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The Chromephone and Its Market Structure

NEW YORK (TheStreet) -- My article from earlier this week caused a bit of controversy.

In short, the article suggested Google (GOOG) will be launching smartphones based on a future version of Chrome OS in about a year, and a Chrome OS tablet even before then. Well, clearly some people don't think this will happen -- whether within a year, or for that matter two.

In a year or two, we will find out who's right. Perhaps it will take a little longer. In any case, let's play with the thought that I'm right. If I am, what would a Chromephone ecosystem look like? Who would be involved? Winners and losers in the food chain?

The logic goes something like this: Android now has 70% to 75% of the world's unit shipments of smartphones, according to the latest surveys. This is an insanely high market share.

If you're in Google's shoes, would you put all of this 75% market share -- the Android operating system -- in one basket forever? What if something goes wrong with Android? For Google to diversify its tablet and smartphone exposure to its other operating system -- Chrome -- is only prudent risk management. This alone is reason enough to believe I will be right about the upcoming Chromephone and Chromepad, in addition to my previous arguments.

Anyway, the future Chromephone industry structure would look like this:

Let's start with the semiconductors. This involves primarily a CPU/GPU as well as the baseband and related radios. Who would get this business from Google and/or its hardware partners?

Let me contend that the leading contenders for this business, which could amount to hundreds of millions of semiconductors on annualized basis, within only a couple of short years, are these:

Qualcomm (QCOM), Nvidia (NVDA), Intel (INTC), Samsung and Broadcom (BRCM).

Qualcomm hasn't yet made a CPU for Chrome OS, but it's the leader in basebands. One would not want to bet against Qualcomm being involved in a future Chromephone or Chromepad.

Nvidia has made CPUs for Android, but its integrated baseband -- the Tegra 4i -- hasn't yet shipped. However, it may be ready in time for delivering product by the second quarter of 2014. Still, not as likely as Qualcomm or Intel.

Stock quotes in this article: GOOG, NVDA, BRCM, INTC, QCOM, BBRY 

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