1. Introduction
In a highly competitive environment, firms must continuously innovate to gain a competitive advantage over other firms. Although most of the firms seem to compete against each other to maintain their advantage continuously, firms also often cooperate with their competitors even while competing. Especially in a high-tech industry where technological innovation and change in products are fast, it is difficult to cope with global competitors with a single, static strategy. In other words, a dynamic competition and cooperation between firms is necessary to sustain a firm’s competitive advantage. This has led some researchers [
1] to claim that within a complex business environment, firms should act outside of their boundaries and cooperate with other firms through “open innovation” by interacting with other firms or players in the market, as surviving alone in a competitive business environment is difficult to achieve.
Coopetition is a term that refers to the simultaneous coexistence of cooperation and competition. The term, based on game theory and popularized by Nalebuff and Brandenburger [
2], was coined to reflect the reality of business management today as companies must respond rapidly to changes in their business environment [
3]. The dynamics of coopetition behavior assume that firms cannot survive alone in the changing environment and that interdependencies among firms create value for those firms [
3,
4,
5]. Coopetition has been previously discussed in various theoretical and empirical studies, which have shown, for instance, that coopetition can be a source of innovation [
6,
7], and there are also tensions between cooperation and competition [
8]. This case study is intended to complement that literature by looking at the actual changes in competitiveness and performance created by one highly successful firm’s coopetition and demonstrating that these actions occur in complex competitive dynamics and influence the firm’s strategic behavior.
Throughout its history, Qualcomm has not only developed innovative technology but also survived with cooperation with other companies. The competitive behavior of Qualcomm thus should be understood as dynamic interactions in which Qualcomm both competes with and cooperates with its rivals. These interactions with their rivals do not occur alone but are intertwined and interrelated with one another. Interactions with a firm’s rivals affect firm’s survival and can lead to destructive or productive results [
9]. This study focuses on the cooperation and competition between Qualcomm and Samsung and how firms employ coopetition to gain a competitive advantage.
Coopetition occurs in two different but interdependent ways regarding the cooperative and competitive firm activities. Although these two processes may seem distinct, simultaneous competition and cooperation exist among firms. In this study, coopetition was analyzed over time. It conducted a comparative case analysis of the two firms to examine how the coopetitive process actually evolves and changes over time.
This study contributes to coopetition research by analyzing and describing how specific firm events and external environmental changes affect competition and cooperation over time. In particular, we identified that competitive actions and reactions of firms are the key foundations of the change and evolution of the coopetitive process. The competitive actions of firms bring competition as well as cooperation reactions from their competitors. The choice of competitive and cooperative reactions depends on how other firms interpret and perceive other firm’s competitive activities.
To achieve this research goal, we first review the literature relevant to the concept of coopetition and then analyzes the case of Qualcomm’s coopetition behavior with Samsung as an example of this dynamic. By analyzing the coopetition process of Qualcomm, this paper provides deeper insights into the dynamics of coopetition behavior.
7. Qualcomm’s Coopetition with Samsung
Qualcomm’s major competitors can be narrowed down to companies that are major players in the mobile device market: Apple, Samsung, MediaTek, Xiaomi, and Huawei. Within this market, there is considerable competition between mobile operating systems (OS). As the smartphone market has grown, the OS market has consolidated into two operation systems: iOS by Apple and Android by Google. Apple optimizes the SoC design for its operating system, iOS, so that its devices run smoothly. Other than Apple and Xiaomi; however, most companies have chosen Android as their operating system, which in 2019 had approximately 77% of the market share [
47]. Accordingly, chips produced by companies such as Qualcomm, Samsung, and MediaTek are used mainly by devices based on the Android operating system.
Among these competitors, Qualcomm has been in a long-term relationship with Samsung since 1993, when Qualcomm provided CDMA technology to South Korea. Since then, Samsung has both paid royalties to Qualcomm for use of its telecommunication technology in its phones and provided consignment production of Qualcomm’s semiconductor, which has strengthened Qualcomm’s leadership in the SoC market. As Samsung’s own technology for telecommunication semiconductors has developed to the extent that it threatens Qualcomm; however, Qualcomm has been placed in a situation where, ironically, it has to coopete with Samsung to keep them as a customer. There exists a symbiotic relationship between the two within the SoC industry; therefore, Samsung is both one of Qualcomm’s most important customers and one of its closest competitors.
