Samsung Q3 17 – Spring clean.

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Now is the best time to clean house.

  • Samsung’s chip business has driven yet another mighty set of results making it the perfect time to deal with all of governance issues that continue to plague the company.
  • Q3 17 revenues and EBIT are expected to be KRW62.0tn / KRW14.5tn slightly ahead of estimates at KRW61.8tn / KRW13.4tn.
  • While these results are not very far ahead of expectations, Samsung has generated 2.8x more EBIT than Intel is expected to have generated in the same period.
  • This will put Samsung’s chip business comfortably in the global No. 1 slot where it looks it is going to stay for some time.
  • Handsets have also had a good quarter driven by its well-received flagship products but the real star of the show remains semiconductors.
  • Typically, an environment of limited supply and strong demand is ruined by over enthusiastic capacity additions but I see the semiconductor industry being a little bit more cautious these days.
  • I think this is due to the prohibitive cost of building a cutting edge fab and the fact that worries regarding Moore’s Law grinding to halt are now firmly on the investment horizon.
  • The big question mark remains China which has said that it wants to create its own semiconductor industry (not including Taiwan) and aggressive roll-outs there could cause yet another demand / supply imbalance.
  • Either way this will take some time meaning that Samsung’s chip business is likely to continue generating vast profits for at least 12-24 months.
  • Against this backdrop, the outlook for the shares remains pretty steady which makes it the perfect time to deal with the corporate governance issues that have been plaguing the company.
  • This appears to have begun in earnest with the resignation of co-Vice Chairman Oh-hyun Kwon who has also been serving as CEO.
  • With Jay Y Lee also likely to out of the picture for a few years, the way is open for new blood to take the helm of Samsung and clean-up these long-standing issues.
  • This is becoming increasingly important as the long-term discount in Samsung’s valuation has evaporated over the last 18 months.
  • This means that the murky way that the company is owned, controlled and managed needs to be changed into something much more transparent.
  • Failure to do this effectively is likely to result in a big correction in the valuation as soon as the current business momentum hits a bump in the road.
  • I am hopeful that today’s resignation is just the first step in this direction and that much more is to follow in the next 12 months.
  • While the company is firing on all cylinders, tolerance to the skeletons as they leave the closet will be at its highest.
  • Samsung’s timing looks to be excellent.

 

 

Huawei – The AI of others

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Huawei needs its own algorithms to succeed in AI.

  • Huawei abandoned its habit of launching a new phone at IFA 2017 and instead focused on a new chipset called the Kirin 970 that promises all usual the bells and whistles as well as artificial intelligence.
  • Huawei made some bold claims regarding its hardware performance as well as power efficiency thanks to its 10nm geometry but I get the impression that it intends to drive differentiation through its embedded neural processing unit (NPU).
  • This is a part of the chipset that has been specifically designed to run AI algorithms more quickly and more efficiently than running them on the CPU or in the cloud.
  • The result should be faster processing of AI tasks resulting in better services that drain the battery less.
  • This is all well and good but what really matters is what users of Huawei devices will notice, to whom they will attribute the value created and for what they will pay.
  • The Kirin 970 NPU supports Huawei’s own APIs as well as Google’s TensorFlow and Facebook’s Caffe 2 meaning that AI created by these two ecosystems will also run optimally on the NPU.
  • The idea is that the algorithms are created in the cloud, downloaded to the device where they run locally improving both speed as well as privacy as the data will not leave the device.
  • I have long believed that this type of AI will be limited to functions where the algorithms are very well established.
  • In the early days this is likely to be image processing such as facial recognition or computer vision.
  • This is where I think Huawei will begin to struggle as I believe that it has very little AI of its own meaning that the Kirin 970 will spend almost all of its time processing the AI of others.
  • The AI of others will be running on the devices of all of Huawei’s competitors meaning that Huawei will be competing purely in hardware performance.
  • When other chipmakers come to market with their own NPUs, it will then be a straight fight based on hardware performance.
  • When it comes to AI, users are going to place value of the depth, richness and intuitiveness of the services themselves meaning that to improve its differentiation, this is where Huawei needs to compete.
  • Of this there is no sign meaning that while the Kirin 970 may help Huawei increase market share, it will do nothing to enable it to increase the prices of its phones.
  • The net result is that until Huawei can outsell Samsung by a factor of 2 to 1 in terms of volume, it will really struggle to increase its margins beyond the 2-4% that everyone else (except Samsung) is stuck with.
  • Google is the only company that really makes money from Android but I continue to be cautious as its valuation is already pretty full.
  • Tencent, Baidu and Microsoft remain my top choices.

