What Qualcomm’s decision says about the DTD Industry

In January 2023, Iridium and Qualcomm introduced the Snapdragon Satellite chipset with plans to jointly pursue mass-market direct-to-device (DTD) communications. Shares of IRDM surged 30% over three months as DTD enthusiasm reached a fever pitch. But, in an abrupt about-face, Qualcomm terminated the partnership Nov. 9, driving shares of IRDM 30% below their pre-Qualcomm trading levels.   

What went wrong? Iridium is one of the most respected companies in the satellite industry and Qualcomm is one of the world's leading semiconductor manufacturers. If they can’t pull it off, what chance does anyone else stand?

Well, pretty good, maybe.

Anyway, this isn’t a Lehman Brothers moment. The Iridium/Qualcomm approach-to-market was actually quite novel, but they totally misjudged the customers’ willingness to pay. That doesn't mean that other DTD technical or spectrum approaches can’t work. 

With that said, our key takeaways from the industry’s first major birthing pain: 

• Demand at what price? Will consumers pay for an emergency satellite service? Probably not. In which case, the service becomes an unburdened cost. Apple is presently the only smartphone with DTD emergency services, which it offers as a free service – for now. If Apple proves successful in: (1) charging for the service, or (2) attracting/retaining subscribers, it is a foregone conclusion that every smartphone will need DTD emergency services. 

• What does this mean for Iridium? Stating the obvious, Iridium now needs a new partner to tackle the DTD market, most likely a chipset vendor or handset manufacturer. If Qualcomm couldn’t pull it off, however, other vendors are likely to remain gun shy until there are signs of market traction, as indicated above.  

• What does this mean for the DTD industry? While it’s early to draw conclusions, Qualcomm’s withdrawal adds to a small but growing body of evidence that suggests the approach of using mobile satellite services (MSS) spectrum for DTD will be a harder climb than first anticipated. Iridium DTD competitor Globalstar, even with Apple as its partner, has echoed concerns similar to Iridium CEO Matt Desch about slow adoption. Other companies that could pursue an MSS-based DTD strategy (mainly EchoStar and Viasat) have yet to articulate any clear plans. We have not observed this level of reticence among DTD companies whose spectrum strategies involve reusing cellular spectrum (AST, Lynk and SpaceX).  

With the U.S. Federal Communications Commission promoting its “Single Network Future” at home and abroad, it is clear policy makers want DTD to succeed. And while it’s nice to have regulators and industry working together, we’re waiting to see if the satellite industry can retain the necessary partners – builders of chipsets, smartphones, mobile network operators, and investors – to make sure DTD doesn’t get stuck in R&D.  

SOURCE: https://www.cnbc.com/2023/11/09/iridium-announces-end-of-qualcomm-satellite-to-phone-partnership.html