Qualcomm inks multiyear deal to power SpaceX's planned U.S. wireless network

What changed

Qualcomm will provide hardware for SpaceX's planned nationwide, ground-based wireless network, including Dragonwing components for towers that move calls and data. The company will also supply some of its own software that will serve as the network's brains.

The companies signed a multiyear agreement in which Qualcomm will make "tens of thousands of cell sites" for a 5G network, with rollout slated to start next year. Qualcomm Executive Vice President Durga Malladi said the number of planned installations will be on par with those of major wireless carriers.

Why it matters

SpaceX has been signaling it wants to go head to head with AT&T Inc., Verizon Communications Inc. and T-Mobile US Inc. for consumer mobile service. A supplier commitment of this size helps Musk's company assemble the ground infrastructure needed to try it.

"From our perspective, they are very committed and serious," Malladi said, adding, "Our degree of confidence is extremely high." He also noted, "When you have a clean sheet of paper and you're building a new network from ground up, you have an opportunity to build a more modern network."

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Strategy check

For Qualcomm, SpaceX is a fresh customer for its networking unit, supporting the push to depend less on a stagnating handset-chip business and evolve into a broader chip supplier. The company said SpaceX's system will take advantage of improvements since the start of 5G, like better spectrum efficiency, and will be well positioned to adopt next-generation networks now being developed.

The build also suggests SpaceX's ambitions reach beyond linking phones to satellites as a complement to existing carriers. The company has amassed licenses for key radio frequencies needed to run a standalone network.

Investor take

Qualcomm shares rose 1.6% to $166.99 by 10:54 a.m. in New York, while SpaceX slipped 3.4% to $136.50. The bottom line: a large, long-duration networking customer and a potential new U.S. carrier both got a little more real, with timelines and scale that matter for capex, chip demand, and competitive dynamics in wireless.

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