 

Samsung Q2 17A – Just chipper.

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Samsung heading for No. 1.

  • A truly mighty performance from Samsung puts it well on track to promoted to being the largest semiconductor company in the world by revenues this year.
  • Samsung has reported preliminary results for Q2 17 with revenues / EBIT expected at KRW 60tn / KRW 14tn nicely ahead of consensus of KRW 58.4tn / KRW 13.0tn respectively.
  • As always with Samsung, the market has already taken into account the discrepancy between published expectations and the real figures, resulting in no meaning movement in the shares after the announcement.
  • Despite the recovery of the handset business following the Note 7 disaster, these results are primarily driven by semiconductors where Samsung is extending its dominance while its competitors flounder.
  • The difficulties that Toshiba is going through and the uncertainty surrounding the future of its flash memory business has certainly done Samsung no harm so far this year.
  • This combined with a rapid move away from magnetic hard drives to solid state storage has meant that demand has been so strong that both volumes are growing very quickly and price declines have slowed.
  • I suspect that around 50% (if not more) of EBIT has been derived from the semiconductor business while the handset business has remained solid but much more pedestrian.
  • The outlook remains very strong as the smartphone market is seeing a temporary blip in growth while the trend towards solid state storage looks set to continue for some time to come.
  • Consequently, it looks pretty certain that the next two quarters are likely to see Samsung post two more record levels of profit and cash generation.
  • However, this has been widely flagged already and with the shares at KRW2.4m, the valuation argument for holding a big position it not nearly as great as it was.
  • Consequently, I remain pretty ambivalent to Samsung, preferring Tencent, Baidu and Microsoft.

 

ARM vs. Intel – Pause for thought.

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Intel shoots at Asia rather than at home.

  • With another attempt to replace Intel chips in PCs on the cards, Intel has moved to protect its position with a not so subtle reminder that its instruction set is covered by a large number of patents.
  • The 40th anniversary of the x86 processor is approaching and to celebrate, Intel has published an editorial extolling the innovation that has made x86 by far the dominant processor in both PCs and servers.
  • The problem has always been that the x86 was never designed to run on battery powered devices meaning that it consumes meaningfully more power than its ARM equivalent.
  • Consequently, there has always been a desire to allow battery powered PCs (laptops) to use the ARM processor as this would, in theory, meaningfully extend their battery life.
  • The first attempt to do this was Windows RT which involved adapting the Windows software to run on the ARM instruction set which failed miserably.
  • The current effort involves an emulator which takes the ARM instruction set and translates it into x86 so that the regular Windows software and applications can run with no modification.
  • However, this proposition already has question marks around implementation and performance (see here) and now Intel is muddying the waters further with its patent pool.
  • Intel has filed around 1,600 patents (533 families) on its x86 instruction set of which around 1,000 (333 families) I estimate are still enforceable.
  • It seems pretty likely that an emulator that makes use of the x86 instruction set will infringe these patents and hence would need a licence from Intel to operate.
  • There are two reasons why I think this warning is not aimed Qualcomm and Microsoft but rather others who may be considering taking a similar route.
    • First: Qualcomm knows and understands more about IP licencing than almost anybody and consequently I think that it will have foreseen this issue.
    • Hence, I think that, together with Microsoft, it will have sorted these issues out with Intel before officially announce its progress down this route.
    • Second: in its 8th June comment, Intel states that “there have been reports that some companies may try to emulate Intel’s proprietary x86 ISA without Intel’s authorization”.
    • At the time of writing, the co-operation between Microsoft and Qualcomm to use an emulator to get Windows running on x86 was not a report, it was an announced fact.
  • This combined with my view that Qualcomm is likely to have sorted the IP issues out in advance, leads me to believe that this warning is targeted elsewhere.
  • Hence, I do not think that this will impact the effort by Qualcomm and Microsoft which, in my opinion, remains completely dependent on the implementation.
  • Emulators have a very bad track record in terms of consuming extra resources which to date, has rarely resulted in any real benefit accruing to the user.
  • I still think that to succeed, these devices must perform at least as well as an Intel powered device at the same price point and have better battery life.
  • I think that this is the minimum requirement as without this, there is no incentive for a user or an institution to purchase the device.
  • This is what I think Microsoft and Qualcomm will be most concenred about but for the other chipmakers in Asia Intel’s comments will have given them pause for thought.

