Even the iPhone can't save Qualcomm from a slide
Qualcomm said this week it expects to supply most of the core chipsets for Apple's iPhone in 2023, up from its prior expectations of just 20%.
Apple is widely expected to shift from Qualcomm chips to its own chips – built on Apple's acquisition of Intel's smartphone chipset business in 2019 – but that transition appears to be taking longer to implement than initially expected.
Moreover, Qualcomm reported significant gains in many of its new lines of business. For example, as noted by the Wall Street Journal, Qualcomm's Internet of things (IoT) business unit posted a 24% year-over-year rise in sales, while its automotive unit sales climbed 58% during the same period.
Indeed, Qualcomm's overall revenue grew 22% year-over-year in its most recent quarter.
But the company's shares tumbled Thursday on Qualcomm's worse-than-expected outlook for its core mobile phone business and the smartphone industry in general. Qualcomm itself instituted a hiring freeze that started last month.
"We will be decisive in managing operating expenses and especially if the downturn gets steeper or more prolonged than we expect," Qualcomm CEO Cristiano Amon said during the company's quarterly conference call, according to a Seeking Alpha transcript.
As noted by Reuters, Qualcomm's revenue forecast for its current quarter was fully $2 billion below market estimates. Part of the problem, according to the company, is a glut of chipset supplies among its customers, partly stemming from furious chipset orders during the pandemic. But Qualcomm also reduced its projections for global 5G handset sales in 2022 to around 650 million, down from earlier forecasts of up to 750 million units.
"We believe a weak market, and even a potential inventory correction was likely not entirely unexpected, though the magnitude is probably worse than what some might have had in mind," wrote the financial analysts at Bernstein in a note to investors, according to Reuters.
To be clear, Qualcomm isn't the only chipmaker suffering. Intel, AMD and others have issued similar warnings.
But Qualcomm's Amon sought to cast a view to the horizon, which he argued remains sunny.
"I would like to remind everyone that the current inventory is a cyclical adjustment that has no impact on the underlying long-term earnings power of the company," he said, likely referencing Qualcomm's efforts to diversify beyond smartphones. "We're well on our way, executing our growth strategy and all the fundamentals remain in place."
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