Twenty-seven years ago, a group of seven former Linkabit scientists and engineers gathered in Irwin Jacob’s San Diego home to discuss the future of digital communications.
With no specific product or business model in mind, just a concept of “quality communications,” Qualcomm Inc. was born.
Its first product, launched in 1988, was OmniTRACS, a satellite-based commercial mobile system for the transportation industry that allowed truck fleet operators to effectively track and monitor their vehicles in the field. These days more than 750,000 systems are in operation worldwide, including extensive use by the government and military.
When the company was established in 1985, cell phones were in their infancy, still using technology that was unencrypted and required a significant amount of wireless spectrum to support. It was clear that analog technology would not be robust enough to support the anticipated demand for wireless connectivity.
Qualcomm began working with a digital wireless technology called Code Division Multiple Access, which would allow eight to 10 times more phone calls to be made within the same spectrum.
Three months after the Telecommunications Industry Association endorsed a digital technology called Time Division Multiple Access in 1989, Qualcomm staged a demonstration of CDMA technology to 50 of the wireless industry’s most influential leaders.
By 1993, CDMA was adopted as the cellular standard in the United States. Today there are more than 1.1 billion 3G CDMA subscribers worldwide.
Qualcomm is now a global player in digital wireless technologies, the world’s biggest chip set provider and by far the largest public company in the region. Its revenues in fiscal 2011 were nearly $15 billion. It employs more than 21,000 people around the world, with two-thirds of those working here in San Diego.
Being one of the city’s largest private employers is “a source of real pride for us,” said Dan Novak, vice president of global marketing, public relations and communications for Qualcomm.
Qualcomm has helped create a flourishing technology hub here in San Diego, Novak added.
“More than the people we employ,” he said, “75 companies clustered around San Diego are here in part because of Qualcomm and Linkabit,” the tech company co-founded by Jacobs in 1968.
Early on, the company established an open and inclusive portfolio-licensing program that encouraged innovation and accelerated the pace of mobile technology adoption around the world.
At the time, Qualcomm was still a small company trying to commercialize CDMA technology. In order to continue investing in research and development, Qualcomm began licensing its 50 or so patents. The revenue generated from Qualcomm’s licensing allowed continued innovation and investment in R&D.
In 2010, the company invested 23 percent of its gross revenue, about $2.5 billion, in research and development -- a figure that has increased every year since 2000.
The company’s technology licensing business now generates a higher profit margin than its chip business. Approximately two-thirds of revenue comes from the chip set business, while one-third comes from licensing and other ancillary business; however, two-thirds of profit comes from licensing, while a third comes from the chip set business.
Over the years, this business model has also helped accelerate the pace of mobile technology worldwide.
“It benefits the entire wireless ecosystem,” Novak said. “We broadly license our technology to more than 200 customers around world. Handset and mobile device builders have access to tens of thousands of patents, which they can use to create unique products to bring to market.”
Qualcomm’s licensing business helps lower the barriers to entry for small mobile players, drive global competition and reduce costs and time to market.
Wireless technology is one of the fastest growing industries in the world, and Qualcomm is well positioned to benefit from the growth. Its patents will provide royalties across most 3G and 4G wireless interfaces, and it continues to innovate chip sets for a large variety of wireless devices, including tablets and laptops. The company is also moving its innovation into new areas.
At the recent Innovation Qualcomm 2012 event, the company showed off other projects in the works, including a wireless charger, forays into wireless health and an augmented reality platform that allows printed pages and product labels to trigger interactive information and entertainment.
Even in a down economy, Qualcomm continues to invest heavily in R&D. Under Jacobs’ direction, and now son Paul Jacobs since 2005, the company has maintained a strong vision and prescience for where the industry is headed.
The company has maintained its edge, Novak said, by hiring top talent.
“Hiring the best and brightest engineers from around world helps us thrive,” he said. “We compete aggressively for engineers coming out of UCSD, Berkeley, Stanford, Michigan, as well as places like China and India.”
Qualcomm has been named to Fortune’s “Best 100 Companies to Work for” since the magazine began compiling the list 14 years ago. Its persistent ranking on that list starts with leadership recognizing success in “the most extraordinary people in the world,” Novak said.
“Our people are hugely passionate about our mission and vision. Qualcomm has the opportunity to reach hundreds of millions of people a year -- we ship 500 million chip sets each year,” he said. “People believe in what this company stands for. They’re passionate, and love working here. When people come to work here, they often finish their career here.”
Klam is a San Diego-based freelance writer.