Figure 2 shows the coopetition relationship between Qualcomm and Samsung. As a fabless firm, Qualcomm orders the production of semiconductor design from, and Samsung buys Qualcomm’s mobile AP and pays royalties for using Snapdragon. Samsung and Qualcomm, thus are competing to create a mobile AP while working together to provide Qualcomm with the production of semiconductors.
Samsung, unlike Qualcomm, performs both design and fabrication and produces its own SoC line, named the Exynos series. Samsung has demonstrated a fast-paced learning capability in developing SoC fabrication and design since it first obtained licenses for proprietary technology from Micron of the United States and Sharp of Japan [
48,
49]. After acquiring licenses from ARM, which offers the core architecture of micro-processors, Samsung was able to enter the SoC design business as well, developing Exynos 3 Single, which was inserted into the Samsung Galaxy S in 2010 [
42]. Samsung has managed to build its internal production capabilities in a mere five years. Although the company performed closed innovation in developing its hardware, it deployed an open strategy platform for developing the smartphone apps, which enabled multiple players to enter the market freely and share their creations [
50]. The smartphones produced by Samsung, named Galaxy, have captured a huge share of the Android market, which also represents a large portion of Qualcomm’s income. In the past, Samsung had been Qualcomm’s key customer because it used Snapdragon for its smartphones. Given that Qualcomm usually receives 2.5% to 5% of the sale price as its patent royalty for using its chips, Samsung paid Qualcomm more than
$9.2 billion during the first four years after Samsung released its Galaxy S series [
51]. Because Samsung currently utilizes its own technologies for both fabrication and design, however, the amount of royalties it has to pay to Qualcomm has decreased considerably.
Furthermore, Samsung encroached on Qualcomm’s competitive advantage on September 4, 2019, when it introduced Exynos 980, a 5 G mobile processor that combines a 5 G telecommunication modem chip with high-performance Mobile AP. According to Samsung, it also aims to become the global No. 1 player in the non-memory semiconductor sector by 2030 and is speeding up its efforts to chase Qualcomm, which is the top player in the market. The semiconductors that used to be equipped with modem chips separately will evolve into integrated chips. It is estimated that the market for 5 G chips will grow rapidly, from
$161 million in 2019 to
$3.03 billion in 2021 and
$7.96 billion in 2023. In 2019, Samsung’s market share will be 7.5%, compared to Qualcomm’s 87.9%. Although Samsung’s current market share is far below Qualcomm’s, it is predicted that it will soon catch up with Qualcomm’s by 2023, increasing to 20.4% [
52].
While the competition in the SoC market has intensified, Qualcomm has been daunted by the deterioration of its reputation starting in March 2015 due to the overheating issue with Snapdragon 810, which is designed by Qualcomm and manufactured by TSMC (Taiwan Semiconductor Manufacturing Company). The issue started with LG’s G Flex 2, equipped with Snapdragon 810, which was released in February 2015. ONE M9 from HTC and Xperia Z+ from Sony also suffered overheating of their mobile devices. Some benchmark tests showed that HTC ONE M9 was 10 °C to 15 °C hotter than other phones [
53].
Samsung was a major customer of Qualcomm that used Snapdragon chips; however, after the overheating of Snapdragon 810, Samsung decided to use their own SoC chip, Exynos 7420, for its follow-up models, Galaxy S6 and Note 5. This decision could be interpreted as Samsung becoming not only Qualcomm’s customer but also a competitor that produce SoC chip which is equivalent to Qualcomm’s.
Although Qualcomm has not admitted to any problems in its chipset, these incidents led to poor market response, resulting in low financial performance. Although Qualcomm had expected to generate up to
$28.8 billion in revenues in 2015, which would have represented a 9% revenue growth, its revenue actually fell by 5%, to
$25.3 billion, after Samsung, its second-largest customer, decided not to use Snapdragon 810 for its follow-up model [
54].
