It's great news for the gadget boom...
Last week, headlines on popular news sites announced that the global population crossed the seven billion mark.
Over the past decade, wireless networks have spread way beyond developed nations in North America and Europe. That means virtually every one of those seven billion people is now a potential mobile phone customer.
For the past year, I've been telling readers about the huge growth in mobile devices ranging from cell phones to tablet computers. I've labelled this trend the "gadget boom."
And it's a gigantic, long-term opportunity for investors.
In spite of all the worries about the global economy, there was no pause in the mobile space. With three-quarters of the year over, the global mobile phone market is on pace to reach over 1.75 billion in unit sales this year.
Although that's a huge number, it's actually up less than 10% versus the 1.6 billion phones sold in 2010.
The real growth is happening in the smartphone market. Smartphone sales are on pace to hit 450 million this year. That's just a hair below a 50% growth rate versus last year.
The best results came from Qualcomm (NASDAQ: QCOM, Stock Forum), a giant $94 billion company. The company makes "chipsets" – the parts that act as the "brain" of mobile devices. Qualcomm makes up more than 60% of the chipset market... So when you pick up a mobile device, regardless of the brand name on the outside, there's a good chance it contains a chipset made by Qualcomm.
Last week, Qualcomm reported quarterly results that included $4.1 billion in revenue. That's up a whopping 39% over the same period last year. During the third quarter, Qualcomm shipped 127 million chipsets that go into handsets that run on 3G wireless networks.
A 39% growth rate is huge for any company. For a company that's already making more than $10 billion in revenue a year, that's astounding. Apple is one of the only big companies that has grown sales as quickly over the past year.
Of course, the majority of growth is coming from emerging markets like China, India, Latin America, and the Middle East. The best part is, smartphones make up less than 10% of mobile phone subscribers in these areas. That means huge potential for smartphone makers and the companies making the parts that go into the devices.
In a world with a population soaring above the seven billion mark, selling gadgets like smartphones is a great business. By 2020, it's likely that more than one billion wireless devices will be sold every year.
Companies like Qualcomm (and another favorite, Intel) represent some of the biggest, safest plays in the market.
As I noted last month, large-cap tech companies have the ability to generate gains for shareholders, even if their industry growth is weak. And many of them are sitting on enormous piles of cash.
Qualcomm itself has more than $20 billion. Once you take that cash into account, shares are trading around 12.5 times 2012 earnings estimates. Qualcomm should grow earnings by at least 10% next year.
The long-term bull market in mobile devices will generate huge profits for the industry's best players for years to come. With billions of potential customers still out there, it's one of the world's best businesses.