Winning Through Market Disruption | The Six Five Summit

Hey everyone. Welcome back to the six five Summit. Daniel Newman, here, CEO of the Futurum Group.

Excited for the continuation of our annual event here, the six five Summit. We've got a returning guest, one that I've always enjoyed talking to, both on the air and behind the scenes. Akash, Paul Akash is the Qualcomm CFO and COO doing two big jobs for a company that has been absolutely on fire.

Uh, great run. Akash, welcome back to the show. I think this is the second time that you've done the six five summit.

It is Dan, and it's great to be back. And thanks for having me here. It's, uh, it's, uh, looking forward to talking about all the, all the cool things that are happening with the company and overall in the industry.

Yeah, it's really hard to pick, you know, there's so many different directions. I could take this thing like your $45 billion design pipeline in automotive, but, uh, actually for those out there, we'll have koal and the on and the summit too. So hold on that thought.

We'll come back to that one. But then you have copilot plus pc. You've got this huge run of form going on right now that's very exciting.

You know, whole new brand, a whole new breakthrough area of A IPC. We could talk about that, but let's just start with the kind of macro picture for Qualcomm. What's the driving force behind the company's enterprise value growth?

The demand and the excitement is, you know, I've followed you for years. I've been through the ups, I've been through the downs, I've been through the litigations. I've been through the m and a, I've been through, you know, I've been through a lot, and this may be the best moment I've seen in the company's history, right?

As AI hits, its inflection. What's going on over there? You know, it's, uh, it's, it's really an exciting time for us to be in this industry and be in the company because, uh, we have so many, uh, technologies in the company that we do organically.

And, and I'd argue that from all the semiconductor companies, we probably have the broadest set of technologies. And, and the journey that we are on is how do we take these technologies and deploy it, uh, across all edge devices. Uh, if you think about ai, this is something that we've done for 10 plus years, but we were applying it in a different way.

We were using it as an ingredient technology within camera, within audio, within video to make 5G better. But as, as everyone knows, well, we've gone through this inflection point with gen AI coming in and broader application of AI techniques, um, and it started off in the cloud, right? We've seen the recognition of that come through broader in the industry, but we are a believer that there is a second inflection point coming in this journey as well.

And as you think about computing, computing is done on the device and it is done on the cloud, and, and we think AI is gonna play out the same way. There is not just gonna be AI happening in the cloud. There's gonna be AI on the device.

And, and that's where Qualcomm comes in. It, it, it is completely aligned with our strategy of being the silicon provider of choice, um, on the edge. And, and as, uh, AI comes into on device applications, we think we have an opportunity to drive differentiation.

We have an opportunity to drive replacement of devices, and we have an opportunity to drive, uh, our, uh, content growth. So tho those are, those are great things, great things for us. When you think about gen AI at the edge, um, there's three or four key advantages that it brings.

The first one in our minds is just privacy and security. There are things that are personal to the user. You wanna leave it on the edge, you don't want to take it to the cloud.

And, and gen AI applications that use personal data can, can be, uh, leveraged on the device. Uh, the second is latency. Um, sometimes depending on the use case, it's way difficult.

It takes a lot of time to go to the cloud and to come back and certain use cases don't allow the, that luxury, and we would like to do those things on the device. And then third is really cost. Once you've acquired a device already, you've paid for the compute power that's in the device.

So why not use it to run gen AI and other AI use cases versus always going to the cloud and use very expensive cloud resources to do that. So those are three things are the foundation of, uh, new use cases that will come through when you use Gen AI on the device. And, and the interesting part about our position is we can do it on the phone, we can do it on the pc, we can do it in automotive.

You talked about our design when pipeline of $45 billion there. Uh, we can do it in XR or Metaverse devices, we can do it in industrial devices. And that just puts us in this unique place to take this trend that is extremely disruptive, that's moving from the cloud to the edge and bring it to all these devices on the edge.

Yeah, I think that connected intelligent edge commitment that was made a few years ago really has found an incredible inertia, akash, because I think people didn't quite appreciate what AI was going to do and how it was going to transform just about every interaction that we had with data. And so you now got these, you know, you got the device, you got the pc, you got the automobile, you of course got all this sensor technology that's going on out there. You've got, you know, even, even watching television, I mean, that's the edge now.

And then of course, you've got these data centers that are explosive and you've got a exponential amount of data that's gonna have to move around. And we're gonna have to decide where data belongs and what transports, what stays, what's local. These are a lot of different things to solve.

