Qualcomm Set To Dominate U.S. Connected Vehicles (C-V2X) Market

Qualcomm' Connected Car Reference Platform. with DSRC and extensible to C-V2X and 5G.

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

At the end of last week, the Federal Communications Commission, under the auspices of its Chairman Mr. Ajit Pai unanimously approved the reallocation of 75MHz of the 5.9 GHz band to Cellular Vehicle to Everything (C-V2X) systems and unlicensed technologies. C-V2X aims to take transportation up a notch, with proponents of the technology hoping to improve driver and pedestrian safety with it.

The 5.9GHz band had been initially reserved for Dedicated Short Range Communications (DSCR) technologies in 1998. These enable vehicles to communicate with other vehicles and with nearby infrastructure. The FCC, backed by the 5G Automotive Association and The Internet and Television Association, states that in the years following spectrum allocation, little progress has been made in developing technologies that utilize the frequency bands.

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Toyota and General Motors have shown interest in bringing DSRC based cars to the market, with the former only having abandoned its plans earlier this year by citing few production commitments from other automakers. General Motors, for its part, has made the technology available on some Cadillac CTS sedans that it first started to sell two years back in 2017. These featured chips from NXP Semiconductor, who has stated that C-V2X platforms are not superior to DSRC in its comments to the FCC.

Following the FCC's spectrum reallocation and Toyota's announcement, we take a brief look at who will benefit the most from connected vehicles shifting over to C-V2X from DSCR. To understand this, however, first, a brief overview of the technologies being discussed is important.

Graphic from Qualcomm laying out the four different components of C-V2X.

What Is C-V2X & How Is It Different From DSRC-based V2X Vehicle Connectivity?

While both technologies utilize the 5.9GHz spectrum to let cars 'talk' to each other, C-V2X and DSRC are not exactly the same. In basic terms, V2X (based on DSRC) follows the IEEE 802.11p standard for the physical layers in its protocol stack, and C-V2X follows standards set out by the Third Generation Partnership Project (3GPP) for Long Term Evolution (LTE) and 5G networks. This difference separates the kinds of communication that a vehicle can conduct when it's running on one of these platforms.

Vehicular communications are divided into four categories. Two of these, vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) can be conducted through either V2X or C-V2X hardware. V2I involves communication between a vehicle and a roadside unit (RSU) to keep track of variables such as pedestrian movements, road conditions, traffic conditions and traffic lights (think of your car automatically stopping when the traffic light turns red). However, as you'll understand after seeing the image above, V2X does not consist only of V2V and V2I communications.

It also includes vehicle-to-network (V2N) and vehicle-to-pedestrian (V2P) communications, which improve road safety for both the driver and other vulnerable users such as cyclists who might be using the road. Additionally, the longer-range offered by C-V2X-based systems provides better early warning and assistance to drivers in tricky environments such as blind corners. As per one study, C-V2X vehicles warn drivers about potential vehicular hazards located out of sight farther out than their DSRC-based counterparts do. The distance increases to 107 meters from 60 meters for DSRC-based systems in normal and icy driving conditions, with C-V2X supporting higher relative speeds between two vehicles owing to additional RF symbols for DeModulation Reference Signals allocated by the 3GPP.

The use of C-V2X for vehicular communications will let them gain information early-on for road hazards or vehicle queues, avoid collisions by building real-time maps of their surroundings, avoid accidents during highway driving and form 'platoons' where the vehicles trail each other more closely than it would be possible for human drivers to achieve. Platooning, in particular, is expected to benefit from 5G networks as they will allow faster communication between vehicles forming a large group. Keep in mind that V2V communication in a C-V2X system is conducted through a PC5 system, which limits communication to a maximum of three cars.

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FCC's Decision To Let C-V2X-based Vehicles To Use 5.9GHz Spectrum Should Prove A Boon For Chip Giant Qualcomm

If you're a regular reader, or if you keep up-to-date with the events in the tech world, then you'll know that the United States government is extremely distrustful of equipment manufactured by Chinese telecommunications company Huawei. Now this fear will also move into the connected vehicles sphere, where one company, in particular, is set to take it all. However, before we get to that, it's important to see how C-V2X connectivity makes its way inside connected cars.

The C-V2X supply chain consists of four different points where different components are manufactured by different companies. The first and the most integral component of the supply chain are communications chips, manufactured by Huawei, Qualcomm, AutoTalks, and Datang. These chips are then integrated into modules that are combined with terminals that make their way inside connected vehicles.

Looking at this, it's clear that those who manufacture the chips well set to establish a strong presence in the C-V2X market. To that end, it's Qualcomm (NASDAQ:QCOM) that is set to dominate the North American market once C-V2X-based cars become the norm of the day. Based on research conducted by Wccftech, all the C-V2X tests and demonstrations conducted in the United States until the start of this year have involved equipment from Qualcomm. The states where these tests were conducted are Michigan, Colorado, California and Maryland.