Samsung Q1 17 – Roaring 40s

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Semis is a powerhouse with growth and margins in the 40s.  

  • Samsung reported a superb set of results driven largely by semiconductors but announced that it would not be re-organising into a holding company much to the dismay of some activists.
  • Q1 17 revenues / EBIT were KRW50.6tn / KRW9.9tn compared to consensus forecasts at KRW49.5tn / KRW9.18tn.
  • At the same time Samsung announced its first ever dividend of KRW28,000 (annualised) giving a yield of around 1.4%.
  • It also announced that it would keep its promise to cancel all of the treasury shares that it has bought resulting in a further return to shareholders of KRW40tn.
  • This is a promise that many US and European companies implicitly make when they ask s for permission to buy back shares but in practice, rarely keep.
  • For me, this is far more important to shareholder value than re-organising into a holding company.
  • I view holding companies as conglomerates where good intentions are, more often than not, ground down into inefficiency, bureaucracy and slowness.
  • Consequently, I do not see Samsung’s reticence to become a holding company as a bad thing for shareholders.
  • Semiconductors was the powerhouse of these results posting 40% YoY growth with EBIT margins of 40% making up 63% of total profits.
  • The handset business was much less exciting with a 17% YoY decline in revenues and EBIT margins of 9.2%.
  • Even if I reverse out the KRW1.0bn hit that was taken during Q1 17 in the handset business for the Note 7 disaster, I still have only 14% EBIT margins.
  • While Samsung’s margins in Android are exemplary compared to its Android competitors, its semiconductor margins are industry leading, handsomely beating even Intel at the operating level.
  • Consequently, I think that it is this business that will be the main driver of performance for the balance of 2017.
  • In that regard, the outlook remains good with steady demand coming from servers and handsets and no imminent threat to its domination of the memory industry.
  • The implosion of Toshiba and potential change in ownership can only continue to benefit Samsung Semi in 2017.
  • This could be further enhanced should Apple decide to move to OLED in its next iPhone generation for which Samsung is the most likely supplier.
  • This should help provide some stability to the display business which is notorious for its wild swings between profit and loss.
  • The net result is that the outlook for Samsung this year remains very healthy with only one uncertainty on the horizon.
  • This is the unquantified damage that has been done to the brand following the Note 7 disaster raising questions with regard to shipments of the Galaxy s8.
  • Despite this, the initial signs are good as the reviews of the device are overwhelmingly positive despite the software shortcomings (see here) and pre-orders are pointing to no lasting damage having been done.
  • Admittedly, I put the brakes on this one too early by deciding to call time in Q4 16 when the scale of the Note 7 disaster became apparent.
  • Now with the share price above KRW2m, the opportunity for further upside is less obvious leaving me to continue preferring Microsoft, Tencent and Baidu.

Intel vs. ARM – Juicy target.

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Intel’s 60%+ gross margins are a juicy target.

  • To date, Intel has been able to brush aside any threat to its dominance in processors for the data centre, but with Microsoft deciding to port Windows Server and Azure to ARM, the threat is back.
  • The data centre has long been the saviour of Intel’s financial performance as it has been supporting the company as the legacy PC business has been going through its rough patch.
  • ARM has taken pot shots at the data centre before with semiconductor makers announcing chips, but this has never gotten off the ground.
  • I have long been convinced that the main reason for this is software as many servers run huge amounts of legacy software that will need to be ported in order for an ARM based server to work.
  • Until now, no one has been willing to do this.
  • This is why the demonstration of Windows Server running on the ARM based Qualcomm Centriq 2400 is so significant.
  • If this can shown to run with similar performance characteristics to Intel, then it would make a lot of sense for Microsoft to begin migrating its servers over.
  • There are some signs of this already and Hewlett Packard mentioned weakness in a large customer on its most recent earnings call which is widely believed to have been Microsoft.
  • However, this solution is still internal only to Microsoft and I doubt that it will be willing to take any risks until it is sure that it can work just as well as Intel.
  • The key to this is performance and here Intel has historically beaten ARM-based processors hands down time and again.
  • This is not because ARM processors are weaker than Intel per se, but because the implementation of x86-based software on ARM involves a translation step to convert x86 instructions to ARM instructions.
  • This translation step adds complexity to an implementation meaning that substantial performance overheads often result leading to a poor user experience.
  • In the data centre, performance is critical and so it is a very big stretch to say that Intel is beaten.
  • In fact, I think that there is a very long road ahead for ARM to make a real impact in servers but with the company now privately owned, there is plenty of money for investment.
  • I think the real risk for Intel here is not so much market share but margins.
  • Group gross margins are still way above the industry average at over 60% and if real competition comes into the server market, these are going to come under real pressure.
  • I think that Qualcomm is highly motivated to make this work as its core markets are now saturated leaving it needing other avenues with which to pursue further growth.
  • This is what lies behind its acquisition of NXP as well as its aggressive push into other areas such as automotive.
  • As always, the outcome of this battle for the data centre will be determined by execution and while I see no immediate threat to Intel, Qualcomm and Microsoft represent its greatest threat to date.

