technology, but also used this technological advantage to become a Fortune 500 company from a technology workshop.

Cellular is booming, but CDMA is struggling

At Qualcomm, novel ideas are constantly emerging. No idea will be shelved because of the company's different focus. There are a large number of applications waiting to be reviewed, and many core members of Qualcomm use their spare time to explore new ideas. This opportunistic approach to new inventions has brought Jacob back to a specific field - mobile voice communication systems. Although Qualcomm engineers spent most of their early careers developing military communication systems, they have always paid close attention to research and development in related commercial fields, such as satellite phones, wireless local loops (using wireless instead of land lines to connect residential and public telephone switching networks), and cellular phones.

The concept of cellular was first developed at Bell Labs in the 1940s. Cellular communications were radically different from the conventional wisdom about wireless communications at the time. Despite such a huge leap in capacity and great advances in mobility, cellular networks could not keep up with the almost unreal level of demand from consumers.

In the cellular industry, many people quickly realized that their efforts to add capacity on analog networks had only given them a temporary reprieve. Worse, carriers were still barely scratching the surface when it came to consumer penetration. The nation's wireless networks, especially in large cities like New York and Los Angeles, would be overwhelmed by new subscribers in the coming years. Network operators needed a new technology that would give them many times the capacity of their current subscribers, as well as new features. Additional bands and tricks alone were not enough for the frequency-based wireless cellular technology of the time; something more fundamental and digital was needed.

No one knew more about digital communications than Irwin Jacobs, Andrew Viterbi, and the rest of the Qualcomm team. And Qualcomm was deeply rooted in digital communications. Like others in the cellular industry, they believed that time division multiple access would soon reach its limits in the growing cellular market, and they proposed that code division multiple access (CDMA) be a true spread spectrum technology in mobile networks, which was completely different from other approaches then being considered for cellular systems.

Dr. Jacob recalled this experience and admitted that before Qualcomm, some people had considered CDMA, but at that time they thought that this technology would take a long time to study before deployment, and coupled with other difficulties, CDMA was neglected until Qualcomm intervened. Qualcomm attached great importance to this technology because "the CDMA system has a great advantage in spectrum utilization and can use spectrum resources more efficiently. In essence, it can support more users and has great commercial value," Dr. Irwin Jacob emphasized. With goals, manpower and funds, Qualcomm devoted itself to the research and development and promotion of CDMA.

However, there were so many difficulties and obstacles in the promotion process that only Qualcomm's startup team was "still in fear"...

Qualcomm began pitching its code-based signaling approach to cellular operators and manufacturers as an alternative to time-based methods. The proposal was so unusual and so different from familiar concepts and approaches that it shocked many simple-minded people. Jacobs and Viterbi were not surprised by the initial reaction, because code division multiple access (CDMA) and spread spectrum technology in general had never been warmly welcomed by the commercial sector. Most people simply believed that spread spectrum technology was only suitable for expensive military systems that required high security but not high capacity. However, part of the resistance Qualcomm faced was a simple "we've done this before" mentality. In this environment, Qualcomm's transition from a military contract executor to a developer of commercial products faced more than just technical challenges in exploring commercial uses of code division technology. It had to convince the world that code division was a real and practical approach outside the scope of military use.

Two innovative applications help CDMA usher in a turnaround

Qualcomm's idea was not adopted, and the Telecommunications Industry Association (TIA), with the support of the Cellular Telecommunications Industry Association (CTIA), voted in January 1989 to select the Time Division Multiple Access (TOMA) digital communication method for cellular systems. Qualcomm was obviously not happy about this. The spending floodgates opened to upgrade the network, but not for Jacob's CDMA system. In just the first inning of the cellular game, Qualcomm was already trailing by double digits. It looked like the end of the road for Qualcomm's cellular CDMA. People thought it should go back to satellite communications and government contracts, but Jacob didn't think so. He had other plans.

Qualcomm has not given up on CDMA and has been working on a variety of measures to solve the near-far problem. In just a few months, Qualcomm developed a fairly simple power feedback control method that can be easily implemented on mobile phones. But this is not enough. In CDMA systems, users use the same frequency band in all cellular areas, so the method of moving between different cellular areas is still unclear. To solve this problem, Qualcomm proposed a more advanced method called "soft handoff" to be used in conjunction with its power control scheme.

