Chip giant Qualcomm crafts a new auto industry role

LAS VEGAS — Qualcomm is carving out a new role in the auto supply chain as its business grows, simultaneously acting as a supplier and a partner with its automaker customers.

"There is a very clear supply relationship that you have to embrace, but that partnership piece has become very important," said Nakul Duggal, Qualcomm's automotive chief, told Automotive News at CES.

As many automakers increasingly lean on Qualcomm to help make their vehicles more digitized, they have started to realize that the San Diego tech giant is not like a traditional Tier 1 supplier. And that reality requires different approaches to doing business on both sides, Duggal said.

"Automakers that we have direct partnerships with now realize we're not a Tier 1," he said. "We're not going to sign up to do things Tier 1 suppliers do. They see what our capabilities are. They know what we're good at and what we're not good at."

The company has become a major player in the vehicle space in recent years.

The latest sign of that came during a CES news conference Wednesday between Honda Motor Co. and its joint-venture partner Sony Corp. when the companies revealed that they will draw on Qualcomm Technologies' Snapdragon digital chassis for their planned Afeela electric vehicle, which Honda plans to begin selling in 2025.

Qualcomm has also flexed its financial muscles against traditional players in the auto space. Last year, it outbid Canadian supplier giant Magna International Inc. to buy Swedish tech supplier Veoneer's Arriver software stack. It was a move that helped give Qualcomm a larger foothold in advanced driver-assistance technology beyond its traditional automotive silicon and software businesses.

The increased focus on auto has resulted in significant financial gains for the company. Qualcomm said in September that its automotive contracts will generate $30 billion in sales in the coming years, up from $19 billion just two months earlier.

That figure has risen since then, Duggal said, though he declined to say by how much.

Some of that revenue pipeline stems from its new Snapdragon Ride Flex SoC automotive processor chip, which Qualcomm said handles both driver-assistance functions and cockpit functions such as infotainment systems. Qualcomm unveiled the Flex on Wednesday.

By creating a chip that can process two traditionally separate domains, Qualcomm said it can bring down costs for automakers as they continue to develop their advanced driving features and infotainment displays.

"For automakers that are focused on cost, this allows them to bring these two domains together and bring technology into more budget segments," Duggal said.

The Flex is expected to become commercially available in 2024.

As it starts the new year, Qualcomm is "guardedly optimistic" that 2023 will bring more success for its automotive business, even as the industry at large faces new economic uncertainty and persistent supply chain challenges, Duggal said.

In case of a recession, he said the significant growth in the number of chips per vehicle and the amount of software they run should help Qualcomm offset a drop in new-vehicle sales.

"We're going to have to watch what the overall macro situation looks like," Duggal said, "and balance that out with the growth that we've been seeing."