The overheating scandal led to a change in the relationship between Qualcomm and Samsung. As a result, revealing that Samsung has caught up with Qualcomm’s chip design capabilities.
Samsung holds a distinctive position, as it was a former customer that comprised the largest portion of Qualcomm’s revenue. Samsung dual-sourced Qualcomm’s Snapdragon and its Exynos into Galaxy S3, S4, S5, and Notes, which presumably served as a benchmark experiment for its own SoC. Although Samsung used Exynos in its smartphones, Samsung has not arisen as a direct competitor to Qualcomm. The brand power of Snapdragon surpasses that of Exynos, and Qualcomm’s revenue increased as the sales of smartphones increased. After the overheating issue, however, Samsung dropped the use of Snapdragon for the Galaxy S6, which makes it evident that Samsung has cultivated chip design as well as chip design capabilities.
Qualcomm has given Samsung an opportunity to learn the technologies of its next-generation chipset, enabling Samsung to absorb Qualcomm’s design capabilities. Based on the acquired technology of Qualcomm, Samsung can enhance the competitiveness of its SoC.
In the meantime, Samsung aggressively tested Snapdragon 820 to decide whether Samsung would turn to dual-sourcing for the next flagship smartphone, the Galaxy S7 [
55]. In February 2016, Samsung released the Galaxy S7 with two chipsets versions: Snapdragon 820 and Exynos 8890.
The production of two chipsets shows that Qualcomm has to coopete with Samsung even though Samsung has to rely on Snapdragon. Exynos has been produced primarily for the internal use of Samsung business groups. However, Samsung revealed its intention to sell chipsets to external customers such as Meizu and Lenovo in 2016 [
56]. Selling Exynos to other external companies suggests that Samsung is confident enough to become a direct competitor of Qualcomm as a general chipset provider in the SoC market.
It is possible that Samsung has received a key opportunity to be constantly up-to-date with Qualcomm’s internal developments by both buying Snapdragon and winning a contract for the fabrication of Snapdragon. Samsung can track Qualcomm’s moves and match the leader, producing comparable products. Moreover, Samsung has fabrication facilities that enable them to reap economies of scale [
57]. In 2019, Qualcomm has decided to entrust Samsung’s foundry division to mass-produce its next-generation semiconductor called ‘Snapdragon 865’. This product will be used for 5G mobile telecommunication smartphones [
58].
Samsung has developed ‘Exynos 980’, which is an integrated 5 G modem chip. Most of 5 G smartphones that have been released in markets until now are equipped with separate telecommunication semiconductors and processors, their power efficiency and performance are somewhat lower and they take up a lot of internal space of smartphones. Therefore, technologies that incorporate 5 G telecommunication semiconductor as an integral part of a processor have been considered the most important challenges for companies that develop mobile processors such as Qualcomm, Huawei, and MediaTek. After Samsung succeeded in commercializing 5 G telecommunication semiconductors that it developed with its own technologies last year, it has been working hard to secure technologies by making official plans for the development of integrated semiconductors that combine them with processors. Samsung has been using most of its own ‘Exynos’ series processors for Galaxy smartphones and has seen little success in expanding its suppliers to other smartphone manufacturers. This is because its top competitors, such as Qualcomm and China’s MediaTek, were maintaining a strong grip on the global market. However, it is likely that Exynos 980 will become the world’s first commercialized 5 G integrated semiconductor, which could provide an opportunity for Samsung to clearly show its superiority in technology to global customers and semiconductor industries [
59].
