Qualcomm courts German carmakers
The former mobile specialist is positioning itself as the chip supplier for the connected car industry. A visit to CEO Cristiano Amon at Qualcomm's headquarters in San Diego.
Qualcomm is courting German carmakers. At the company’s San Diego headquarters I got a sense of the ambitions of CEO Cristiano Amon and his team – and observed a strategic shift that will preoccupy the German car industry for years to come.
What is at stake
Qualcomm, for decades a mobile specialist with chips in almost every smartphone, has a new priority: cars. Connected and increasingly autonomous vehicles need enormous computing power. Qualcomm delivers it in the form of specialised vehicle chips. In San Diego’s colourfully lit demonstration room stands a prototype: one box handles infotainment and climate control, another processes sensor data. “This is how we imagine the future of connected driving,” says Nilesh Parekh, a senior manager in Qualcomm’s automotive division.
Why German carmakers are buying in
BMW and Volkswagen are working closely with Qualcomm; Mercedes is instead pursuing a partnership with Nvidia. Different partners, same logic: the carmakers are making themselves dependent on chip companies they had barely registered a few years ago. Nvidia is already worth more on the stock market than all German carmakers combined. And Qualcomm is building its automotive business at an impressive pace. For the industry in southern Germany, this means: the most important differentiating factor of the future – the intelligence inside the car – comes from California.
What Tesla does differently
While German manufacturers outsource their chip strategy to suppliers, Tesla goes the other way. Tesla initially bought chips from Nvidia too; today the company develops its most important semiconductors in-house. “That is the truly interesting development,” says Guido Appenzeller, a former Intel executive and now a partner at Andreessen Horowitz. Whoever controls their own chip controls latency, costs, further development – and the software platform above it.
Why this could tip the industry balance
Value creation in the car is shifting step by step from the combustion engine to the computing platform. Whoever supplies the platform will in future get a larger share of the value. Tesla grasped this early. Qualcomm and Nvidia are positioning themselves as the two big suppliers for everyone who cannot take that path themselves. For the German industry, this creates a dependency that is strategically very hard to reverse – unless the companies invest in their own chip and software expertise.
I wrote the full piece together with Joachim Hofer and Felix Holtermann for Handelsblatt.