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Qualcomm does have a nice margin (20%) [https://valustox.com/QCOM https://valustox.com/QCOM] but this is roughly in line with other big co's in the industry. M

Qualcomm does have a nice margin (20%) [https://valustox.com/QCOM https://valustox.com/QCOM] but this is roughly in line with other big co's in the industry. Motorola makes 18% [https://valustox.com/MSI https://valustox.com/MSI] Broadcom, Nvidia, and even Texas Instruments are around 40%! [https://valustox.com/AVGO https://valustox.com/AVGO, https://valustox.com/NVDA https://valustox.com/NVDA, https://valustox.com/TXN https://valustox.com/TXN]. Intel and AMD bring up the rear with 1.8% and 0.5%. [https://valustox.com/INTC https://valustox.com/INTC, https://valustox.com/AMD https://valustox.com/AMD] For reference, Apple is at 25% and Tesla is at 11%. https://valustox.com/AAPL https://valustox.com/AAPL, https://valustox.com/TSLA https://valustox.com/TSLA]

axlee 3y ago
It's so weird that an oligopolistic industry with the largest barriers to entry (your average CPU factory will cost $5/10+ billions, and that's just the factory) have the lowest margin, by far. Why is that so?
- bootloop 3y ago
  I guess that is what competition brings to the table.
- FredPret 3y ago
  It might be that that's not as high of a barrier to entry as it seems. It would cost much more than that to replicate the engineering quality that goes into the Apple system of products for instance.
  - lotsofpulp 3y ago
    Also, Apple has lots of products and services to lots of potential buyers it can sell to at lots of price points, whereas a fab owner only has a few buyers and therefore less negotiating power, plus all the buyers are sophisticated and well informed.
- Guvante 3y ago
  They made a ton of money not long ago. 30% in 2021 eye balling it. But all those factories have to be paid for no matter income. So if income goes down your profit margin goes to terrible.
  - chorsestudios 3y ago
    This particular bump in sales might be attributable to the boom in computer sales resulting from COVID and the surge in WFH.
- Scoundreller 3y ago
  AMD is fabless since 2008/2009 (and sold its last stake in the subsidiary in 2012): https://en.m.wikipedia.org/wiki/GlobalFoundries https://en.m.wikipedia.org/wiki/GlobalFoundries
- gary_0 3y ago
  You're looking at the wrong company. TSMC has a margin of 40%.
  - jandrese 3y ago
    And Intel has just been poorly managed for over a decade now.
- asianometry 3y ago
  I cannot speak to AMD, but for the case of Intel, it is hard to be a fast follower. The billion dollar factory translates to hundreds of millions of dollars of depreciation each year - a fixed cost that means declines in revenue hit the bottom line very hard.
- dathinab 3y ago
  While there are not many competitors, they still do (most times) properly compete due to various factors like pressure from their customer (some very very large with the capabilities to become a competition iff they stop innovating and/or become to expensive), but also factors like political pressure to stay ahead of mainland china. Through TSMC for example has margin >40%. Which isn't that surprising I mean there is not much competition. Intel doesn't (yet) provide their capabilities to anyone else, and the other competition is behind enough to not be an option for many things, especially high end and/or high efficiency. What is quite fascinating is that while TSMC is a close to monopoly(/duopoly if you count Intel) in many sectors and takes advantage of it they seem to have successfully resisted the common problem of such companies stopping/slowing innovation and similar problem. I'm not sure if it's related to the additional pressure of them being on of the main lifelines for Taiwan or if they have just pretty good management or if it's because they still competition oligopoly main customers do push them to do so.
  - chii 3y ago