Qualcomm – Tooth and nail.

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This time around, Qualcomm should fight.

  • I think Qualcomm will best serve its shareholders by fighting tooth and nail to halt the fall of royalty rates that has been going on for the last 9 years.
  • The fight between Apple and Qualcomm is a sure indicator that life in the smartphone market is getting tougher which came to light in Qualcomm’s latest earnings release.
  • FQ1 17A revenues / Adj-EPS were $6.0bn / $1.19 compared to consensus estimates of $6.11bn / $1.18.
  • Guidance was very slightly weak with FQ2 17E revenues / Adj-EPS of $5.5bn – $6.3bn / $1.15 – $1.25 compared to consensus of $5.9bn / $1.19.
  • Apple’s dispute with Qualcomm is nothing new and in fact from a brief examination of Apple’s complaint and Qualcomm’s response, it is clear that while times have changed, the arguments remain broadly the same.
  • Between 2006 and 2008, Qualcomm was embroiled in a bloody and bitter fight with Nokia which at the time was in the same position that Apple finds itself today.
  • At that time, Nokia made almost all of the mobile phone industry’s profits and so it was the largest payer of royalties to Qualcomm.
  • When its contract expired, it sought to lower the rate it was paying to Qualcomm and when negotiation did not work it resorted to the courts.
  • At the time, I believed that Qualcomm had the advantage and would eventually win but Qualcomm decided to settle with Nokia in 2008.
  • Although the real details were not disclosed, I calculated at the time that this resulted in a new royalty rate of around 2.3% down from the old rate of 4.1% (of the wholesale price of the device).
  • The problem with this is that everyone else was paying 4.1% and then went on to demand the same deal as Nokia.
  • More recently, Qualcomm has done a deal with China where the effective rate appears to be around 1% which could very well a further decline in the overall global royalty rate that Qualcomm receives for its IP.
  • This is the heart of the problem with patents as there is no real way to determine what should be paid to for them.
  • I have long believed that patents are worth either:
    • First: what an entity is prepared to pay for them or
    • Second: the present value of the cash flows that the patent generates.
  • This is why historical precedent is so important when it comes to patent licencing and here Qualcomm has a huge advantage.
  • Qualcomm has hundreds of agreements and more than 20 years of history as evidence that its agreements have not damaged the mobile industry, in fact quite the reverse.
  • The issue of course is that Apple simply wants a lower royalty rate and even the terms of the deal in China appear not to be low enough.
  • Qualcomm claims Apple has rejected terms that are consistent with the deal it did in China and upon which it has struck most of its Chinese licences.
  • The problem as I see it is that if Qualcomm gives Apple a discount then the rate paid by everyone will go down yet again and where it will end is impossible to tell.
  • By fighting against Apple, it has a chance to arrest the general fall of royalty rates across the industry and stabilise them at what I would estimate will end up at around 1%.
  • This is why Qualcomm must fight as I think that the future of its IP licensing business depends on it winning the second time around.
  • It will be painful and expensive but I can’t see how Qualcomm has much choice.

ARM vs. Intel – Silver bullet?

