Rose welcome to the program. Tonight, we talk about the mobile revolution in the United States and around the world with paul jacobs. He is the c. E. O. Of qualcomm. Theres a lot of opportunities for us. I mean, obviously, the smartphone, you know, trend is going to continue. Its growing like crazy. And now were seeing p. C. S really being subsumed by smart foams, whether its tabloids or the fact that microsoft put windows on top of our choips tiger. Its become mobile. I look farther into the future and say the wireless technol will be an enabling technology for a lot of other industries. Rose we continue with a conversation on the sounds of science with radiolab cohosts d umra and Robert Krulwich. There are moments in the busyness of your life when youre crossing the street, and you think, im late to be robert. Im going to be five minutes late. And for a beat you think, its funny being late. What is time anyway . Oh, forget it. Im late. For me i want to live more deeply in those moments and this show is to take that flicker of a moment and stretch it and take it longer and get more deeply into it, investigate it, think about it, dream about it. Rose the mobile revolution and radiolab when we continue. S captioning sponsored by Rose Communications from our studios in new york city, this is charlie rose. Rose paul jacobs is here. She the chairman and c. E. O. Of qualcomm. Is e World Largest provider of Chip Technology for mobile and wireless communication. Many of your favorite devices from smart phones to tablets are powered by qualcomm chips. The company has capitalize on the revolution mobile with a vision. It put in place more than a decade ago. Today there are over one billion spar phones users around the globe. That number could double in the next few years as consumers in chine and india will access the internet for the first time on their mobile devices. Qualcomm is poised to be at the center of that growth and much more. Im pleased to have paul jacobs at this table for the first time. Welcome. Thank you very much, charlie. Rose take me back to your dad, who was an m. I. T. Scientist. Right. Rose what was his vision we created qualcomm . Me had had a Previous Company before that called linkabit. And he was one of these world experts on Digital Communication theor. We all think everything is digital today. Back then it was all analog and digital was hard to do. This was all theoretical when it started. And he started linkabit, and basically you could do engh computation, and it was sort of expensive enough you could only use it for military and space communication. Then he goes on to start qualcomm, and they didnt really have an idea for products when it started. It was just seven people got together who knew the kind of theory, and they said, okay, were going to go on rose and believed it was the future. It was definitely the future. But what happened was computation became so cheap they could tuz for commercial and consumer applications. So that really was the start of the company. It wasnt that they thought of that specifically, but it turned out that way, and now we have these, you know, incredible cell phones that do an amazing amount of computation. Rose and where does his sort of stewardship end and yours begin . I took over as c. E. O. In 2005, and i took over as chairman in 2009. But the thing that happened between us was that i mostly focused on mcs of the technology. And heex toed on making the radio link better and better and better. So i was looking at the radio link as kind can have a pipe. And he was thinking i need to make that pipe bigger, fatter, more stuff through it. So in 2005, it was kind of the time frame when wiless internet became something that was more mainstream. Obviously, things like the iphone really helped break that into peoples minds. But that transition happened right around that time. So it was a focus of the company from being a Radio Technology company to being much broader, all sorts Wireless Technology, and the application of it. Rose you saw smart phones early. Oh, yeah. I did rose or mobile devices. We put the internet protocols into cell phones in the early 90ss before peoplenew what the internet was. And i did a phone with palm very early on, when palm pilots rose i remember, yes gee, a funny story, i had an apple newton at the time, and i tried to do a deal with aptoll put a radio inside the apple newton and make that into a smart phone and they werent so interested and i went across the street to palm and i was carrying my apple newton and i thought this probably wasnt the best thing but i was using it to take my notes. They had a palm pilot brochure shaped like a palm pilot. I scotch taped it on top of my newton and i put down and theyre like, othe, okay, well talk to you. It all worked out. I believed in the notion of connected devices. I was sitting on a beach in maui and they just turned on the cellular system we created and i had this device with me. And there was an old Search Engine alta vista. And i typed in maui sushi. And i got the best soucep restaurant in if maui. These things are dead. The future really is connected devices. This was the end of the 90, 97, 98 time frame. Rose now were on the eve of 2013. Where are we going . Oh, there are a lot of opportunities for us. Obviously, the smart phone, you know, trend is is going to continue. Its growing like crazy. And now were seeing pcs really being subsumed by smart phones, whether its tablets or the fact that microsoft put windows on top of our chips for example. Its become mobile. But then i look out even farther in the future and say this Wireless Technology is going to be an enabling technology for a lot of other industries. One of the areas were really focused on is health care. Its such a huge rose i find this really exciting. This has to do with sensors and things like that. Explean this to us. The phone is going to sit at the center of a web of sense of sensors you will have on where you are can of your body. You may have them inside your body. Let me tell you something that is pretty cool. There is a researcher were working with who will put a tiny, tiny little chip inside where you are bloodstream rose inside yo bloodstream. Theyll inject it, and maybe lodge in your wrist and it will sit there and look for certain indicators