    i suspect that TSMC doesn't have as big a monopoly as you've made it out to be, not because intel is competing, but because the customers of TSMC are large enough that they "force" the innovation (aka, they "threaten" to not use them if they stop innovating). Also, TSMC hasn't been around long enough to become the slow behemoths that other big monopolies have become.
    - hughesjj 3y ago
      I think it's just a matter of 'if you stop innovating, others will catch up quicker than you expect'. It's a continual r&d March, and you don't want to end up like Intel and get stuck on 14nm forever And Intel was a company that was still shoving billions into r&d, yet still got stuck So much of the tech industry has Moore's law baked into the supply chain forecasts, so lots of incentive to deliver on it.
    - civilitty 3y ago
      TSMC doesn’t have a real monopoly, they’re just a few years ahead of everyone else in integrating ASML’s latest tech. Samsung and Intel aren’t very far behind. The more money TSMC charges the more incentive the others have to catch up but they can only move so fast. GlobalFoundries and STMicroelectronics seem stuck in the double digits. It makes a big difference to a few competitive customers so TSMC gets paid well for that first mover advantage, but yeah it’s not well secured monopoly.
- ksec 3y ago
  AMD they had amortisation assets with the Xilinx acquisition. Otherwise they are doing in the industry standard 20% margin if I remember correctly. Intel has been burning their cash to try and catch up in both Foundry and CPU business. Probably better if those % were Non-GAAP numbers. But that is another debate.
- cushychicken 3y ago
  Intel’s business model is heavily based on reinvesting almost all profits into research on a node that’s 3-5 years out. They’ve been betting the farm on delivering the highest performance chips on the market for the last 25 years. For many years, they were unopposed technically. Now, though, their technological advantage is starting to erode. Intel is in deep shit as a business. How much runway they have is anyone’s guess. But they’re in trouble.
- amadeuspagel 3y ago
  Margins are not determined by how many companies sell certain products, but rather by willing the individual buyer is to consider different products. Both Apple and Microsoft can charge high prices for MacOS and Windows, because most Mac and Windows users will not consider another OS. But most people who currently use a laptop with an Intel chip will consider a laptop with an AMD chip, and vice versa, even speaking of an Intel user or an AMD user feels wrong.
  - RugnirViking 3y ago
    > Margins are not determined by how many companies sell certain products Rule 1: Margins are as large as a company can get away with them being Rule 2: The primary thing that brings down prices (thereby shifting consumer demand) is another company competing offering lower prices Rule 3: Fewer companies are able to maintain a unified front of higher-than-required margins for longer, owing to fewer individuals needing to agree to make the prsioner's-dilemma-esque status quo hold. Any one of them can take business from the others by lowering their prices, but at the cost of reduced margins for everyone (including themselves). Margin pricing in general is "sticky". When it goes down, its difficult for it to rise. That's why companies jump on inflation as an excuse to raise prices - usually much more than inflation. Similarly, see power prices in Europe after ukraine war - record profits despite attributing price rise to rising supply chain costs. Yes, this doesn't follow your economics 101. This is economics 102. As soon as there is an "excuse", companies make massive profits and margins rise. This will also cut into demand as price-sensitive consumers drop out. This is seen as fine. Sometimes, it is better to make more money from less work than grow less efficiently.
    - amadeuspagel 3y ago
      My economics 101? Your comment is a random rant that doesn't engage with my comment or with the broader discussion.
