New Competition Threat for Qualcomm … Overrated? (QCOM, BRCM, NOK, DCM)

NTT DoCoMo’s announcement of a basic agreement to establish a joint venture will cover development of low-power chipsets that are both small in size and feature-rich and will come with modem functionality. The chipsets are said to target the LTE and LTE-Advanced mobile communication standards and are expected to launch by the end of March 2012.

Nikkei in Japan had reported this as a rumor back in September, and this appears to be the confirmation. NTT DoCoMo will establish Communication Platform Planning Co. as a subsidiary, and the Wall Street Journal noted that this will cut the reliance on U.S. chipmaker Qualcomm, with its near-80% market share.

Before assuming that this is the beginning of the end, keep in mind that the investment initially is tiny. DoCoMo is investing a sum of about $5.8 million to create the subsidiary in preparation for the start of the partnership.

The news comes with Qualcomm shares down less than 10% from a year high. Shares closed Friday at $54.63 and the 52-week trading range is $45.98 to $59.84. Qualcomm also carries a market capitalization rate of $91.8 billion.

If NTT DoCoMo was truly going to pose a serious threat, that initial investment would have been in the billions of dollars. The market likely will react negatively and new competition may arise, but the reality is that competing against a company like Qualcomm takes extremely deep pockets.

JON C. OGG