Qualcomm has the ability to design SoC chips. It also still has a competitive edge in the mobile AP market, and its design capabilities will keep it competitive. Samsung, on the other hand, can design SoC chips and has the ability to manufacture them. Qualcomm faces the overheating issue of their chip, Snapdragon 820, and challenges from the competitors. To get out of this unfavorable situation in which Qualcomm faces, the firm has to keep up the coopetition with competitors. At present, Qualcomm still coopete with competitors, as in the case of Apple’s decision to receive 5 G modem chips from Qualcomm. Apple decided to yield in the patent war with Qualcomm. Qualcomm is still maintaining its top position in the semiconductor market. With the advent of the 5 G semiconductor era, Qualcomm’s market dominance persists, and Qualcomm’s share stood at 87.9 percent as of 2019 [
52]. Qualcomm still has Samsung as its customer, even though Samsung has emerged as a competitor. These respective strategic differences show that while Qualcomm continues to coexist with Samsung, the relationship of global cooperation entails inherent risks. Since Qualcomm is Samsung’s largest supplier of components, the two companies are basically collaborative in that they maintain a cooperative relationship in the mobile AP market. But at the same time, Samsung is inevitably competing with Qualcomm by having the ability to produce mobile APs in-house. As a result, a global firm does not span only one industry but changes into a complex structure. In the midst of this process, a firm develops into having complex roles, such as being a competitor and a customer.
Figure 3 summarizes the history of coopetition process of both firms.
8. Discussion
This study analyzed the growth process of Qualcomm with the framework of coopetition. From the case of Qualcomm, the study discovered that the growth of the SoC market and its dynamic competition is a long-term phenomenon. Qualcomm first developed CDMA technology and became the industry standard. The company seemed to succeed in retaining its first place. However, the competition is not a one-on-one rivalry, it is intertwined and dynamic. In the early days, Qualcomm led the market, but with the growth of the market, a rivalry began to emerge. While analyzing, the study offered one of competitive dynamic behavior reference, coopetition.
Qualcomm still holds the lead in the market, but the chase against latecomer Samsung continues, which marks Qualcomm’s strategic shift. In spite of increased competition, Qualcomm can be seen as collaborating with Samsung. From the case, Qualcomm provides Samsung a mobile AP chip; Snapdragon resulted from their cooperative relationship. Then, their relationship became competitive since Samsung threatened Qualcomm with its own SoC chip Exynos series. This implies that firms might evolve through cooperation and competition with competitors [
60].
This case study provides an actual example of how firms are engaging in coopetition process. This study suggests that it is difficult for a firm to succeed in a competitive industry solely by competition and that it could only survive through coopetition. This study focused on the development of coopetition between firms as they simultaneously compete and cooperate. The case of Qualcomm shows that competitive actions and reactions among firms are critical to the change and evolution of coopetitive process. In terms of our case analysis, the competitive activities of firms lead to competitive reactions or cooperation with competitors. The competitive and cooperative relationship among firms depend on how other firms interpret and perceive other firm’s competitive activities.
In the global business environment, firms face conflicting issues and problems of competition, such as whether they should compete or cooperate. From the competition perspective, firms compete with each other, and it is a battle between firms. In a cooperative perspective, it is about pursuing growth through collaboration with firms in the same industry or a business sector. Competitive dynamic offers that these two perspectives do not conflict with each other or occur exclusively in reality, but coexist at the same time. The coopetition behavior of firms is necessary should a technical firm to succeed in the global market.
In terms of managerial implications for firms in the technological industry or other sectors, it is time-consuming and costly to firms that only compete with rivals. The continuation of coopetition has the effect of bringing together the complementary resources that each company has and widens the market through integrated technology. It has been shown that coopetition improves product competitiveness [
60]. There also exists the risk of opportunistic behavior of other parties. The partnerships with competing firms could lead to the leakage of important corporate resources, as in the case of Qualcomm. Qualcomm offered industry-standard technology and cooperated with competitors. During those process, rivals gradually developed their technology and have attained Qualcomm’s technological level.
Managers could use this study as the representative type of behaviors of coopetition and establish innovation strategies based on it and can play an important role in determining industrial strategies through a comprehensive understanding of the ecosystem surrounding the SoC industry in the future. In addition, this study could be applied as a method for analyzing the firm’s strategy for reliable strategic choices and diagnose the coopetition process required for determining technical management and strategy. It would be possible for firms pursuing coopetition to identify the characteristics of promising technologies and technologies that should be intensively fostered through future corporate management and environmental assessments.
