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At its investor day last month, San Diego chip giant Qualcomm Incorporated (NASDAQ:QCOM) announced that its settlement with Apple Inc (NASDAQ:AAPL) led to a $4.7 billion licensing fee, as the two companies look to collaborate on developing 5G connectivity for the iPhone. Now, we've got a report from Bank of America stating that Qualcomm stands to earn an additional $4 billion from Apple by the end of the fiscal year 2022. Take a look below for more details.
Qualcomm Set To Earn $4 Billion From Apple In The Next Three Years Believes Analyst Tal Liani of Bank of America
With the roll-out of 5G set to take place in North America and Europe over the course of the next few years, Qualcomm has invested heavily in researching and developing modems supporting the next-generation cellular network. The company anticipates that more than 750 million 5G handsets will be shipped globally in 2022, and these shipments will be driven by demand in China and middle-tier devices.
Its licensing arm, Qualcomm Technologies has signed more than 75 5G contracts globally so far, with these contracts set to net Qualcomm a neat $2.3 billion - $2.7 billion in revenue by the end of June 2020. Qualcomm is notorious for its tough licensing deals, and if Bank of America's estimates are correct, then Apple will have paid the company $8.7 billion by 2022. This amount is more than four times what Qualcomm's current 5G contracts are worth.
Qualcomm's revenue has fluctuated over the past three years, as the company reversed a drop in product sales through a gain in licensing fees. Qualcomm has earned $16.6 billion, $17.4 billion and $14.6 billion through providing hardware components to smartphone and other device makers in the years 2017, 2018 and 2019 respectively. The $2.8 billion revenue drop in the equipment and services segment that the company reported in the fiscal year 2019 was more than made up for through the $4.4 billion gain that Qualcomm made in licensing revenues.
Keeping in mind 5G networks, Bank of America has maintained a $100/share target price for Qualcomm(NASDAQ:QCOM). Price targets for the company range between $135 and $47, with a $100 median. Qualcomm is basing the growth of 5G device shipments on middle and upper-middle tier gadgets, While the company has introduced 5G connectivity on the flagship and non-flagship Snapdragon 800 and 700 series, it also plans to add this to the Snapdragon 600 lineup next year.
North America, for its part, should prove a viable market for the company given the security concerns surrounding products from Huawei Technologies. China might be a different story altogether.
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