Qualcomm’s Forecasting Is Bleak As Smartphone Sales Continue To Be Sluggish

Since it would take longer for the smartphone industry to use up excess chips before new orders started coming in, Qualcomm Inc. predicted third-quarter revenue and profit would be lower than Wall Street expectations.

After the chip designer said its forecast also took into account macroeconomic headwinds and weaker global sales of handsets, shares of the company fell nearly 7% in extended trading.

On a conference call with investors, Qualcomm CEO Cristiano Amon stated that “we have not seen evidence of meaningful recovery” and “we are not incorporating improvements into our planning assumptions.” Qualcomm still anticipates a rebound in Chinese smartphone sales in the second half of the year.

The business claimed that the timing of purchases by a modem-only handset was mostly to blame for a larger-than-normal decrease in its semiconductor revenue projection from the prior quarter.

Apple Inc., which manufactures its own application processor, was the customer, according to Kinngai Chan, analyst at Summit Insights Group. Qualcomm did not identify the customer.

Instead of using Qualcomm’s main flagship chip, which combines a modem and an application processor, Apple is the company that buys the most independent modem chips.

After the market closes on Thursday, Apple releases its earnings.

Qualcomm predicted $6.9 billion to $7.5 billion in revenue from semiconductors.

When high inflation reduced consumer spending on discretionary items like electronics, vendors reduced their orders for new chips, which hit the smartphone market hard.

Despite discounts and advertising, demand for smartphones has remained subpar. According to research company Canalys, the first quarter saw a 13% decline in global smartphone shipments.

As seen by Apple and its Android rivals’ declining first-quarter sales in the second-largest economy in the world, relaxing COVID-19 limits in China has not appreciably increased demand.

The competition from Taiwan’s MediaTek is also getting tougher for Qualcomm, particularly for high-end smartphone CPUs.

“MediaTek is pushing hard into the high-end market,” said Runar Bjorhovde, analyst at research firm Canalys. “It is very open to working with anyone that can help it grow a bit more into the high-end where I guess Samsung is the big one for Qualcomm to defend.”

Amon claimed that as a result of Huawei Technology Co Ltd leaving the premium smartphone market, Apple took some of its market share, which caused a net loss for Android devices running Qualcomm’s flagship chips.

Chief Financial Officer Akash Palkhiwala noted that the sales of high-end devices are also beginning to be affected by used phones, which is already anticipated in Qualcomm’s estimate and is being constantly watched by the business.

In the third quarter, Qualcomm projected total revenues between $8.1 billion and $8.9 billion. Refinitiv polled analysts who predicted $9.14 billion in sales.

Analysts had predicted $2.16 in adjusted earnings per share, and it projected them to be between $1.70 and $1.90.

(Adapted from MoneyControl.com)


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