The other thing that's gonna need to be solved for too is gonna be, um, you know, productivity, worker productivity. How does AI drive more productivity for, you know, knowledge workers? And the A IPC has been a red hot topic.

You know, recently there was a big Microsoft, uh, copilot plus PC event, and Qualcomm was star of the show. Um, you know, I'll be candid, I think there were some people that, you know, after Nuvia and after the acquisition time kind of elapsed, they weren't sure is this gonna be a good thing? And then there's people that kind of look at the PC market and they're like, that's a really hard market.

Like, you sure you want and you guys charge through. Um, it seems that you see an opportunity to disrupt that space. Yeah.

So I think it's the DNA of the company, right? If you think about how Qualcomm has grown into other areas, we got into wifi. We were not a player.

We got into RF frontend and became the leader. We went into automotive and we became the leader. And what's common in each case is we come from a place of technology.

It's all about having the technology leadership having the best part. And that, of course, there is the channel we need to tackle, learn to work with new customers, learn to work with new ecosystem partners. Uh, but none of that matters if you don't come in with the right technology.

So when you think about this PC part that we've announced, Snapdragon X Elite, uh, we are very proud of it. I think it comes from a place where we have three very significant advantages. The first is the CPU and the processing power.

Uh, we think we're gonna bring absolutely the best CPU there is in personal computing, uh, in any ecosystem, not just windows. And, and that's, that's a great place to start. The second is, uh, battery life.

We are gonna have a very long battery life. I think Microsoft talked about a 22 hour battery life and watching content on the device, uh, which is significantly higher than what anyone else can, uh, afford in the industry. And, and we think that's a, that's a tremendous, uh, kinda tap, uh, tip of the hat to the legacy we come from, from handsets, uh, where battery life is really at the center of how we design everything.

And for the first time, we're gonna have a pc, which might have a longer battery life than handsets even do. So that's a, that's a interesting thing for the consumers to wait for. And then the third one, which, which really is the topic du jour is, is really around gen ai and how that will completely transform the way, uh, the PC is used.

And I, and of course that's Microsoft is at the center of that transition. Um, they outlined a very clear vision of the next generation of windows, uh, which, uh, which is called copilot plus, and, and the tremendous use cases that come with it. And what was interesting to us was there were approximately 22 devices, uh, PCs that were launched, uh, with, uh, with the announcement of the new Windows copilot plus devices.

And every single one of them used used a Qualcomm chip. I mean, for us to have come from really no real presence in the PC industry and to then intersect this inflection point in how PCs are gonna be used and AI PCs, uh, becoming the next generation device and have really every single device that gets launched, uh, using our chip, we're extremely excited. We're, we think we're at the front end of a multi-year change, uh, for Qualcomm.

If you think about it, this is one of the largest semiconductor markets there is. And we are coming into that market with a position of tremendous strength in technology. We think the strength is sustainable.

We have this NPU that, uh, it's a neuro processing unit, just like CPU is dedicated to processing. GPU is dedicated to graphics. Our NPU is dedicated to running AI workloads.

And that the magical thing about it is that it runs those at extremely low power. And, and that's important because a lot of the use cases that Microsoft outlined, they need pervasive ai. You need to have models running always in the background when a consumer is using the device.

And, uh, and it's something that, uh, cannot be afforded in, uh, in, uh, the chips that our competitors have. And so we are excited. We're at the front end of the line.

I think, um, we get to take our technology and exploit a very large silicon market. It's exciting stuff. Yeah.

And some, some people are actually looking at what you're building as as much a competitor to Apple and what Apple has done as to the traditional PC market, which is an interesting, um, perspective because it's always kind of been Mac is Mac, and people that buy Mac would never buy anything else, or almost nobody would ever buy something else. And suddenly there's people asking questions as, you know, especially with what was shown with ARM and Qualcomm and Arm and traditional Apple and Arm, is that there is a different way to build, design and create experiences on the pc. So it's pretty interesting.

Um, I'll let that be my commentary and I won't ask you to weigh in on that particular part, but what I do want you to weigh in on is, you know, in your recent earnings report and in fact sound, I believe it's several earnings reports, Akash, that I've listened to you, I've listened to Christiano, we've had these conversations. You've been adamant that the diversification strategy is working. You know, anyone that refers to you as sort of a handset or handset chip company is missing the point and the entire opportunity that Qualcomm has identified and is executing against.

How well are you doing on this strategy of diversifying the business? Yes. Yeah.

