Investor Essentials Daily

Leading the way with 5G

June 6, 2024

In today’s interconnected world, technology advances simultaneously across regions mainly due to global licensing by initial developers. 

InterDigital (IDCC) exemplifies this with a focus on R&D in wireless technology, holding over 30,000 patents and leading in 5G. 

It licenses its technology to major companies like Apple, and Samsung, generating significant revenue. 

With the global 5G adoption accelerating, InterDigital’s financial performance remains strong, and its diversified portfolio positions it well for future growth. 

The current market pessimism offers a promising opportunity for investors.

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In today’s interconnected world, technology typically advances concurrently across different regions.

This simultaneous development doesn’t occur because each area independently discovers new innovations, but rather because the initial developers of new technology often license it to others globally.

A prime example of this is InterDigital (IDCC).

InterDigital is a company that specializes solely in research and development, with a strong focus on wireless technology. It holds more 5G patents than any competitor, with 30,000 patents across wireless, video, and AI.

InterDigital’s technologies are integral components of 5G-enabled devices, used across industries like smartphones, automotive, IoT, and consumer electronics.

The company signed over 35 licenses in the past 3 years driving almost $2.7B of contract value.

It calls huge players in consumer electronics like Lenovo, Apple, Samsung, and Xiaomi its clients. The market is not a fan of this customer concentration, but these companies need InterDigital as much as InterDigital needs them.

InterDigital is well-positioned for continued growth with 5G adoption accelerating and global 5G smartphone subscriptions estimated to reach 5 billion by 2030.

As 5G penetrates more industries, demand will grow for the company’s patented wireless technologies.

Despite the slowing smartphone sales, InterDigital’s financial performance remained strong. The company grew its revenues by 20% and net income by almost 130% in 2023.

Consumer electronics, IoT, and auto segment is picking up the slack from smartphone sales. While smartphone revenue shrank 57% in Q1 24, CE, IoT/Auto revenue grew 1,035%. Total revenue for Q1 24 grew 30% YoY.

InterDigital intends to further strengthen its portfolio through ongoing R&D investments. It is also exploring new technology areas like AI and video coding that will be critical to future innovations.

With its robust patent portfolio and blue-chip customer base, InterDigital is well-positioned for continued success as wireless connectivity further transforms our lives.

The market’s recent pessimism around InterDigital presents an attractive opportunity for investors.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research

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