Additionally, as is the case with 5G connectivity for smartphones, the rollout in the United States will come after the technology has made its way internationally. To that end, out of the fourteen C-V2X demonstrations globally, five have featured equipment from Qualcomm and four have featured equipment from Huawei.

The Quectel AG15 Module featuring Qualcomm's 9150 C-V2X application-specific integrated circuit. The 9150 features ARM's Cortex A7 cores clocked at 1.7GHz and the chip is fabricated on the 14nm node.

Patent Research Shows An Edge For Qualcomm In Connected Vehicles Arena

Taking a cursory look at the United States Patent and Trademark Office's database shows that Qualcomm (NASDAQ:QCOM) has been granted five of 16 patents with the term 'c-v2x' in them, 1 of 3 with cv2x, and 8 patents assigned in v2x communications. These include key patents such as "Low latency enhancements to CV2X autonomous resource selection and re-selection procedure for vehicle-to-vehicle communications". 

When considering Qualcomm's patent portfolio, it's important to keep in mind that Cellular-V2X is a diverse field that requires input from different industries. So while Qualcomm makes the 9150 chip to power autonomous vehicles, solutions developed by automakers will solve problems such as regulating vehicle speed during platoon formation and those developed by carriers will manage communications between the vehicle and cellular networks.

Patents are often the result of research and testing, and given the fact that Qualcomm has dominated C-V2X tests in the United States, it's no surprise that the company has also taken the lead in the patent arena. And the primary reason we've mentioned the diverse ecosystem of companies in the cellular-and-dsrc-v2x spectrum is due to the sheer volume of patents related to the technologies.

Scanning the United States Patent and Trademark Office's Patent Full Text and Image Database merely for the term 'v2x' reveals 1195 patents with the term in them. Adding the parameter '3gpp' to v2x narrows the list down to 314 patents, adding 'qualcomm' further brings the number down to 73, and finally, searching the string 'v2x and 3gpp and assignee and Qualcomm and Incorporated' shows that the company has been granted seven v2x patents that are also compatible with 3gpp standards.

So while Qualcomm (NASDAQ:QCOM) might not be able to stop other companies from selling their C-V2X chipsets inside the United States, the company will nevertheless earn royalty from its patents if other companies are successful. And unless AutoTalks is able to vastly step up its marketing game, it's looking all the more likely that Qualcomm Incorporated (NASDAQ:QCOM) is set to dominate cellular vehicular communication in the future.

Ford testing its connected vehicle inside the United States.

Rough Estimates Peg Qualcomm's Expected Licensing Revenue At $2 Billion From C-V2X Chipsets

Data from the United States Bureau of Economic analysis shows that approximately 2.8 million vehicles were manufactured inside the country last year, down by a million from 2016. So far, Ford has been C-V2X's most enthusiastic supporter, with Toyota and General Motors being on the backfoot due to previous investment in DSRC-based technologies. Still, Qualcomm's existing licensing practices and the number of new cars manufactured in the U.S. let us speculate on how big the potential revenue pie is for the company.

In the smartphone world, Qualcomm (NASDAQ:QCOM) charges a licensing fee of 5% per device sold by companies including Apple (NASDAQ:AAPL) and Samsung. The average new light-vehicle price in the United States last year stood at around $35,000 last year. If we assume that Qualcomm reduced its licensing fee for cars to 2%, then the company stands to make $700 per car sold. And if its technologies made it on to every new car sold inside the U.S., then the company can earn $2 billion only from licensing fees, since the revenue that Qualcomm earns from chip sales is separate, and it is accounted for under the company's CDMA Technologies business.

If the San Diego chip giant doubles its hypothetical licensing fee percentage to 4%, then Qualcomm Licensing Technologies' revenue also doubles to $4 billion. For reference, the Bank of America expects Apple to pay Qualcomm $4 billion by the end of 2022 for using the company's 5G modems in the iPhone.

Of course, this back-of-the-envelope analysis assumes that C-V2X solutions are ready for mass-market adoption and have cleared regulatory scrutiny. At this point, it's very important to note that groups representing Ford Motor Co (NYSE:F), Toyota Motor Co (NYSE:TM), BMW, General Motors (NYSE:GM) and others have claimed in court filings that Qualcomm's current licensing practices will increase the cost of connected vehicles. The company does not license its technology to chipmakers; instead, it targets only automakers.

Thoughts? Let us know what you think in the comments section below and stay tuned. We'll keep. you updated on the latest. And, as always, keep in mind that this piece does not constitute investment advice, the author does not own any stock or shares of the aforementioned companies, conduct your due diligence prior to investment separately from this piece and consult a broker before making any decisions.

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