The chip maker receives a patent royalty on just about every handset that uses third-generation or later cellular technology. Apple Inc.'s iPhone 5, for example, communicates with Qualcomm chips—as do most smartphones that use the speedy technology known as LTE.
That has helped Qualcomm amass $26.8 billion in cash and marketable securities and a $105 billion market capitalization that recently topped Intel Corp.'s as the biggest in the semiconductor sector.
Not all gambles have paid off. A mobile broadcast service called MediaFlo and Mirasol, a display designed for viewing in direct sunlight, didn't pan out. And while Apple uses Qualcomm's wireless chips, it prefers to design its own mobile processors.
Mr. Jacobs plans to bankroll new mobile technologies, including tiny home equivalents of cellular broadcast towers to ease congestion on the carriers' networks and smartphones that link with sensors in homes, cars, stores and medical devices.
The 50-year-old CEO, who has a doctorate in electrical engineering and is the son of co-founder Irwin Jacobs, recently sat down in the firm's San Diego offices to discuss what's ahead in the mobile market. Edited excerpts:
WSJ: How much growth is left in the smartphone wave?
Mr. Jacobs: There is still a long way to go. This year, 39% of shipments were smartphones. In the first half of the year there were about 300 million smartphones shipped, and that's a 45% increase year over year.
There's about 1.9 billion mobile broadband connections and there's six billion connections overall. So there's still a huge place to go in terms of growth for mobile broadband, which is really the fundamental enabling technology for smartphones.
WSJ: Qualcomm's patent-licensing business is unique. Are there any threats to that model?
Mr. Jacobs: There is all this discussion about the smartphone [patent] wars. But people blow these things up. If you look in the history of the world there were sewing machine wars, and there were other telephone wars, and all these kinds of things.
Right now, we're sort of a bystander trying to be as neutral as we can. But you never know. These things can happen. We are always prepared.
WSJ: What are your most promising R&D bets?
Mr. Jacobs: Obviously we are continuing to invest a lot on the smartphone side and on new radio technologies, because that's sort of table stakes these days.
We are building even more high-powered processors with better and better graphics, but still trying to make sure they have all the connectivity that you want and operate at very low battery consumption.
Then we see this opportunity on the network side because there is so much demand for data traffic over the air. So we have a project to improve the capacity of wireless networks by 1,000 times.
WSJ: You've talked about offloading data traffic to small home cellular base stations.
Mr. Jacobs: A base station that used to be this huge thing sitting by the side of the road is now going to be the size of a deck of cards or smaller.
You plug it into your Ethernet or hook it up to your Wi-Fi and that is going to give you very fast data rates for doing whatever it is you want to do with your cellular phone.
WSJ: And subscribers driving by might also use the connection?
Mr. Jacobs: Exactly. In some cases you'll use the big network because maybe you are in your car and you are going too fast to really hook on and use it for very long. The big network stays around. But more and more of the traffic gets loaded onto this small cell network.
WSJ: Talk about some other new developments.
Mr. Jacobs: When you get in your car now you can see the traffic around you. When the cars are actually talking to each other, it will be even better. When the information is uploaded to the cloud and down, the information gets a little bit stale.
Then we talk about things like social networking, which today takes place as you go to a device and mostly you see the posts that are updated.
What would be cool is when you walk into a room and you sort of know the people around you and they share whatever information they want to share. In a business setting it would be wonderful.
WSJ: Your phone also may have a better idea where you are.
Mr. Jacobs: People always used to say with GPS that you'd walk by McDonald's and McDonald's would know you walked by and they'd send you an offer. And I always said I don't want McDonald's tracking me all the time to be able to do that.
What will happen in the future is that McDonald's will just send out information, and as you walk by your phone will decide if you're interested in that information.
WSJ: Not all your bets have paid off. You've decided to license the Mirasol technology to other companies rather than manufacture the displays.
Mr. Jacobs: We got into the manufacturing just to catalyze that market. We always intended eventually to move to a licensing model.
The technology we have today isn't ready to be the main display of a smartphone or a tablet. We have that technology in development. That will come out over the next couple of years.
WSJ: So you might sell your factory?
Mr. Jacobs: We might sell, partner, there's a bunch of different options on the table.
WSJ: Your Snapdragon chips, which combine a processor with communications, have been popular. What happens if the two biggest smartphone makers—Apple and Samsung—keep making their own stand-alone processor chips?
Mr. Jacobs: We're hopeful that the companies not using our processors will [eventually] want to use them. If that doesn't happen, that's not such a good thing. But other companies aren't
December 12, 2012