[ljhsiung]

Disclaimer: current employee. Purely personal opinion.

I'm curious how long ago this was? I can't find any time period where QTL (the licensing division) made more than QCT (the Snapdragon et. al division). Still, I think your statement's sentiment is the consensus-- that overall, Qualcomm is/has been the "Oracle of hardware" that milks the licensing cow.

Let's look at Q2 '22, Q2 '19, Q2 '16, Q2 '13. I choose 3-year gaps for no particular reason, simply how I personally view company timelines and how long it might take to "steer a ship", e.g. if the CEO wants to change its public perception, it might take a few years. I also choose Q2 simply because Q2 was the most recent quarter. Relatively arbitrary, but still sensible data points when talking about Qualcomm's recent history. Noteworthy also, is that Q2 '22 is about the 1 year anniversary of when the new CEO was instantiated.

($mil) | - QCT - | - QTL -- | QTL % of tot rev

--------------------------------------------

Q2 '13 | $3,916 | $2,057 | 33.6%

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Q2 '16 | $3,337 | $2,135 | 38.5%

--------------------------------------------

Q2 '19 | $3,722 | $1,122 | 22.9%

--------------------------------------------

Q2 '22 | $9,548 | $1,580 | 16.5%

Licensing revenue has actually been flat or on the decline recently. Even in business outlooks, Qualcomm usually directly says "our goal is to maintain QTL" while heavily expanding on QCT, somewhat implying an attempt to cast off this "ran by lawyers" reputation.

Time will tell, I suppose.

[1] https://d1io3yog0oux5.cloudfront.net/_ef937ef9314613934ed123...

[2] https://d1io3yog0oux5.cloudfront.net/_ef937ef9314613934ed123...

[3] https://d1io3yog0oux5.cloudfront.net/_ef937ef9314613934ed123...

[4] https://d1io3yog0oux5.cloudfront.net/_ef937ef9314613934ed123...

[JOnAgain]

I'm guessing the licensing is much more profitable. Especially if, accounting-wise, all the costs of developing the the patents is attributed to the chip division.

[ljhsiung]

That would make sense. You touch on an interesting point-- that the chips themselves might be somewhat of a loss-leader to just get them out the door, where the licenses *on those chips* are the real money maker. While that might make OP's original statement ("a long time ago... made more money") true, these days it is no longer true.

QTL in Q2 '13 had $1800mil EBT with 88% of revenue contributing to earnings. EIGHTY EIGHT PERCENT. Holy cow. QCT in that same year had $600mil EBT with 17%.

For comparison, QTL in Q2 '22 had $1540mil EBT with 74% of revenue contributing to earnings. QCT in that same year had $3340mil EBT with 35%.

I guess really you can only squeeze so much before the market gets annoyed. Given these numbers, I can't see how QCT would be a loss-leader. Why else would the margins on them be increasing, and margins on QTL be decreasing?

My point is, I believe things aren't as lawyer-y as before. The Qualcomm of today focuses a lot more on its QCT division. Licensing is still obviously there, and will always be an incredibly nice moat, but it's not the suffocating "shakedown" it might have been 10 years ago.

[beembeem]

Yes, last I checked QTL's revenue was much lower yet profit higher than QCT.

[kappi]

Looking at Q2 is misleading. QTL revenue has increased from 4.591B in 2019 to 6.320B in 2021. https://investor.qualcomm.com/segments/qtl. Qualcomm is heavily represented in lot of industry standards. Every "if condition" is patented and counted as part of any standards. Standards group decisions are highly political and not completely based on technical merits. With Qualcommm political power, they are able to include many of their proposals in standards which end up getting them royalty.

[ljhsiung]

I disagree that it's misleading. Or maybe, yes, it's misleading, but in the opposite way you think-- misleading investors that it's an expanding revenue stream. Shift your view further to FY13. If we're making the claim of a "shakedown over [2] decades" we should look at the past decade.

I use Q2 '22 specifically because it's a recent quarter that's most likely to reflect the vision of the current CEO. Given that my thesis is "current Qualcomm is different", I think it's apropos to talk about current results. And my yearly sampling is based off of the assumption that the general business cycle is periodic YoY (i.e. Q2 2020 is roughly similar in growth rates to Q2 2019, barring anything massive like a pandemic haha lol haha).

Furthermore, I also think it's important to look at breakdowns of % of revenues by division, to see how much a company relies on any specific source.

---- | QTL Rev | QTL EBT | QTL % as non-GAAP Rev

FY13 | $7,554 | $6,590 | 69%

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FY14 | $7,569 | $6,590 | 65%

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FY15 | $7,947 | $6,882 | 74%

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FY16 | $7,664 | $6,528 | 80%

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FY17 | $6,445 | $5,175 | 69%

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FY18 | $5,163 | $3,525 | 64%

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FY19 | $4,591 | $2,954 | 58%

-------------------------------

FY20 | $5,028 | $3,442 | 50%

-------------------------------

FY21 | $6,320 | $4,627 | 34%

The pie was rather small back then, and the licensing slice was HUGE. Nowadays, the exact quantity of licensing revenue is actually just reverting to the mean, and the slice is actually decreasing. You can't go by the growth rates you're given there.

Links to FY13--FY19 here. BTW you can skip every other year, since FYXX tends to report FY(XX-1) as well.

https://investor.qualcomm.com/financial-information/historic...

[tooltalk]

Qualcomm is well represented b/c it's a wireless pioneer who helped define the wireless industry as we know it today. Why do you think SSO's are "highly political"? Do you have any faintest idea how a patent becomes a SEP -- or how royalties are collected? or are you even aware of the fact that Qualcomm who more or less single handledly created the CDMA standard is just a leading patent holder in recent wirelss standard.

I get that there were some aspects of Qualcomm licensing practices weren't quite kosher, but seems there are lot of folks parroting talking points from Apple who orchestrated the original lawsuit along with FTC behind the door. If you want to talk about "political power," we could talk about Apple all day.