Thus, power control and soft handoff methods working together made CDMA a major breakthrough, although they would not have achieved much if they worked alone. By going beyond the old standard handoff method, Qualcomm was able to avoid expensive and complex solutions in other areas. Once again, Qualcomm engineers achieved unimaginable results through innovative thinking. Then they introduced a method called variable rate coding (YRC), which, when used with many other innovative methods for handling mobile voice calls, Qualcomm's CDMA is increasingly able to meet the capacity and quality needs of operators.

During the promotion process, Jacob recalled: In order to show customers the functions of CDMA, Qualcomm repeatedly invited colleagues in the industry to visit its mobile phone demonstrations; when promoting the CDMA protocol standard, Qualcomm employees also visited and persuaded customers everywhere; Qualcomm also had foresight about the Chinese market. As early as 1993, he came to China to give a speech on CDMA and tried to persuade government officials, academic leaders and industry representatives who attended the meeting. With the full support of Qualcomm colleagues, CDMA finally became a global standard in July 1993, opening the door to the world.

After the standard was determined, promotion became much simpler. In November 1995, the first CDMA system was commercially deployed in Hong Kong. At that time, the industry was still quite controversial about CDMA; in 1996, the other two CDMA networks were deployed in South Korea and the United States respectively. But at this time, Qualcomm faced a new problem, which was to persuade mobile phone manufacturers to produce mobile phones. In order to promote the CDMA network, Qualcomm produced CDMA mobile phones in its own factory in San Diego and then sold them all over the world. At the same time, Qualcomm also produced chips and system equipment. Under this "soft and hard combination" promotion method, by the end of 1996, the number of CDMA users worldwide exceeded 1 million. As for the Chinese market, Qualcomm did not cooperate with China Unicom until 2001 to introduce CDMA to China. At this time, CDMA can be said to have won the first battle.

Qualcomm's continuous efforts in producing CDMA equipment have indeed brought benefits to customers and helped itself in return. Although production is not Qualcomm's core competitiveness and Qualcomm does not have an advantage over large manufacturers, Qualcomm's involvement in the production of CDMA equipment has promoted the growth of CDMA.

There are sacrifices and gains, and a clear future direction

After CDMA's performance was proven, its global development trend was also very good. For Qualcomm, what needed to be considered was how to better promote the development of the industry and drive its own business to a higher level. This required wise leaders and shrewd choices: choosing the right one would bring you one step closer to success; choosing the wrong one would lead to eternal damnation. Qualcomm was lucky to be the former. The key to this was closely related to Qualcomm's abandonment of the mobile phone and system equipment businesses and its focus on new business models.

It is precisely because of the complementary nature of Qualcomm's software and hardware that CDMA has been recognized worldwide. But after gaining market recognition, this strategy seems to have a new bottleneck - those mobile phone manufacturers and equipment manufacturers who have obtained Qualcomm's authorization will worry about the competition from Qualcomm, which also makes base station equipment and mobile phones. They believe that if only intellectual property rights are authorized, no matter how attractive it is as a business model, it does not seem to be strong enough to guarantee success. If nothing can be provided except written knowledge and experience, it will be difficult for Qualcomm to reach the critical scale of corporate development and it will be difficult to continue to develop its business with only authorization. But broad authorization is an important link in quickly making most companies in the industry become its allies, so this must be an important part of the business. In order to avoid this situation, Qualcomm resolutely made subtractions.

In 1999, Qualcomm sold its mobile phone business and system equipment business respectively, and has since focused on the development and evolution of technology, the research of semiconductor chips, and the advancement of software. After undergoing drastic reforms, Qualcomm has entered the new century with a new image. In the words of Irwin Jacobs, Qualcomm in the new century will focus more on bringing more companies in the industry into the entire ecosystem to make CDMA more successful. Qualcomm has also gradually formed two major businesses: technology licensing (QTL) and semiconductor chips (QCT). For Qualcomm, this "subtraction" also allows them to focus more on human and material resources, and their development can be said to be rapid.

Technology licensing business

Qualcomm's licensing business has two main goals: one is to promote the company's development and CDMA research and development; the other is to compensate for the company's long-term development. The first R&D expenses were included in the licensing transaction (and still are today) because Qualcomm needs funds to pay engineers and other employees. In addition, if the partner company has already invested in Qualcomm's CDMA technology, it will continue to invest in research and development. Therefore, licensing and R&D expenses are the main aspects of all Qualcomm's early joint venture negotiations.