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Last time it was software. This time its emulators 

  • Qualcomm and Microsoft have announced that Windows is once again coming to the ARM processor but this time the approach is completely different to the disaster that was Windows RT.
  • In Windows RT, Microsoft modified Windows 8 such that it would work on an ARM processor and in the process killed flexibility and backwards compatibility to legacy software.
  • The result was a platform that was shunned by both developers and users, completely killing any hope that ARM would gain penetration in Intel’s home turf of PCs.
  • The fact that Intel has cut its lower end Atom line of products that aimed to compete with ARM in Android tablets has left space in the market for these products to grow into.
  • This time the approach is completely different as Qualcomm and Microsoft have produced an x86 emulator that fools the software into thinking that there is an x86 chip present.
  • The net result is that any Win32 and universal Windows app will run on the device with no modifications being required by the developer.
  • The net result is hoped to be cheaper, fan-less, always-on, mid to low end PCs that have longer battery life than their counterparts powered by Intel.
  • Qualcomm and Microsoft have also promised that Adobe Photoshop, Microsoft Office and Windows 10 games will all run on these products and it is here that I find the big caveat in this strategy.
  • This caveat is performance.
  • Intel processors may be power hogs but they offer blistering performance in real world devices as well as in benchmark tests.
  • ARM has been able to match some of the benchmarks but has never been able to come close to Intel in real devices.
  • This is why the mention of Photoshop, Office and games is so important as these three are well known to be very processor intensive.
  • Their requirements are so high that the software is written directly to the processor (written to the metal) to avoid any lags created by going to the processor via the operating system.
  • This is where the problem will occur as processor heavy apps will no longer be written directly to the metal but instead will be going through the emulator.
  • The emulator process is as follows:
    1. Translate requests from the x86 programs sitting on top of it into the RISC instruction set that ARM understands.
    2. Execute the request on the ARM processor.
    3. Translate the results back into the x86 instruction set so that the app can run.
  • Consequently, the emulator will incur additional processing overhead as well as consume power.
  • The big questions are how much will it consume and will it have an impact on the overall user experience?
  • For Intel, this is a critical question because if there is no impact it could see its market share in the mid-range PC market (most of the volume) come under serious threat.
  • In Q3 16A Intel reported non-GAAP gross margin of 64.8% compared to Qualcomm at 58.9% but if I remove the profits from licencing, I estimate that Qualcomm’s chip gross margin is around 40%.
  • Consequently, if Qualcomm’s Snapdragon chipset plus the emulator can match Intel’s performance, Intel will have to cut its prices to stay in contention.
  • This could see its gross margin come under sustained pressure as the first real challenge to its monopoly finally hits home.
  • History is on Intel’s side as emulators on battery powered devices have always impacted the user experience so much that the experience failed to win over users.
  • In order to put pressure on Intel, the Qualcomm powered Windows 10 devices will have offer the same level of functionality and performance, better battery life as well as a cheaper price.
  • These are my three criteria for Qualcomm to really challenge Intel and success will come down to the quality of the emulator that it has created.
  • Qualcomm will also need to work closely with the device makers as there are endless hardware configurations for Windows 10 PCs and clumsy integration could easily make a complete mess of the elegant product that Qualcomm and Microsoft have created.
  • The first devices will be available early 2017 (launch at CES 2017 looks likely) and it is by these that Intel’s outlook will be judged.
  • This is obviously negative for Intel but it is worth remembering that every attempt to dislodge Intel to date has been a miserable failure.

Intel – Data dreaming

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Intel is doing what it must to keep its position in the Data Centre. 