      - RugnirViking 3y ago
        it explains why typically markets with fewer players have higher margins. This is why competition is good (and also why the government has whole departments to consider whether mergers in sparse markets will hurt consumers)
Madetocomment 3y ago
The article specifically refers to the patent division of Qualcomm which has margin of 68%
- fomine3 3y ago
  I wonder how R&D cost divided into patent and real product cost
ChainOfFools 3y ago
Do you happen to know if it has always been this way, or is this the result of a gradual squeeze to a limit due to megahertz wars, increasingly shortened product cycles, and each companies product line structured in a way that tends to cannibalize their own sales before creating fresh profit. And the decreasing return, in practical terms, for their customer base when upgrading since most basic computation tasks have long been solved and it's only exotic high-end workloads (plus constant bloat scaling factor that is largely a consequence of the added performance, rather than it's target) that benefit from added performance. In short, was Intel making percent, or even single digit margins back in the 80s or even early '90s?
- FredPret 3y ago
  Thats a great question; I'd have to dig into their statements to see more. It's hard to get reliable data from that long ago for free. From what I remember as a consumer, MSFT + INTC (Wintel) absolutely cleaned up in the 90s until AMD started the CPU price & MHz wars, and Apple started making MacBooks. For Intel, it looks like they kept one dollar out of every four until the recent crash. I don't know the reason for the decline, but I know I wouldn't want to compete against Apple.
jauntywundrkind 3y ago
Having margins because no one can legally compete with you is pretty remarkable in the chip industry. No one else has carved out such a large market like this. The other bit that blows me away is that sometimes it feels like Qualcomm's perpetual inability to integrate chips is a vast submarine point no one using Qualcomm sees coming, but which forever works out in Qualcomm's favor. I don't know how many chips a MediaTek cellular modem takes, but iPhone 15 pro has 6+ chips dedicated to cellular, probably more. Modem, two transceivers, an envelope tracker, and probably a bunch of in this case non-qualcomm power supplies but most probably use Qualcomm pmics, maybe plural. https://www.ifixit.com/Guide/iPhone+15+Pro+Max+Chip+ID/165320 https://www.ifixit.com/Guide/iPhone+15+Pro+Max+Chip+ID/16532... . There's also separate but non-Qualcomm solutions for wifi & bt too, where-as again I rather expect a company like MediaTek has much more working together. I'm really interested to see chip identifications of the upcoming desktop/server class Qualcomm Oryon, supposedly by the Nuvia team (one of the strongest possible cases for anti-trust I have ever seen). https://www.semiaccurate.com/2023/09/26/whats-going-on-with-qualcomms-oryon-soc/ https://www.semiaccurate.com/2023/09/26/whats-going-on-with-... is not partial journalism, but this cavalcade of ridiculousness is entirely the sort of poorly integrated Qualcomm solution I'd expect, that both builds terrible terrible products but which also lets Qualcomm fail upwards by requiring 5x more board components than is reasonable. Terrible for consumers, OEMs are in tears, but oh sorry, your design is late hot over priced and seemed reasonable but you're going to have to add a bunch more pmic's to get to market because we are Qualcomm and we spend more on lawyers than design.
- anitil 3y ago
  > is a vast submarine point This is an interesting turn of phrase, but I don't understand what it means - are you able to explain? (Google is not helping)
  - stavros 3y ago
    I guess they just mean "a point no one sees coming".
ejz 3y ago
Read the article! Apple and Tesla aren’t the comps. Companies like Intel and Broadcom are. The industry as a whole has a 23% margin. The 20% margin this year was an anomaly. It’s usually closer to 29%+