that in two weeks you might have a heart attack. You can imagine that . Your phone will ring rose it will be able to read the messages. Two weeks ahead of time that youre going to have a heart attack soap your phone will ring and tell you to go to the doctor. Imagine that. Rose thats real. That is stuff thats in the lab right now. People are working on that right now. Rose and the engineers believe in it . We believe in it. Its not that insane to think people will have stuff inside their body. I know people with pacemakers, and there have been studies that show if your pacemake ser connected versus nonconnected it improves if mortality rates 50 . Rose how does that work, your pacemaker is connected so it can be read remotely. You might have a problem, and ill go to the clinic or not and by the time you go, it may be too late whereas if you have that monitored all the time they can check that out and say, hey, you better come in. There was a thing where you wore the sensors, the kind of sensors when you get your treaill checkup. They plug this into a piracy p. D. A. There was a guy sit may go hospital bed and they called him up and said, you are looking bad. You need to go to the hospital. And he said, i am in the hospital. And they said, call the nurse right away. You really need a nurse. And it saved his life. Rose in emerging nations, where they have not had land lines, it oppose up the future by skipping a generation. Yeah. I mean, it really is. And you see the kind of adoption rates that are going on there, just huge rose therere a billion smart phones . So, lets just take chine pap there are a billion connections in china right now, and about 27 of throws what i call mobile broadband. Why are people using that stuff . We just did the survey with time magazine, and it shows people are using that instead of a computer nape dont have the computer. 84 of people read their news on a smart phone, and the u. S. , its less than a third of people interested on a smart phone. Rose around the world its 88 . That people around the world no, people around people in china are using it 84 to read the news. And in the United States, less than a third. Its just fascinating. These people use it in ways that we think were advanced in the United States, and yet, in china, in india, you see people using it for all these different entertainment and information applications, and theyre ahead us because thats the only way that they get access to that stuff. Rose its a huge market for you. Its a huge market. Smart phones, there will be five billn smart phones sold between now and 2016. Rose 5 billion in the next three years. Between 2013 rose heres the opening question from this is a story in the wall street journal today. Qualcomm c. E. O. Foresees home base stations. Noose what that . So this is an interesting thing. Right now everybody wants to get all this data on their smart phone and theyre upset when it doesnt work that well. The other thing theyre upset is they pay a lot to the wireless operator and the wireless operor sometim doet give them as much data as theyd like. And we were thinking we need get 10 to 12 times more capacity. N. T. B. From japan comes in and says we want 1,000 times more. We say 1,000. What are we going to do . It turns out the small cell idea is the idea. You will have these things, the size of a pack of cards. It will cost less than a cell phone because its basically built like a cell phone but doesnt have a screen or memory or battery and you plug it into the squall it will give you very high data rates. Itill al serve the people coming by outside the house, and it turns out that if you just get these small cells into a few peoples houses, most of the traffic of the network ends up on the small cells. So you need the big network still, the one that we all use, but it doesnt have enough capacity for all of us to download videos all the time, so most of the traffic goes on to the small cells. Rose how much growth is left in the smart phone wave. A lot . Its amazing. Like i said, five billion the growth rates this year just the first half of this year, there were 300 mlion smart phones sold. That was up rose 300 in the first what first half the of the year. Rose the First Six Months of. 2012, 300 million. Thats only 39 of all the devices shipped. So theres still a long way to go. Next year the projections are basically half of all phones shipped will be smart phones which is really amazing. When i was running the handset business in the early days of qualcomm, you were lucky if you could sell 10 of highend phones and now everybody wants these things. Rose whats the place for tablets in all this . Ll, tablet, thats the next thing. Everybody is interested obviously the ipad is one really selling well but theres a lot of competition coming whether from google tablets or as we talked earlier, microsoft tablets are come along. Theres a lot of focus on that. Were doing a lot of cool things with it, whether the health care stuff we talked about, but also education. Were working with various companies to try and get tablets into the schools so that kids will learn in a school the way that they learn at home. They use rich media. They click. Theyet mre information. I mean, being an engineer, i always think its strange that i have a physics textbook where they show me an experiment and its just kind of drawn on a piece of paper, whereas you take a tablet, that thing will be live. Ill be able to play around with it and see how things react and so forth. I really think theres a huge opportunity. We have to deal with the fact that kids might drop their tablets and break them. We have to make them robust and get the right curriculum. Rose one tablet two tablets, or 100 tablets emerge . I think somewhere between two and 1. I mean, theres a big world up on the there. So theres lots of other place wheres people are trying to drive drive it indias got a government project a very lowcost tablet. Turkey has an education tablet project. Governments are getting involved, particularly in the education space. So i think youre going to see a lot. Actually, whats going on that i find fascinating, also, is just the degree of innovation. Your p. C. Looked the same for decade you know, decades, maybe adecade and a half. It was this black thing. Now you have all these