In the context of coopetition, during the process of growth of SoC industry, simultaneous cooperation and competition may have a positive impact on the industry as it stimulates open innovation, but there may be negative consequences for a firm [
19]. Firm’s coopetition behavior offers positive innovation outcomes [
6,
61], although the coopeting partner could become a threat at the same time as in the case of Qualcomm. From the coopetitive relationship, firms could learn from each other, which accelerates knowledge creation that could benefit both firms. Although coopetition affects positively innovation performance of firms, it affects negatively firm’s innovation. For instance, Qualcomm entrusted Samsung to produce mobile AP chip. However, Samsung made their own mobile chip that could threaten Qualcomm. This shows that cooperative partner may turn into a competitor and threaten the other firm. The opportunistic behavior of partner firm cannot be controlled. This implies that the inherent paradox of coopetitive relationship exists among firms. Firms interact within paradoxical continuum, that is, they pursue collaborative interests while possessing opportunistic interests at the same time [
8]. Qualcomm was in partnership with Samsung, but it could not prevent Samsung from developing its own chips.
While current literature offers view of the positive and negative sides of competitive dynamics, this study has showed coopetition behavior of a firm from practical case study. This paper has identified the competitive dynamic behaviors between technological firms and industry. Behind the competition, cooperation coexists, and while maintaining the tension, firms must constantly detect the potential for the competition to shift to cooperation and vice versa at any time. To this end, through case analysis, the two firms were the supplier and the customer from the perspective of cooperation, and the competition process of the two firms could be summarized from the perspective of the competition. In the coopetition, firms are dependent on each other to achieve their respective goals. Rather than focusing on one side of cooperation or competition, they represent structures that maintain cooperative relationships with rival companies in certain areas and compete with each other in other areas.
The starting point of a firm’s basic management strategies should be centered on the coopetition, and their strategic balance should be adjusted, in line with the changing business environment, sometimes by placing their strategic emphasis to the direction of competition and in the direction of cooperation. Although this study has focused on a particular firm’s behavior with a descriptive case study, the findings could be applied to other coopetition behaviors.
In conclusion, this study specifically derived the pattern of competition and cooperation among firms from a competitive dynamic perspective by further demonstrating the process of real-world coopetition case, which is the concept of simultaneous coexistence of competition and cooperation [
2]. The contributions of this study are as follows. First, this study identified the process of strategic change from competition to coopetition of a particular firm through case analysis in the actual management environment. This study showed the process of forming a coopetition of entities within the SoC industry and how the entity behaves in the process. During those process, it can be concluded that firms have a coopetitive relationship by establishing supplier-customer relationships and at the same time being competitors. Second, the analysis of this coopetition process has supplemented existing studies to demonstrate the corporate trends surrounding the coopetition process. Firms are pursuing coopetition in order to create their competitiveness and to retain their value [
5]. Specifically, in this study the coopetition process and strategic actions were captured in the SoC industry by demonstrating that firms are coopeting. This study depicted the dynamic aspects of interaction between firms by identifying the process of coopetition from real-life cases. By applying the competitive dynamic perspectives on this study and related methodologies from the real-world management, we can present the direction of a firm’s management strategy that considers competition and cooperation concurrently. It is valuable as a differentiated study using the latest trends from a more holistic and macroscopic perspective of actual firms’ management strategies, by focusing on information that takes into account the strategic behaviors of firms and the changing process of partners becoming competitors over time. Third, in addition to existing studies, this study apprehends the specific behaviors of cooperation and competition among firms through a case study that focused on specific coopetitive behavior. The strategic behavior of firms’ cooperation and competition-related technology management was described in detail and patterns were analyzed between them. It is also differentiated from existing research in that it captures the dynamic context of global firms’ cooperation and competitive activities in the SoC industry and identifies future direction from the perspective of coopetition. This study has not only provided examples of the coopetitive behaviors involved in the coopetition of the firms, but has also been able to show how the future behaviors would occur among global firms in a more coopetitive way.
For future research, it needs to broaden the time range of analysis to conduct research. For instance, the case of this study is descriptive rather than developing new theoretical constructs. It would be interesting for future studies to develop dynamic process of coopetition by introducing new constructs with the use of case studies. Furthermore, this study conducted a case analysis of the coopetition process of firms without quantitative analysis. For future studies, it is necessary to be reinforced with more in-depth quantitative studies that could broaden the scope of coopetition to enhance the feasibility of the analysis.