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5G wireless has been getting a lot of talk lately. While we've seen 4G LTE technology evolve rapidly over the past several years, with peak theoretical speeds surging from about 100 megabits per second to north of 1 gigabit per second, 5G promises another quantum leap in transfer speeds. Consider, for example, that wireless chip specialist Qualcomm (NASDAQ: QCOM) says its first 5G modem, the Snapdragon X50, can handle "multi-gigabit" download speeds.
While tech specs are cool, you're probably wondering which companies can capitalize on the industrywide transition to 5G wireless. Three of them are Qualcomm, Broadcom (NASDAQ: AVGO), and Intel (NASDAQ: INTC).
Image source: Intel.
1. Qualcomm
Wireless giant Qualcomm makes its money in two key ways: selling chips -- primarily applications processors to smartphone makers -- and licensing its vast portfolio of wireless patents to companies that sell cellular-capable devices.
On the company's most recent earnings conference call, CEO Steve Mollenkopf highlighted the importance of the move to 5G, claiming that markets "are unforgiving to companies and competitors that are late to these transitions, especially in the initial ramp years." He added (emphasis mine): "Our focus and investment priorities over the last couple of years have enabled us to successfully establish a strong technology position and lead the 5G industry transition, which will represent a significant opportunity for Qualcomm to expand revenue and earnings as we exit fiscal 2019."
Later during the call, the head of Qualcomm's chip business -- known as Qualcomm CDMA Technologies, or QCT -- expressed the company's view that 5G will be "a significant expansion, even on existing units, both in revenue and earnings for QCT, but also likely to be an expansion of share."
Investors should keep an eye on how the 5G transition affects the company's chip business, as well as its licensing business, over the next couple of years.
2. Broadcom
Broadcom, unlike Qualcomm, doesn't sell mobile applications processors or even standalone cellular modems. It does, however, sell a wide variety of chips that are key to enabling wireless capabilities in smartphones, including Wi-Fi, Bluetooth, and cellular. Like Qualcomm, it stands to benefit from the transition to 5G.
On Broadcom's Sept. 6 earnings call, CEO Hock Tan cited the industrywide shift to 5G as something that will push its key customers -- including Apple (NASDAQ: AAPL), which makes up north of 60% of Broadcom's overall wireless revenue -- to keep buying its more advanced cellular chips. Those chips tend to cost more, boosting the amount of revenue the chip giant generates from each iPhone sold.