Comms chips

Qualcomm Hangs Hope on 5G in 2020 as Sales Weaken in Q3

Qualcomm's prospects are looking gloomy for the latter stages of its financial year, but the giant chipmaker is still selling itself as a leader in 5G technology, demand for which it expects to ramp globally in 2020.

The company blamed weakened Chinese demand for a 13% year-on-year dip in fiscal third quarter sales, and it expects that trend to continue into the fourth quarter. Qualcomm also noted that its Chinese OEMs, which include Oppo, OnePlus, Vivo and Xiaomi, are "managing inventory ahead of 5G," meaning they are ramping demand for products based on the new technology.

Qualcomm said that as a result of the trade dispute between the US and China, its business is being affected by a shift in Chinese OEM demand for local products sourced from Huawei, as the Chinese vendor increases its focus on its domestic market.

"As a result of the [US] export ban, Huawei shifted their emphasis to building market share in the domestic China market where we do not see the corresponding benefit in product or licensing revenue," said Steve Mollenkopf, Qualcomm's CEO on the earnings call Wednesday.

Qualcomm, however, is still bullish on the 5G market growing in 2020, as global rollouts of 5G are expected to increase that year.

"Today, we are the only chipset vendor that has 5G system level solutions spanning both sub-6GHz and millimeter bands. This is key to global deployments," said Mollenkopf on the call.

The CEO claims more than 150 devices are now "launched or in-development" using its 5G chipsets. In China, Qualcomm expects some OEMs to deliver select 5G devices priced at the equivalent to US$300 by the end of 2020.

"By the first calendar quarter of 2020, we anticipate reaching the inflection point as our financial results begin to reflect the benefits of our substantial efforts over the years to bring 5G into the market worldwide," Mollenkopf said on the call.

For its fiscal third quarter which ended late June, Qualcomm reported revenues of $4.89 billion, a decrease of 13% compared with the same quarter a year earlier. In the fiscal fourth quarter, Qualcomm is expecting revenues of between $4.3 billion and $5.1 billion. Analysts had been expecting revenue of $5.63 billion.

Shares were down 5.47% at $69.16 in after-hours trading Wednesday.

— Dan Jones, Mobile Editor, Light Reading

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