Qualcomm stock is up over 43% this year as investors bet that its mobile chips, like the modem in Apple‘s latest iPhones or the processor in Samsung Galaxy phones, stand to benefit from a wave of spending on 5G.
But Qualcomm’s new Radio Access Network chips go on the other side of a 5G connection — instead of being inside a handset, they’re designed to go into the base stations, packed with antennas and chips, that carriers place around cities to deliver internet over cellular connections. The RAN products are Qualcomm’s shot to get a piece of the 5G network infrastructure market, which will be worth over $8 billion this year, according to a Gartner estimate.
Qualcomm won’t actually make any base stations or infrastructure, unlike companies such as Huawei, Ericcsson, or Nokia. Instead, Qualcomm will sell its customers baseband, processing and RF chips combined with software that allow them to build “virtualized radio access” networks in which base station components are built according to specifications that allows them to work together. This could allow carriers to avoid lock-in to a single provider and choose components of a base station on a part-by-part basis. For example, a carrier could buy radios from one provider and processors from Qualcomm.
Qualcomm’s RAN products support several bands of 5G, including the speedy millimeter wave connections that require more base stations and have a fairly short range, and the slower sub-6 millimeter flavor that can be broadcast over wide regions.
“5G enables a very large expansion of the Qualcomm addressable market, because 5G is going everywhere. It’s going to automotive, it’s going everywhere. The networking aspects of 5G comes with that transition,” Qualcomm President Cristiano Amon said. “It’s a very small incremental investment and it creates an expansion of the Qualcomm addressable market.”
Amon declined to identify companies planning to use Qualcomm’s RAN product but said the likely customers include existing base-station makers as well as new companies that want to create cellular infrastructure, such as carriers that could end up building their own base stations. Qualcomm’s customers will get engineering samples in 2022.
Open standards
Qualcomm has a history of selling chips for infrastructure back in the ’90s, and it started selling RAN products in 2018, but so far it has focused on “small cells,” or tiny base stations for small numbers of users. Its new products can support “macro” base stations for public networks operated by carriers that have millions of subscribers, Amon said.
Qualcomm’s products are compatible with O-RAN, a standard backed by Verizon, AT&T, and T-Mobile. Open standard base stations are expected to generate $5 billion in sales per year over the next five years, according to Dell’Oro Group, an industry researcher. Other companies including Intel, Hewlett Packard Enterprise, Dell, and Cisco are also offering base station parts that are compatible with O-RAN, Bloomberg reported last month.
Amon compares the rise of virtualized cellular networks to the growth of cloud computing over the past decade where companies realized that instead of buying and maintaining servers, they could purchase computer processing as a commodity, separating the expensive server hardware from the software.
“The telecom networks have been end-to-end systems. Now with 5G, there is one thing happening parallel which is the transition of networks to full virtualization,” Amon said. “The networks get virtualized, so the radio access networks run on general purpose computers.”
The announcement also marks an American company making substantial investments in the world of cellular infrastructure, which has become a hot international topic as countries like the United States and Australia have eliminated China’s Huawei gear from 5G networks because of what officials say are national security reasons.
White House economic advisor Larry Kudlow said in an interview in February that the U.S. wants to have 5G infrastructure “done by American firms.” Officials in Congress have also introduced legislation that would fund O-RAN technology development.
