• Qualcomm has acquired Sequans Communications’ 4G technology for $200 million, expanding into the cellular IoT market.
• The deal enhances Qualcomm’s offerings in the LPWA segment, addressing performance and efficiency gaps with Sequans’ advanced 4G IoT technologies.
• The acquisition provides Sequans with capital for 5G RedCap development while allowing it to continue leveraging its 4G IoT technology.

Qualcomm, a global leader in IoT chipsets, has entered an agreement with France-based fabless semiconductor company Sequans Communications to acquire its 4G IoT technology for $200 million. Sequans will continue its 4G IoT business, retaining the license to use its 4G IoT technology for ongoing operations. The deal is expected to close by the end of October 2024. Sequans had been looking for potential buyers following a challenging 2023, during which its revenues nearly halved. Earlier, in 2023, Renesas Electronics had attempted to acquire Sequans’ business, but the deal did not materialize.

What could be the possible reasons for Qualcomm to get into this deal? Let us walk through our list:

• Market dynamics: Qualcomm is already a dominant player in the global 4G IoT (non-automotive) market with a 23% share, while Sequans holds just 0.5%. Excluding China, Qualcomm's market share soars to over 59%, with Sequans barely reaching 1.4%. This means the acquisition isn’t about boosting market share. However, it allows Qualcomm to cater to a broader range of enterprise customers seeking low-power, reliable cellular connectivity for industrial IoT applications. The addition of Sequans’ advanced 4G IoT technologies to Qualcomm’s existing suite of IoT solutions will strengthen the latter’s position in the industrial IoT market.

• Technology: From the technology perspective, Qualcomm’s strength extends across the LPWA landscape, encompassing LTE-M, NB-IoT, Cat-1, Cat-4, and higher categories. While Qualcomm previously faced challenges in the Cat-1 bis segment, it has rapidly gained traction, increasing its market share from 2% to 16% outside of China within one year. This significant improvement demonstrates Qualcomm’s ability to compete effectively in all LPWA technologies without relying solely on external acquisitions like Sequans.

It is important to note that the 4G segment is heavily dominated by Chinese vendors, including UNISOC, Eigencomm, Xinyi, ASR Microelectronics and emerging players like Altair Semiconductor. This competitive landscape highlights the challenges Qualcomm may face in certain regions, particularly those with strong domestic 4G ecosystems.

Sequans Product Portfolio Comparison

Source: Counterpoint Research

• Monarch 2: Released in 2018, Qualcomm’s MDM9206 and MDM9205 LPWA Dual Mode chipsets are now considered outdated. Sequans’ Monarch series is the latest and offers improved performance, lesser power consumption and smaller size compared to Qualcomm’s chips. Acquiring Sequans technology is a smart move that will help Qualcomm strengthen its position and effectively address this gap in the LPWA market.
• Financial strength: The transaction provides Sequans with significant capital, enhancing its financial stability and enabling further investments in its IoT business. Sequans can concentrate on advancing its 5G technology and expanding its market presence. Qualcomm has acquired Sequans’ 4G IoT technology and then licensed it back to Sequans. This allows Sequans to continue using the 4G IoT technology, ensuring uninterrupted service to its existing markets and customers.
• Industry focus: Earlier this year, Sequans strategically reduced its focus on certain segments, such as FWA broadband. It has now redirected its focus towards core areas of Massive IoT. This shift allows the company to concentrate on key technologies and significant customer wins, including partnerships with companies like Itron. Sequans has several promising projects in the pipeline, including advancements in LTE-M/NB-IoT technology and the anticipated launch of its 5G RedCap TaurusLT chipset, which is expected to contribute to its growth in the coming years.

Conclusion

The acquisition of Sequans Communications’ 4G IoT technology by Qualcomm is a strategic move to enhance Qualcomm's IoT portfolio. Despite Sequans' small market share, the integration of its advanced 4G technologies will bolster Qualcomm's position and allow it to serve a broader range of enterprise customers seeking reliable, low-power connectivity solutions.

From a technological standpoint, the acquisition helps Qualcomm address gaps in its offerings, particularly in the LPWA segment by incorporating Sequans' superior Monarch series chipsets. This move is timely given the competitive 4G landscape, which is dominated by Chinese vendors.

Financially, the deal provides Sequans with the capital to strengthen its position and invest in 5G development while retaining its 4G technology for ongoing market service. Besides, Sequans’ shift in focus to key technologies and partnerships, along with promising new projects, positions it well for future growth.

Overall, the acquisition is a strategic alignment that addresses both immediate technology needs and long-term market goals for Qualcomm.