tablets coming out and you see different size, shapes. My wife carries a thing called a thablet, halfway between a phone and tablet. She likes it because its a bigger screen and she can stick it in her purse. Were gog see an amazing amount of innovation going on. Rose your business will be developing better and better and better processors. Was in earlier stage it was intel that drove the business by developing better and better processors. Right, so in the case of a mobile devic ough a processor is more than just doing computation. Its also doing the connectist into the network, so the radio piece of it is there. And then we also emalate game consuls. There are really good graphics capabilities. And you also have to process your voice or do the multimedia stuff. So there are dipping tap process nors there. Theres connectist like wifi and blue tooth. Our claim to fame is we integrate more things into one piece of siconha any of our competitors do, and thats what allows us to be the most successful and were number one in terms of weiss chips. Rose how important to your success has been your relationship with apple . Oh, its been very important. Theyre a great company. They really did a lot of work to popularize the notion of the wireless internet. Like i said, we were putting the internet protocols in the phone in the early 90s, but it wasnt really breaking through to the mainstream. And rose what caused the breakthrough . I think, you know, apsell an amazing mrketg company. They did that. They made some user interface things they did rose the iphone perhaps was the driving force 20 expansion of mobile . It was happening, but i think that was helped the curve really ramp up. And it raised the bar. People were, obviously, building smart phones all along and doing this. But i do think you know, steve jobs had a way about him to really get in the mind of the consumer and popularize things. So they did that. And we had been doing things we built an app store in the early 2000s. Verizon still sells applications on your fepture phone through qualcomms app store. But it didnt really transcend and get in the mainstream. Rose we all know moores rule. Whats the rule about the acceleration of processors today. Moores law is a very interesting thing right now. We can see just a if couple of generations out of the process technology where its not clear that you get the economic benefit anymore. What happens is rose you dont get the economic benefit a couple generations from now. Which by the way are happening very fast. Well go through new process technologies in the chip side upon, you know, a new one everyone year, basically, year, year and a half. So we where getting to the point where you can see out there, there might be a problem. We might not be able to get all this economic benefit, which theres a lot of Value Creation in the world based on the fact that chips keep getting cheaper and cheaper and have more and more functionality in them. Hopefully, smart engineers will come about and fig outer this is how were going to get that next step and get the cost down. But right now,ts a little worrying. We do lookute and say a couple of more generations, its definitely getting tougher. Rose dont you make your own smart phone . I did that in the past. Its that was a tough tough business. Rose everybody else is doing it . I asked jeff, hes thinking about it without saying hell do it. But youve got google has gone and bought motorola. So well, you know, so we really are a horizontal enabling company. We want to build our chips and work with the broader rose do you worry about cannibalizing your sales . Is that what it would be . No, i worry about sis suede, my partners for working with us. There was a time when qualcomm had a handset and chip set business and all our customers believed we were keep the the best stuff for our own handset business. Our handset business was not profitable. We were learning our way back then. There was a time where we thought we had this phone where we were going to make all the money and one of the korean manufacturers came in is and dropped their prices at the end of the quarter and all that money wentway. And woo we said why are we beating our heads against the wall to do this . Our partners do it better than us. We create the technology better, and we create the chips better. Let us focus on what we were good at. Let them focus on what theyre good at, and were all happy. Our values are lets innovate, execute deliver the things we told people we were going to deliver but the third value is partner. Qualcomm doesnt sell directly to the end user. Rose how much of your annual revenue comes from licensing . Oh, its actually, so 60 ou rvenues are from the chip, and about 35 of the revenues are from the licensing business. But if you look at the profitability, its kind of flipped because the licensing business isnt very highmargin business. On the other hand rose thats in terms of growth, right . It takes a lot of r d to create that. Were spending a lot on that. What we try to do is deliver all these innovations to the entire industry and thats yet license business is so good. We have 220 companies we have licenses with glgz gl in addition to what we talked about in terms of sensors on your body that will tell you what you should do, where else . Jeff emmel was here, and everybodys looking at how to collect and analyze data. I mean, theres a wave of the future thats it. Absolutely. So theres going to be hundreds of millions of sensors and connected devices in the world around us. Rose looking at everything and taking the temperature of everything and reporting back to a big brain which will assess it. It will report back to your phone. Rose which is a big ain. That is true. Theyre getting bigger and bigger for sure. What i think is going to happen is the phone is going to be this thing that merges kind of cyberspace around us and physical space. Ill walk into an environment and there might be content available, say a media some show that got recorded and i want to download that. Opener there might be a screen, and the screen might be able to talk to my phone and say, im a screen. Heres the resolution. Heres how you talk to me. Heres the protocols i support. And the phone says, heres a content and i want to show it. Or i mig be speaks a cas