Qualcomm

Qualcomm started by designing semiconductor chips for mobile phones. But the founder had an insight. Designing and manufacturing weren't the same business. Manufacturing required huge factories and capital. Designing required talent and patents. Qualcomm would design the chips and license the designs to manufacturers. Others would build the factories. Qualcomm kept the profit. Every smartphone sold worldwide uses chips that incorporate Qualcomm technology. The company doesn't manufacture them. Qualcomm licenses the technology and collects royalties on every unit sold. That royalty stream scales with the entire mobile phone industry. Not just Qualcomm's manufacturing capacity. A successful competitor like Samsung pays Qualcomm royalties. The licensing model creates that paradox.