Qualcomm lowers revenue target for December quarter

Chipmaker Qualcomm has lowered its revenue target for the December quarter in the wake of poor demand for smartphones.
Qualcomm QCT revenue streams 2022Qualcomm is targeting $9.2-$10 billion revenue as its largest smartphone customers are now drawing down on their inventory.

“Looking to 2023, the smartphone market’s expected recovery, which we continue to believe will happen, will be pushed further into the year. Moreover, we now expect a steeper shipment decline for 2022 and a softer recovery in 2023,” Nabila Popal, research director with IDC’s Worldwide Tracker team, said in October.

“The deterioration in demand and easing of supply constraints across the semiconductor industry have resulted in elevated channel inventory,” Qualcomm CEO Cristiano Amon said announcing its financial results.

Qualcomm’s disappointing forecast comes shortly after both Intel and Advanced Micro Devices (AMD) cut their earnings estimates, Reuters news report said.

Chipmakers including Texas Instruments and Micron Technology have raised concerns about a drop in demand from electronics companies as consumer curb their discretionary spend due to decades-high inflation, rising interest rates and fears of an economic slowdown.

A recovery in the smartphone market could be pushed to the second half of 2023 from the first half, IDC’s Nabila Popal said.

“Demand has dropped globally, but very much so in China as well as in emerging markets. This is what’s actually pulling down the smartphone market the most,” Nabila Popal said.

The easing of chip shortages and supply-chain bottlenecks has led to excess inventory at smartphone makers, with Qualcomm estimating about eight to 10 weeks worth of “elevated inventory” that could take a couple of quarters to work through.

Qualcomm Chief Financial Officer Akash Palkhiwala said the holiday-quarter could be the bottom in terms of inventory as manufacturers use up their existing chips.

Qualcomm’s revenue rose 28 percent to $9.904 billion for fiscal fourth quarter ended September 25, 2022.

Qualcomm’s revenue rose 39 percent to $37.677 billion for fiscal-year ended September 25, 2022.

Qualcomm has generated revenue of $25.027 billion (+49 percent) from smartphone business, $4.33 billion (+4 percent) from RF front-end business, $1.372 billion (+41 percent) from Automotive and $6.948 billion (+37 percent) from IoT business in 12 months.

Revenue from Qualcomm’s handsets business, which accounts for more than half its total sales, rose 40 percent in the fourth quarter ended Sept. 25, though revenue from chips that enable WiFi and Bluetooth connections fell by a fifth.

Qualcomm won more business from Apple, which the chipmaker has been trying to rely less on, and said the company would start to see benefits from its increased share of chips Samsung uses in the March quarter.

Qualcomm said it was expecting to have the vast majority of 5G modem share for the 2023 iPhone launch, up from a previous assumption of 20 percent. It also said on a post-earnings call that it was assuming minimal contribution from Apple in fiscal 2025.

“Apple will drive some growth in the December quarter … but the Android market is extremely weak and many new premium-tier foldable models that were launched a few months ago did not sell well at all,” said Kinngai Chan, analyst at Summit Insights Group.

Qualcomm is facing stiffer competition from Taiwanese chipmaker MediaTek in the higher-end Android market, said Runar Bjorhovde, research analyst at Canalys.

Qualcomm’s Cristiano Amon told analysts the company implemented a hiring freeze and would make further cuts to operating expenses as needed.

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