Market Insight

The market implications for the refreshed Snapdragon 600 tier

May 08, 2017

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Qualcomm has announced a refresh of its high-tier smartphone platforms with the Snapdragon 630 and 660, an update to the 653 and 626, just announced last fall. These updates come in time to answer some of the products being released by Qualcomm’s competition. The 600 tier has been very successful for the company to date, with over 1,000 design wins in smartphones and tablets. The new platforms reinforce the company’s position in the mid-range and high-end smartphone market segments.

The two new platforms demonstrate the rapid pace of innovation occurring outside the premium flagship smartphone market segment and will have some key upgrades relative to their predecessors. As it has in the past, the company is bringing features which are common in premium tier Snapdragon 800 devices down into the 600 tier. Devices powered by the new platforms should have more extensive camera features, better connectivity options, and improved battery lives. The improvement of the LTE modem is a key differentiator for Qualcomm, moving from category (Cat) 7 to Cat12 LTE will essentially double the downlink speed from 300 megabits per second (Mbps) to 600Mbps. Also with the new platforms, Qualcomm has moved from a 28nm to 14nm process node and incorporated audio/visual processing and contextual awareness capabilities via the integrated Hexagon DSP. Specifically for the Snapdragon 660, the company introduced its custom Kryo 260 CPU design into the 600 tier. Non-cellular connectivity advances are also present in the 660 with a move to 2x2 MIMO Wi-Fi, and both platforms offer Bluetooth 5. With some upgraded features moving down from the premium smartphone segment, how will the new Snapdragon 600 platforms position Qualcomm in the high-end/mid-tier smartphone market and what implications will there be for Qualcomm’s competition there?

The Snapdragon 600 platform tier serves a large swath of the smartphone market

IHS Markit defines the smartphone market differently than how Qualcomm’s products are defined. Where Qualcomm has four Snapdragon platform tiers (200, 400, 600, and 800) focused on the entry-tier, mid-tier, high-tier, and premium tier, respectively, IHS Markit has three. Based on the average selling price (ASP) of a given smartphone, IHS Markit defines the entry-level product tier as products selling for under $150, the mid-tier segment are those devices which sell for $150-$400 and high-end segment devices are those which sell for more than $400. Although the Snapdragon 660 and 630 fall into Qualcomm’s high-tier product line, many phones powered by past Snapdragon 600 products tend to fall within IHS Markit’s mid-tier smartphone market with some landing in the high-end. According to the Smartphone Electronics Design Intelligence Service, while the mid-range smartphone market is the smallest of the three smartphone segments tracked by IHS Markit, it is only expected to be three million units smaller than the high-end market in 2017. The mid-range segment is expected to post the fastest growth of the three over the next five years with a consolidated annual growth rate (CAGR) of 7.5%. By 2021, it will be the largest segment of the smartphone market by shipment volume.

In the past devices with a wide range of ASP were served by Qualcomm’s Snapdragon 600 tier products. For example, phones with the Snapdragon 653 such as the Oppo F3 plus have prices ranging between $450 and $500. While other phones like a global version of the Xiaomi Redmi Note 4 have a price under $170. Despite the wide ASP range of the end devices, these platforms are good for Qualcomm as it should be able to attach more peripheral content such as WLAN ICs, power management ICs, audio codecs, and RF front end content around the SoC, relative to some premium tier smartphones.

In many of these mid-range/high-end phones, OEMs may opt to use simpler designs that rely more heavily on one supplier in order to reduce the overall development and design cost and time-to-market for the device. In the premium, flagship level tier of the smartphone market which is currently dominated by Qualcomm and vertically integrated OEMs, phone manufacturers are more likely to diversify their supplier base as they have more resources and more leverage given the generally high volumes of successful devices in this segment.

Fierce competition in the mid-range market segment

With the refreshed Snapdragon 600 platforms, Qualcomm is playing to its strength by including a Cat12 LTE modem in each of the 660 and 630. With the improved modem, Qualcomm remains a generation or more ahead of its competition with the newest additions to its 600 tier. Both vertically integrated OEMs such as Samsung and Huawei and other third-party suppliers like MediaTek and Spreadtrum don’t currently offer SoC with Cat12 LTE modems targeted toward the mid-range smartphone market. Huawei and Samsung have SoC in the highest tiers of their product portfolios that offer Cat12 LTE while MediaTek offers Cat10 in its latest Helio X30 SoC announced earlier this year. Spreadtrum which recently released its own chipset that should be competitive in the mid-range smartphone market, the SC9861G-IA, has a Cat7 LTE modem.

Over the past couple of years, the biggest third-party competitor to Qualcomm’s 600 product tier has been MediaTek with its Helio products. Qualcomm has announced the 660 and 630 during a challenging time for MediaTek. During the first two years of its existence, MediaTek’s Helio product line helped the company gain share in what it coined “the super mid-tier” smartphone market. Helio products comprised almost 20% of MediaTek’s smartphone SoC shipments in 2016; however, management anticipates this to drop by almost 5% in 2017. In its first quarter 2017 earnings call, MediaTek’s management stated that the company had lost market share specifically with Helio, due primarily to the lack of Cat7 modems in its product portfolio and strategic decisions or financial difficulties at some key OEM customers. Up until the Helio X30, MediaTek’s best LTE smartphone modem was Cat6. The company plans to release a Helio P-series product with Cat7 in the fall of this year but has likely missed out on some designs due to its absence thus far. Helio products have been adopted by major OEMs in Asia such as Xiaomi, Meizu, and LeEco. Despite the release of the X30, management did not expect to win back market share with their Helio X series products until 2018 at the earliest.

Qualcomm’s new Snapdragon 660 is already shipping and the 630 is expected to begin shipping by the end of the month. The company is bringing premium features to and enabling better performance of its Snapdragon 600 tier, showing commitment to defending and enhancing its market position within the mid-range and lower part of the high-end smartphone markets. The company may be able to drive up its average revenue per smartphone as its thin modem business becomes less of its product mix over time and it benefits from higher peripheral IC attach rates at the 600 and 400 product tiers compared to the 800 product tier. However, it remains to be seen if any traction gained in the mid-range smartphone market will be enough to offset the increased competition and multi-sourcing strategies taking place in the premium flagship segment of the high-end smartphone market.

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