  • Intel has launched its attack on the field of Artificial Intelligence (AI) with a series of initiatives aimed at easing the compute load but seems to completely miss the fact that the real challenges of AI are based on software not hardware.
  • At a special event in San Francisco, Intel detailed its strategy to address AI and at the same time relaunched an AI compute platform it acquired from Nervana.
  • Intel’ strategy includes:
    • First: A new Intel product called Knight’s Crest that tightly integrates Xeon processor with Nervana’s computing platform that is built from the ground up for AI.
    • Second: An update to the Xeon Phi processors (Kinghts Mill) that will be available in 2017 that will deliver a 4x improvement in AI computations.
    • Third: Intel has launched a series of initiatives to ensure that the platform it is offering is both easy to use and as widely available as possible.
    • This includes the release of developer tools and a series of initiatives aimed at driving engagement with the AI community, higher education and schools.
  • This strategy is exactly what Intel needs to be doing as it plays directly to its strengths in terms of designing the best performing processors but its commentary shows that it has not understood what the big challenges of AI are.
  • Intel confidently expects that the Intel Nervana platform will provide a dramatic reduction in the time required to train neural networks and promises to deliver a 100x improvement in performance by 2020.
  • However, I think that Intel has missed the fact that the big challenges faced by AI today have very little to do with the ability to crunch data.
  • The biggest problems with AI are:
    • A vast amount of data is needed to train an AI because the algorithm needs to see a lot of examples before it can draw any conclusions.
    • A trained AI cannot transfer what it has learned to any other task.
    • Building and adjusting the models during training is a manual and very time consuming task.
  • I believe that it is these issues that are holding up progress in AI and no amount of raw horsepower is going to meaningfully speed up the solution of any of these problems.
  • Consequently, while Intel might deliver a 100x increase in performance in number crunching, it won’t be until the programmers have figured out how to train AIs with less data or to have the machines build their own models that AI takes a big leap forward.
  • The net result here is that Intel has produced a product line-up that should help preserve its dominant position in data centre processors but it will not suddenly make Intel a nerve centre for AI.
  • If Intel can encourage all of the AI industry to run its models on Intel processors, then the threat from ARM in the data centre will be meaningfully reduced.
  • Intel is merely doing what it must to ensure that its hugely dominant and highly profitable products are relevant for the next generation of data centre computation.

Qualcomm vs. Intel – Storm in a teacup.

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Qualcomm thrashes Intel but not where it really matters. 

  • It appears that Qualcomm has once again demonstrated superiority over its peers when it comes to radio but I think it highly unlikely that users will notice.
  • Radio performance analysis specialists Cellular Insights have run a series of tests on the iPhone 7 powered by Qualcomm’s MDM9645M modem and the iPhone 7 powered by Intel’s XMM7360 modem to compare radio performance.
  • The results are startling and much more so than in the infamous “chipgate” episode where the A9 (iPhone 6s) made by TSMC resulted in 5-7% battery life than the same chip made by Samsung.
  • In this case the Qualcomm modem has consistently outperformed the Intel modem on 4G by 30% when the signal was moderate and 75% when the signal was at its weakest.
  • When the signal was at full strength, both modems performed similarly.
  • This does not come as a huge surprise as Qualcomm modems have for years been consistently better at performing in non-ideal radio environments giving it a major point of differentiation.
  • This difference is far greater than it was for chipgate but I doubt whether this is going to have users scrambling to check the model numbers of their devices prior to purchase.
    • First: Battery life is a major issue for every smartphone and is a concept that is very easily grasped by the consumer.
    • As long as there is a connection and the service works, most users will be satisfied, meaning that a difference in speed is less likely to be noticed.
    • A device that does not turn on or fails right at a critical moment is far more noticeable.
    • Second: Bleeding edge.
    • What Cellular Insights has measured is performance at the bleeding edge.
    • For example, in band 4 at -120dBm (very weak radio) Qualcomm manages around 30Mbps while Intel does around 12Mbps.
    • When I look at the Digital Life pie of smartphone usage there is not a single service that I think will be noticeably degraded by that difference to the point where the user will blame the radio.
    • Furthermore, almost all networks still have an underlay of 3G meaning that user will have some data coverage even in the advent that 4G fails completely.
  • Most tellingly of all is the fact that the iPhone 7 has been widely available for over a month and there has been not a single murmur from reviewers or users that one version of the device has a better radio than the other.
  • Consequently, I think that posterity will take note of this difference and move on with no real impact being felt in shipments of one variant or the other.
  • However, for Qualcomm this is an important demonstration that it remains peerless when it comes to radio modems.
  • This is critically important as this test is likely to influence device makers when they are selecting which modems to use in their products giving Qualcomm slightly better pricing power.
  • The general consensus out there is that radio modems are beginning to commoditise as LTE matures as a standard but this test clearly shows that this is not the case.
  • Despite this good news, Qualcomm still needs to expand its horizons into other device categories to keep growth going as smartphones are grinding to halt.
  • This is where its smart drone, IP camera reference platform and potential purchase of NXP semiconductors come into play.
  • This is bad news for Intel but I think it can quite easily shake it off as its performance inside the iPhone 7 is clearly good enough.