axlee 3y ago

It's so weird that an oligopolistic industry with the largest barriers to entry (your average CPU factory will cost $5/10+ billions, and that's just the factory) have the lowest margin, by far. Why is that so?

bootloop 3y ago
I guess that is what competition brings to the table.
FredPret 3y ago
It might be that that's not as high of a barrier to entry as it seems. It would cost much more than that to replicate the engineering quality that goes into the Apple system of products for instance.
- lotsofpulp 3y ago
  Also, Apple has lots of products and services to lots of potential buyers it can sell to at lots of price points, whereas a fab owner only has a few buyers and therefore less negotiating power, plus all the buyers are sophisticated and well informed.
Guvante 3y ago
They made a ton of money not long ago. 30% in 2021 eye balling it. But all those factories have to be paid for no matter income. So if income goes down your profit margin goes to terrible.
- chorsestudios 3y ago
  This particular bump in sales might be attributable to the boom in computer sales resulting from COVID and the surge in WFH.
Scoundreller 3y ago
AMD is fabless since 2008/2009 (and sold its last stake in the subsidiary in 2012): https://en.m.wikipedia.org/wiki/GlobalFoundries https://en.m.wikipedia.org/wiki/GlobalFoundries
gary_0 3y ago
You're looking at the wrong company. TSMC has a margin of 40%.
- jandrese 3y ago
  And Intel has just been poorly managed for over a decade now.
asianometry 3y ago
I cannot speak to AMD, but for the case of Intel, it is hard to be a fast follower. The billion dollar factory translates to hundreds of millions of dollars of depreciation each year - a fixed cost that means declines in revenue hit the bottom line very hard.
dathinab 3y ago
While there are not many competitors, they still do (most times) properly compete due to various factors like pressure from their customer (some very very large with the capabilities to become a competition iff they stop innovating and/or become to expensive), but also factors like political pressure to stay ahead of mainland china. Through TSMC for example has margin >40%. Which isn't that surprising I mean there is not much competition. Intel doesn't (yet) provide their capabilities to anyone else, and the other competition is behind enough to not be an option for many things, especially high end and/or high efficiency. What is quite fascinating is that while TSMC is a close to monopoly(/duopoly if you count Intel) in many sectors and takes advantage of it they seem to have successfully resisted the common problem of such companies stopping/slowing innovation and similar problem. I'm not sure if it's related to the additional pressure of them being on of the main lifelines for Taiwan or if they have just pretty good management or if it's because they still competition oligopoly main customers do push them to do so.
- chii 3y ago
  i suspect that TSMC doesn't have as big a monopoly as you've made it out to be, not because intel is competing, but because the customers of TSMC are large enough that they "force" the innovation (aka, they "threaten" to not use them if they stop innovating). Also, TSMC hasn't been around long enough to become the slow behemoths that other big monopolies have become.
  - hughesjj 3y ago
    I think it's just a matter of 'if you stop innovating, others will catch up quicker than you expect'. It's a continual r&d March, and you don't want to end up like Intel and get stuck on 14nm forever And Intel was a company that was still shoving billions into r&d, yet still got stuck So much of the tech industry has Moore's law baked into the supply chain forecasts, so lots of incentive to deliver on it.
  - civilitty 3y ago
    TSMC doesn’t have a real monopoly, they’re just a few years ahead of everyone else in integrating ASML’s latest tech. Samsung and Intel aren’t very far behind. The more money TSMC charges the more incentive the others have to catch up but they can only move so fast. GlobalFoundries and STMicroelectronics seem stuck in the double digits. It makes a big difference to a few competitive customers so TSMC gets paid well for that first mover advantage, but yeah it’s not well secured monopoly.
ksec 3y ago
AMD they had amortisation assets with the Xilinx acquisition. Otherwise they are doing in the industry standard 20% margin if I remember correctly. Intel has been burning their cash to try and catch up in both Foundry and CPU business. Probably better if those % were Non-GAAP numbers. But that is another debate.
cushychicken 3y ago
Intel’s business model is heavily based on reinvesting almost all profits into research on a node that’s 3-5 years out. They’ve been betting the farm on delivering the highest performance chips on the market for the last 25 years. For many years, they were unopposed technically. Now, though, their technological advantage is starting to erode. Intel is in deep shit as a business. How much runway they have is anyone’s guess. But they’re in trouble.
amadeuspagel 3y ago
Margins are not determined by how many companies sell certain products, but rather by willing the individual buyer is to consider different products. Both Apple and Microsoft can charge high prices for MacOS and Windows, because most Mac and Windows users will not consider another OS. But most people who currently use a laptop with an Intel chip will consider a laptop with an AMD chip, and vice versa, even speaking of an Intel user or an AMD user feels wrong.
- RugnirViking 3y ago
  > Margins are not determined by how many companies sell certain products Rule 1: Margins are as large as a company can get away with them being Rule 2: The primary thing that brings down prices (thereby shifting consumer demand) is another company competing offering lower prices Rule 3: Fewer companies are able to maintain a unified front of higher-than-required margins for longer, owing to fewer individuals needing to agree to make the prsioner's-dilemma-esque status quo hold. Any one of them can take business from the others by lowering their prices, but at the cost of reduced margins for everyone (including themselves). Margin pricing in general is "sticky". When it goes down, its difficult for it to rise. That's why companies jump on inflation as an excuse to raise prices - usually much more than inflation. Similarly, see power prices in Europe after ukraine war - record profits despite attributing price rise to rising supply chain costs. Yes, this doesn't follow your economics 101. This is economics 102. As soon as there is an "excuse", companies make massive profits and margins rise. This will also cut into demand as price-sensitive consumers drop out. This is seen as fine. Sometimes, it is better to make more money from less work than grow less efficiently.
  - amadeuspagel 3y ago
    My economics 101? Your comment is a random rant that doesn't engage with my comment or with the broader discussion.
    - RugnirViking 3y ago
      it explains why typically markets with fewer players have higher margins. This is why competition is good (and also why the government has whole departments to consider whether mergers in sparse markets will hurt consumers)