This also earned Qualcomm a good return. According to Qualcomm's financial report, about 1/3 of Qualcomm's annual revenue comes from the QTL business, and 2/3 comes from the QCT business. The former and the latter account for 2/3 and 1/3 of Qualcomm's profit income respectively. It is with the support of these two businesses that Qualcomm has been ranked first in the global Fabless list in the past few years.

Some people joked that Qualcomm is a "rogue" in the patent world. Why is it called that? The main reason is Qualcomm's charging rules for patent licensing. Half of the charging rules are based on the proportion of patents involved in the product, but Qualcomm is different. Qualcomm charges based on the base of the product. Simply put, if a mobile phone sells for $100, Qualcomm will charge 5 yuan in patent fees. This is why Apple and Qualcomm were fighting over patents some time ago. The industry is accustomed to calling Qualcomm's patent licensing fees "Qualcomm taxes." It can be said that patents are the "Panama Canal" of the Qualcomm empire and the money source of Qualcomm.

Today, Qualcomm has about 130,000 patents, including those being applied for and those that have been authorized. These patents not only cover the field of cellular technology, but also include connectivity, imaging, radio frequency, power supply, software, security and multimedia. With the support of these patent technologies, the electronic world will reach the next peak.

Semiconductor chip business

The most famous processor in this field is the Snapdragon processor, which is the symbol of high-performance mobile phones. Especially its high-end 8 series, which is a must-have for Android flagships every year. Now Qualcomm has launched the Snapdragon 855 that supports 5G. This performance beast not only has a CPU, but also integrates many units such as DSP, GPU, Gigabit LTE and ISP. The shock brought by such high integration is unimaginable in the past. The support brought by this chip to the terminal is far more than just a smartphone. There is no doubt that Qualcomm is the representative of the Android chip industry. The achievement is inseparable from Qualcomm's close cooperation with the industry.

Qualcomm has been working closely with industry chain companies, which is the key to ensuring that Qualcomm can maintain its leading position in chip technology for a long time. In addition, in the process of cooperating with companies, Qualcomm can also help partners improve. For example, in the process of cooperating with manufacturers, it can guide the development of wafer fab processes. In addition, since they have put forward higher integration and performance requirements, this makes manufacturers and related companies improve to meet Qualcomm's needs. This kind of cooperation can promote the progress of the entire industry.

Business transformation and innovation

Qualcomm had to go through several major and sometimes painful corporate transformations to move innovative ideas from theory to commercial reality, which fully utilized the abilities of Dr. Jacobs and senior management and pushed them into some unfamiliar areas. When they quickly entered the cellular network industry, they established many new and important partnerships to help promote code division multiple access wireless technology solutions. When Dr. Jacobs and senior management had to build a large number of products to support the industry, they spent a lot of extra time negotiating joint ventures that provided the necessary resources.

Therefore, due to the changes in the integration of third-generation wireless services and other technologies, Qualcomm has changed its strategy and gradually penetrated into markets other than the traditional CDMA field. The ability to adapt to the new environment and effectively acquire new customers will once again verify Qualcomm's strength. With the company's past successful experience and firm attitude, Qualcomm certainly has a great opportunity to take risks again and achieve ambitious goals. No matter how difficult the challenges are now, Qualcomm will lead the entire wireless industry successfully into the future.

Irwin Jacobs emphasized that even though CDMA later became the main wireless communication system in the 2G and 3G eras, Qualcomm still faced severe challenges because other communication systems had already been deployed at the time. For example, the policy risks of entering various countries, the impact of government relations between countries, and the pessimism of Wall Street investors, etc. However, Qualcomm always persisted, believed in itself, and finally found an unprecedented path.

Today, under the organization of 3GPP, mobile networks have gradually moved from 2G to 3G, to 4G, and are now preparing for 5G, and Qualcomm has made great contributions in this process. Qualcomm can be seen behind almost all wireless communications, and in many fields, Qualcomm even has an absolute advantage.

Sticking to your beliefs, overcoming numerous difficulties, moving forward continuously, and ultimately gaining recognition, this is Qualcomm's secret to success.

references:

"Qualcomm Formula", Ikkyu Intellectual Property Research Institute, Sohu Digital, Electronics Fans, Semiconductor Industry Observer, etc.