The Apple Qualcomm Wars

1. DRDavid Rosenthal0:00

   So Qualcomm loses a lawsuit with Broadcom in 2009, has to pay nine hundred million dollars. In 2012, uh, Paul Jacobs, well, at the helm, makes a, a, a really bad bet, maybe it's a good bet, but bad outcome, on a reflective display technology called Mirasol.

2. BGBen Gilbert0:18

   Oh, I remember.

3. DRDavid Rosenthal0:18

   They spun a two billion dollar fab to make it, um, well-

4. BGBen Gilbert0:22

   They actually made a fab?

5. DRDavid Rosenthal0:23

   Yeah.

6. BGBen Gilbert0:23

   Oh, damn.

7. DRDavid Rosenthal0:23

   There's ultimately zero customers for this next gen-- The promise was cool.

8. BGBen Gilbert0:26

   Real companies don't have fabs.

9. DRDavid Rosenthal0:28

   It was supposed to be like a screen that looks like a magazine page, but they were never really able to reproduce the, the, the image quality-

10. BGBen Gilbert0:35

    That's right. I was working at The Wall Street Journal at this time and like, "Oh, man."

11. DRDavid Rosenthal0:39

    That was the future. Uh, 2013-

12. BGBen Gilbert0:41

    Turns out the iPad was the future.

13. DRDavid Rosenthal0:42

    Yes. Steve Mollenkopf comes in and becomes CEO, or I suppose, gets promoted, uh, to become CEO. Very technical leader, uh-

14. BGBen Gilbert0:50

    He was COO before.

15. DRDavid Rosenthal0:51

    Was COO before. Uh, but the problems, uh, problems... They keep growing revenue, they keep doing well as a company, but the, the ecosystem issues for them and ecosystem reputation continues. So in 2015, uh, they enter into not just an issue with other companies, but now with nations. So they have a licensing dispute with China. You have an activist investor who comes in that same year, Jana Partners, to try to split up the licensing and the chip business.

16. BGBen Gilbert1:18

    Mm.

17. DRDavid Rosenthal1:19

    The, that activist investor is kind of saying, "Why do these need to be the same company? The licensing business is printing cash. It has-

18. BGBen Gilbert1:25

    And at this point in time, many semiconductor companies have split out the actual, like-

19. DRDavid Rosenthal1:30

    Yep

20. BGBen Gilbert1:30

    ... chip operations and the IP. Like, a lot of old semiconductor companies are basically just litigation companies [chuckles] at this point.

21. DRDavid Rosenthal1:37

    Yeah. So that's the Broadcom model. So it's interesting to say, okay, what is Broadcom at this point? Broadcom is actually a company called Avago, where the CEO of that ha- uh, basically made a bet and said, "I think the semiconductor industry is no longer experiencing growth. I think that industry should be harvesting profits," 'cause I think, I think it's predicated on Moore's Law decelerating, but basically saying, "I don't think that this industry should be reinvesting as much in R&D anymore because it's a, it's a settled frontier, and what should be happening is we should be rolling up these companies." So Avago buys Broadcom, takes Broadcom's name, buys some other stuff like LSI Logic.

22. BGBen Gilbert2:21

    LSI Logic! Oh-

23. DRDavid Rosenthal2:22

    I think-

24. BGBen Gilbert2:23

    ... big, uh, Sequoia win.

25. DRDavid Rosenthal2:24

    Don Valentine's-

26. BGBen Gilbert2:25

    Yeah

27. DRDavid Rosenthal2:26

    ... one of his ver- first very few investments.

28. BGBen Gilbert2:28

    Yeah, yeah, yeah.

29. DRDavid Rosenthal2:28

    Um, [lips smack] and, and really, the, the Broadcom strategy is to roll up the semiconductor industry, uh, squeeze them-

30. BGBen Gilbert2:38

    Whoa

Episode duration: 10:51