Madetocomment 3y ago

The article specifically refers to the patent division of Qualcomm which has margin of 68%

fomine3 3y ago
I wonder how R&D cost divided into patent and real product cost

ChainOfFools 3y ago

Do you happen to know if it has always been this way, or is this the result of a gradual squeeze to a limit due to megahertz wars, increasingly shortened product cycles, and each companies product line structured in a way that tends to cannibalize their own sales before creating fresh profit. And the decreasing return, in practical terms, for their customer base when upgrading since most basic computation tasks have long been solved and it's only exotic high-end workloads (plus constant bloat scaling factor that is largely a consequence of the added performance, rather than it's target) that benefit from added performance. In short, was Intel making percent, or even single digit margins back in the 80s or even early '90s?

FredPret 3y ago
Thats a great question; I'd have to dig into their statements to see more. It's hard to get reliable data from that long ago for free. From what I remember as a consumer, MSFT + INTC (Wintel) absolutely cleaned up in the 90s until AMD started the CPU price & MHz wars, and Apple started making MacBooks. For Intel, it looks like they kept one dollar out of every four until the recent crash. I don't know the reason for the decline, but I know I wouldn't want to compete against Apple.

jauntywundrkind 3y ago

Having margins because no one can legally compete with you is pretty remarkable in the chip industry. No one else has carved out such a large market like this. The other bit that blows me away is that sometimes it feels like Qualcomm's perpetual inability to integrate chips is a vast submarine point no one using Qualcomm sees coming, but which forever works out in Qualcomm's favor. I don't know how many chips a MediaTek cellular modem takes, but iPhone 15 pro has 6+ chips dedicated to cellular, probably more. Modem, two transceivers, an envelope tracker, and probably a bunch of in this case non-qualcomm power supplies but most probably use Qualcomm pmics, maybe plural. https://www.ifixit.com/Guide/iPhone+15+Pro+Max+Chip+ID/165320 https://www.ifixit.com/Guide/iPhone+15+Pro+Max+Chip+ID/16532... . There's also separate but non-Qualcomm solutions for wifi & bt too, where-as again I rather expect a company like MediaTek has much more working together. I'm really interested to see chip identifications of the upcoming desktop/server class Qualcomm Oryon, supposedly by the Nuvia team (one of the strongest possible cases for anti-trust I have ever seen). https://www.semiaccurate.com/2023/09/26/whats-going-on-with-qualcomms-oryon-soc/ https://www.semiaccurate.com/2023/09/26/whats-going-on-with-... is not partial journalism, but this cavalcade of ridiculousness is entirely the sort of poorly integrated Qualcomm solution I'd expect, that both builds terrible terrible products but which also lets Qualcomm fail upwards by requiring 5x more board components than is reasonable. Terrible for consumers, OEMs are in tears, but oh sorry, your design is late hot over priced and seemed reasonable but you're going to have to add a bunch more pmic's to get to market because we are Qualcomm and we spend more on lawyers than design.

anitil 3y ago
> is a vast submarine point This is an interesting turn of phrase, but I don't understand what it means - are you able to explain? (Google is not helping)
- stavros 3y ago
  I guess they just mean "a point no one sees coming".

ejz 3y ago

Read the article! Apple and Tesla aren’t the comps. Companies like Intel and Broadcom are. The industry as a whole has a 23% margin. The 20% margin this year was an anomaly. It’s usually closer to 29%+