In order to jointly develop 5G technology for iPhone, on Investor Day last month, Qualcomm announced they had reached a settlement with Apple. Moreover, they have obtained a $4.7 billion license fee. Bank of America, in the latest report, said it is expected Qualcomm will receive an additional $4 billion in revenue from Apple by the end of fiscal 2022.
How Apple May Help Qualcomm Earn More?
5G technology is deployed in North America and Europe in the next few years. Qualcomm has invested a lot of money to research and develop modems that support next-generation cellular networks. The company predicts that by 2022, global 5G smartphone shipments will exceed 750 million units.
Qualcomm Technologies, the technology licensing division of Qualcomm, has signed more than 75 5G contracts worldwide. These contracts will enable Qualcomm to generate revenues of $2.3 billion to $2.7 billion by the end of June 2020. If Bank of America’s estimates are correct, Apple will pay $8.7 billion by 2022. This is more than four times the total value of Qualcomm’s current 5G contracts.
As Qualcomm hopes to offset the decline in product sales through licensing fees over the past three years, its revenue has been fluctuating. Qualcomm achieved revenues of $16.6 billion, $17.4 billion, and $14.6 billion by providing hardware components to smartphone and other device manufacturers in 2017, 2018, and 2019, respectively. The company reported a $2.8 billion decrease in equipment and services revenue in fiscal 2019. This is more than offset the $4.4 billion gain in Qualcomm’s licensing revenue.
Bank of America maintains Qualcomm’s target stock price at $100 per share. Major investment banks give the company a target stock price of between $47 and $135, with a median of $100. Qualcomm’s growth depends on the increase in shipments of mid-range and mid- to high-end 5G electronic equipment. The company has already put the 5G modules on the Snapdragon 800 and 700 series. And they are also planning to add such modules to the next Snapdragon 600 series.