Understanding the Semiconductor Industry: Design vs. Manufacturing

This is Zack Fuss, an investor at Irenic Capital, and today we're breaking down Qualcomm. When you think of semiconductors, Qualcomm isn’t necessarily the first name that comes to mind but its size and utility in our lives is truly striking. The business has an enterprise value of $150 billion and set the standards for 3G, 4G, and 5G mobile connectivity that we rely on so heavily in our daily lives today. I bet that if you don’t have a Qualcomm product in your pocket right now, you most certainly have one in your home. To break down the business, I’m joined by Jay Goldberg, a semiconductor industry consultant and partner at Snowcloud Capital. Please enjoy this breakdown of Qualcomm.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

[00:02:41] - [First question] - Describing what a semiconductor is for laypeople 

[00:03:51] - Distinguishing between chip designers and producers

[00:04:53] - Why the semiconductor industry evolved the way it did 

[00:05:57] - The history of Qualcomm from the 50s leading up to today 

[00:08:40] - Where Qualcomm fits into the world of wireless phones 

[00:12:01] - What winning the war of standards means for their economics writ large

[00:13:42] - The dynamics within the business that influenced their growth 

[00:16:00] - Qualcomm’s direct competitors as they exist today 

[00:17:20] - The relationship between Qualcomm and Apple

[00:19:42] - What’s happened over the last couple of years in the industry

[00:21:05] - The possibility of a structural tailwind in a digitally interconnected world 

[00:22:56] - Some of the competitive hostility in the semiconductor space

[00:26:58] - Unique directions Qualcomm could be taken beyond positioning 

[00:29:02] - What they can do with their abundant free cash flow 

[00:30:24] - Variables that preserve and could threaten their margins 

[00:32:58] - Where Qualcomm sits within the global struggle for chip dominance geopolitically 

[00:35:00] - Capacity constraints that could impact them directly 

[00:36:51] - Lessons for investors and operators when studying Qualcomm’s story

[00:39:50] - Unique characteristics of Qualcomm’s company culture  

[00:41:06] - Thoughts about Steve and Aman as CEOs

[00:43:08] - Where Meta, Apple, and Microsoft source their chips