What Owning No Factories BuysWide moat

Qualcomm (QCOM) — moat facet

The peer that owns its fabs halved its return on capital building them; Qualcomm's did not fall, because there was nothing to depreciate.

Not owning a fab is the reason Qualcomm's returns look nothing like a semiconductor company's.

Return on invested capital, most recent year (%)22.2%Qualcomm — fabless18.6%Texas Instruments — owns fabs~10%Assumed hurdleTI fell from 49.8% building fabs. Qualcomm fell from 48.6% losing a customer.
Two ways to lose half your return on capital.

Return on invested capital ran between 22% and 49% in every year since fiscal 2019, against a cost of capital nearer 10%.1 A company with $44 billion of revenue and no wafer fabrication plants keeps very little capital on the balance sheet, so the denominator stays small and the spread stays wide.

The comparison that makes the point is Texas Instruments, in this same collection: an analog manufacturer that owns its fabs, spent roughly $24 billion on capacity over six years, and watched its return on invested capital fall from 49.8% in 2021 to 17.6% in 2024 — not because anything went wrong, but because building factories is what putting capital to work looks like.4

Qualcomm's cash goes to engineers instead. $9,042 million of research and development in fiscal 2025, about a fifth of revenue.2

The trade is that the manufacturing advantage belongs to TSMC and is available to anyone who pays. On process, Qualcomm has no edge over MediaTek or over Apple, and in a supply squeeze its input costs are set by somebody else's price list — which management named as one cause of the June 2026 handset decline.3

Moat trajectory: Holding steady

Return on invested capital has run in the twenties for three years — down from the 2022 peak, up from the 2023 trough, and well above a 10% hurdle throughout.

The number that tests this moat
Moat Explorer calc
ROIC against a fab-owning peer
22.2% versus Texas Instruments at 18.6%

Both in their most recent fiscal year, both computed the same way from EDGAR filings. The gap is smaller than the difference in business quality because TI is at the bottom of a capital cycle and Qualcomm at the top of a franchise in decline. The instructive part is the path: TI fell from 49.8% building fabs; Qualcomm fell from 48.6% losing a customer.

How it's calculated: NOPAT / average operating invested capital for both companies, from tools_roic_edgar.py.
Source: Computed from SEC EDGAR filings ↗
⚠ Threats to the moat
⚠ THREAT 01
Volatile Returns Are the Honest Character of It
A small capital base produces 48.6% in a good year and 2.8% in a bad one, and Qualcomm has had both.
References
  1. Moat Explorer calcReturn on invested capital ran between 22% and 49% in every year since fiscal 2019, against a cost of capital nearer 10%.
    Return on invested capital for Qualcomm computed from SEC EDGAR XBRL filings — NOPAT divided by average operating invested capital, where NOPAT is operating income after the effective tax rate and invested capital is total assets less current liabilities less cash. The series for fiscal 2015 to 2025 is 13.1%, 14.2%, 7.2%, 2.8%, 45.9%, 35.1%, 40.7%, 48.6%, 22.8%, 28.2% and 22.2%. The underlying operating income series, from the same filings, falls from $6,495M in fiscal 2016 to $2,581M in 2017 and $621M in 2018 before recovering to $7,667M in fiscal 2019. — FY2015-FY2025 · publ. 2025-11-05 · source ↗
  2. Reported$9,042 million of research and development in fiscal 2025, about a fifth of revenue.
    Qualcomm Incorporated, Form 10-K FY2025 — consolidated statements of operations and the income-tax note. Revenues: equipment and services $37,869M and licensing $6,415M, total $44,284M (2024 $38,962M, 2023 $35,820M). Cost of revenues $19,738M, research and development $9,042M, selling, general and administrative $3,110M, other $39M, total costs and expenses $31,929M; operating income $12,355M (2024 $10,071M). Income before income taxes $12,663M; income tax expense $7,122M, driven primarily by a $5.7 billion charge to income tax expense to establish a valuation allowance as a result of the tax reform legislation included in the One Big Beautiful Bill; net income $5,541M against $10,142M in 2024. Diluted earnings per share $5.01 ($8.97, $6.42) on 1,105 million diluted shares (1,130, 1,126). Qualcomm intends to continue paying quarterly cash dividends. — FY2025 · publ. 2025-11-05 · source ↗
  3. ReportedOn process, Qualcomm has no edge over MediaTek or over Apple, and in a supply squeeze its input costs are set by somebody else's price list — which management named as one cause of the June 2026 handset decline.
    Qualcomm Incorporated, Form 10-K for the fiscal year ended 28 September 2025 (SEC, CIK 804328) — Item 1, Business, and the revenue-concentration and geographic disclosures. Qualcomm operates through QCT (semiconductors) and QTL (licensing), with QSI making strategic investments. QTL grants licences to portions of a patent portfolio including rights essential to and/or useful in the manufacture and sale of certain wireless products. In fiscal 2025 revenues from Apple, Samsung and Xiaomi each comprised 10% or more of consolidated revenues. Revenues by country, reported by customer or licensee headquarters: China including Hong Kong $20,340M (46%), United States $10,515M (24%), South Korea $9,542M (21%), other foreign $3,887M (9%), total $44,284M; the equivalent 2023 figures were $13,386M (37%), $10,503M (29%), $8,075M (23%) and $3,856M (11%). Approximately 52,000 full-time, part-time and temporary workers at 28 September 2025, in over 200 locations in 38 countries, with a voluntary turnover rate around 6%. Named registry and semiconductor competitors and the risk factors relating to customer vertical integration are set out in the same Item. — FY2025 · publ. 2025-11-05 · source ↗
  4. ReportedTexas Instruments' capital expenditure of about $24 billion over the decade to 2025 coincided with a fall in its return on invested capital from 49.8% in 2021 to 17.6% in 2024.
    Texas Instruments Incorporated, Form 10-K FY2025 — Management's Discussion and Analysis, cash flow statement and the free-cash-flow reconciliation. Cash flow from operations $7,153M (2024 $6,318M), 40.5% of revenue; capital expenditures $4,550M (2024 $4,820M); proceeds from CHIPS Act incentives $335M; free cash flow $2,938M (2024 $1,498M), 16.6% of revenue. In 2025 TI invested $3.94bn in R&D and SG&A, invested $4.55bn in capital expenditures and returned $6.48bn to shareholders. Dividends paid were $4,999M against $4,795M in 2024 and $4,557M in 2023, reflecting an increased dividend rate; $1,477M was used to repurchase 8.5 million shares against $929M for 4.7 million shares in 2024. Net proceeds of $1,199M were received from the issuance of fixed-rate long-term debt and $750M of maturing debt retired. Over the ten-year period from 2016 to 2025 TI allocated $109 billion, of which about $24 billion went to capital expenditures, and states it is near completion of its six-year elevated capital expenditure cycle. The dividend was raised 4% to $1.42 per share per quarter, marking 22 consecutive years of increases, since extended to 23. The One Big Beautiful Bill Act, enacted 4 July 2025, provided for expensing of US research and eligible capital expenditure and increased the CHIPS Act investment tax credit; TI expects the effective tax rate and tax-related cash payments to be lower than under prior law from 2026. — FY2025 · publ. 2026-02-06 · source ↗
Sources
Generated September 23, 2026