Qualcomm’s Audio Chips Have Unlocked a Big Opportunity

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Qualcomm (NASDAQ: QCOM) is going all out to attack the smart-home opportunity. Back in May, the chipmaker had released a mesh networking platform and reference router design that can integrate a variety of virtual voice assistants into just one piece of hardware.

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Qualcomm's platform has the potential to disrupt the virtual voice assistant hardware market since customers won't need a separate device to run Amazon's Echo or Alphabet's Google Home, with the mesh router doubling as a virtual assistant hub. But Qualcomm isn't done yet -- it recently launched new audio platforms that could make it the go-to supplier for audio chips across different applications.

Qualcomm's serious about wireless audio

Qualcomm is targeting different use cases with its new audio chips. Its entry-level chip family is aimed at mass-market Bluetooth headsets and speakers, while the premium chip gives the makers of high-end wireless speakers and headphones better signal processing power to deliver an immersive experience.

Qualcomm is making a smart move by targeting the different price points in the wireless audio market as this space could double in the next seven years, hitting $31.8 billion in revenue in 2023 according to Markets and Markets. More specifically, the chipmaker's focus on the high-end market for smart-home speakers could generate a lot of revenue given the growing adoption of these devices.

Qualcomm's high-end chip will allow smart-home owners to hook up their virtual assistants to their speakers wirelessly as opposed to using a 3.5 mm audio jack. Additionally, the chip specialist is ready to support speaker manufacturers with an audio development kit that will provide programming resources, accelerating the time to market for smart speakers.

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For instance, Qualcomm's high-end audio chip supports near-field communication (NFC) along with Bluetooth Low Energy. It is equipped with an LED driver and touch controller so that speaker makers can integrate a display into their products. That means Qualcomm is trying to make things easy for OEMs (original equipment manufacturers) to come out with speakers aimed at smart homes, setting itself up to tap a market where shipments could grow tenfold to 60 million units by 2022.

Not missing the USB-C party

Qualcomm also doesn't want to miss out on the USB-C gravy train, which is fast becoming the standard among smartphones for charging and high-speed data transfer. ABI Research forecasts that 830 million smartphones equipped with USB-C technology will be shipped in 2021, clocking an annual growth rate of almost 70%.

Not surprisingly, Qualcomm has decided to make a dent in this market with its WHS9420 and WHS9410 single chip USB audio SoC (system-on-a-chip) platforms. These chips can help the semiconductor specialist tap the growing deployment of USB-C connectors as smartphone OEMs move away from the 3.5 mm headphone jack in order to make their devices slimmer.

What's more, the two USB-C chips launched by Qualcomm target the two different price points of the headset market. While the cheaper WHS9410 is aimed at entry-level products, Qualcomm has equipped the higher-end WHS9420 chip with active noise cancellation and high-quality digital-to-analog conversion.

Therefore, Qualcomm doesn't want to cut any corners in capturing a greater share of wired headphones, as they still account for more than 50% of the overall market. Looking ahead, USB-C type wired headphones could gain in popularity as more smartphones are built with this technology, which opens up another secular growth opportunity for Qualcomm.

The Foolish takeaway

Qualcomm is aggressively trying to find new growth opportunities as its core markets of smartphone application processors and LTE basebands are under pressure. Therefore, smart homes, wireless audio, and USB-C could bring the much-needed diversity to the chipmaker's top line by opening up new revenue streams.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Qualcomm. The Motley Fool has a disclosure policy.