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The Chromephone and Its Market Structure

Stocks in this article: GOOG NVDA BRCM INTC QCOM BBRY

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.

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