Qualcomm today said its Q2 FY 2014 revenue increased 4 percent to $6.37 billion, while net income rose 5 percent to $1.96 billion. Qualcomm CEO Steve Mollenkopf tried to paint a rosy picture about the long-term future, while admitting concerns about the next 1-2 quarters.
This is the smallest quarterly revenue increase since 2010. China and shift in smartphone growth and preferences have impacted Qualcomm.
Qualcomm in China
Qualcomm had a tough Q2 FY 2014 in China. The chip vendor said consumer purchasing decisions in China were delayed in advance of the rollout of LTE and TDS CDMA volumes were stronger than anticipated and negatively impacted sales of WCDMA CDMA 2,000 units.
Its main issue is the shift in smartphone growth to China and other emerging telecom markets, which consume cost effective devices from the U.S.
Qualcomm is also being investigated by China’s anti-monopoly regulator, which says it suspects the U.S. company of overcharging and abusing its market position, allegations which could lead to fines of more than $1 billion, Reuters reported.
China and other developing countries are a major opportunity for the San Diego-based company as consumers upgrade from feature phones to smartphones and as China Mobile rolls out its 4G network with technology that Qualcomm dominates.
China presents challenges for Qualcomm as its competes with local rivals like MediaTek to sell chips used in smartphones made by Chinese manufacturers like Huawei and Xiaomi, which sell for much less than phones popular in the United States.
Earlier in the day, market research agency IHS said Qualcomm of California and Taiwan’s MediaTek were the other major success stories last year among the top 25, owing to their market-leading performance in chips for wireless products such as smartphones.
Qualcomm maintained the No. 3 position with 30.6 percent growth, while MediaTek rose to No. 14 with a 36.1 percent increase, IHS said.
Smartphone shift and Apple
Apple Q2 FY 2014 revenue reflects the shift. Apple clocked 13 percent revenue year-on-year growth in China against 2 percent increase in America.
Also read: Apple Q2 FY 2014 result: India sales doubled, China iPhone boost revenues, iPad flopped
On quarter-on-quarter basis, Apple’s revenue in America dipped 29 percent, decreased 22 percent in Europe. On the other hand, Apple posted 5 percent increase in China, 20 percent in Japan and 28 percent in rest of Asia Pacific.
Painting Strong Future
Qualcomm is quoting a Gartner forecast that said approximately 1.9 billion smart phones will be shipped in 2018, while cumulative smartphone shipments between 2014 and 2018 will reach approximately 8 billion.
Samsung Galaxy S5, HTC One M8 and Sony Xperia Z2 smartphones and tablet are using Snapdragon 801 chipset.
Qualcomm said its products based on its Snapdragon 805 and fourth-generation multimode 3G/4G modem, featuring Cat 6 LTE will be launched later this year.
There are more than 525 designs in the pipeline for Snapdragon-based devices. In the second half of the fiscal year, it expects more than half of our MSM chip shipments to be LTE-enabled. Wi-Fi shipments rose more than 45 percent.
LTE and unlicensed spectrum will provide further capacity enhancements and coexist nicely with Wi-Fi to help meet the expected significant increase in data demand. RF360 solutions shipments more than doubled this quarter. Qualcomm has over 75 designs across 15 OEMs.
The chip vendor said it will continue to focus on China market. Chinese telecom operators including China Mobile are planning massive investments in 4G.
China Mobile alone is planning to expand its network coverage nationwide to more than 500,000 LTE base stations by the end of 2014. There is significant demand for Qualcomm multimode 3G LTE chipsets in China.
Globally, 270 operators have deployed LTE and more than 210 additional operators are planning deployments according to the GSA.
The extension of mobile technologies into industry such as automotive, healthcare, smart city’s, energy and other consumer electronics wearables and other segments is another set of growth opportunities. Approximately 400 million 3G/4G non-handset device shipments are expected in 2017.
Despite challenging conditions in China, Qualcomm tried to forecast strong growth of 3G/4G -based device shipments in calendar 2014. It has more than 100 single mode 4G OFDMA licensees globally, including more than 60 in China. In addition, Qualcomm has more than 255 CDMA-based licensees globally.
Qualcomm said it now expects full-year non-GAAP earnings per share between $5.05 and $5.25. It had previously forecast 2014 EPS between $5.00 and $5.20.
It said revenue in the fiscal third quarter, which ends in June, would be between $6.2 billion and $6.8 billion.