So we are, we are very proud for, of where we come from. We do come from the handset legacy. I think we have a great position in handsets and, and as the handset continues to evolve, both in terms of form factor, in terms of the things that it does and, and with Gen AI and other technologies coming into handsets, we think it continues to be an extremely exciting area.

And then we're very proud of it. But, you know, uh, when Christiano became CEOA few years ago, one of the things he did is he formalized the diversification strategy. We were already doing it to a large extent, but he formalized it.

And, and you've seen us kind of methodically focus on very large markets, silicon markets where we intersect those markets with inflection points. So if I just quickly go through, uh, our track record on that RF front end was kind of the first most significant step we took. This is an industry that we did not have, uh, any position at.

We are not a player in it. And then we acquired this asset, RF 360 that came into the company, and then we built them from number four, number five player in the industry to, to one of the top players. And then we've grown it significantly.

We continue to believe that there is, uh, growth opportunity left as we take those technologies and now bring it into automotive, bring it into iot. So that's example number one. The second example is automotive.

Um, we've done extremely well. We had no presence in the car. And at this, the automotive industry, as you know, well, is going through two transitions.

There is electrification and digitization, and we intersected the digitization transition in the industry, and we brought our technologies to bear. We have cloud connectivity with our connectivity solutions. We have digital cockpit solutions.

We have ADAS hardware, ADAS software, and those, all of those things come together in what we call the digital chassis that sits on the physical chassis in the car and really delivers these, these solutions to cars that are all the way from low, low end to high end. And then they go across all these different domains. And, and as we talked about earlier, we have an extremely strong design win pipeline and very confident on executing on the revenue targets we've set.

Uh, the third market we went after is xr. And, and that's a market where you've not seen the volume take off significantly, but every leading player in that market is working very closely with us. Uh, we're very happy with our relationship with Meta.

We are very happy with our relationship with Google, uh, with OEMs in China and and Samsung. And we're just at the beginning of how that market is gonna reshape, uh, our interaction with digital and physical. Uh, the next, uh, next market is what we just talked about.

It's pc, uh, again, a part of our diversification plan. We've invested in PCs for a very long period of time with not much success to date, but I think we're now hitting an inflection point. The industry is changing.

Uh, gen AI has come into the picture and we get to exploit the change in the industry once, one more time. And then I think the final one that we'll we'll talk about a lot more as we go forward is industrial. I think we are at the front end of how those devices are gonna change.

They have historically been microcontrollers wired connectivity devices. Um, but we are at the point where we're gonna use a lot more technology in those endpoints. We'll bring in wireless connectivity, we'll bring in microprocessors.

We're gonna bring in AI at the edge and AI connectivity into the cloud as well. And as those device changes, it, uh, presents an opportunity for us to go and exploit, uh, that transition as well. So very, very excited about what we've done to date.

There is a lot more to come and, and what we really want to do is be consistent with investors. We want to lay out a plan and then go execute to it. And, and we're, we're, we're very happy to see the proof points.

We're happy to see us get credit for, for what we've been doing inside the company for a period of time. And, uh, and we're stay at it. Well, Akash, I want to congratulate you on the progress.

Uh, it's been very, uh, it's been, it's been very exciting to watch and to be sort of part of the covering analysts stable and our team to actually made these calls. And we, we sort of heard you, we heard Christiano, we saw where it was heading, and we said that's gonna work. And there's a lot of people that I think at times, uh, get it wrong.

This is one that we definitely got right. It seems that you're getting it right too. And of course, confirmation will come in the metrics, the numbers tend to not lie.

Um, sometimes it takes time for them to flush out into the, into the final financials. But it's great and great to watch. And Akash, I really appreciate you joining me this year once again at the six five Summit.

Let's talk again soon. And thank you. Thank you so much.

Thanks for all the support. Uh, you've, you've kind of pushed us, challenged us through the process and we appreciate it. And, uh, there's a lot more of, a lot more for us to do together.

Hey, um, you know, someday if I'm driving around in a Snapdragon ride car using a Snapdragon PC and a Snapdragon phone, and uh, maybe I'll find myself in a stadium or at an F1 event watching a Snapdragon car. Uh, things are moving along. You guys are doing great and, uh, I appreciate the partnership that, Uh, that sounds good.

We'll give you a Snapdragon shirt to add to the collection as well. Appreciate that. Alright, everyone, you heard it here.

That was Qualcomm, C-O-O-C-F-O, Akash, Pauly Walla. Great Conversation Company has definitely executed well. This is gonna be one to watch.

I'm sure we'll see them again soon. Or back at next year's six five Summit Studio. I'm sending it back to you.