Export Compliance Daily is a Warren News publication.
50M-100M Fewer Handsets

‘Elevated Uncertainty’ Spurs Qualcomm to Lower Its 5G Phone Forecast

Qualcomm now expects global handset shipments in calendar 2022 to decline by “a mid-single-digit percentage” year over year, including 650 million to 700 million 5G handsets, said Chief Financial Officer Akash Palkhiwala on an earnings call Wednesday for fiscal Q3 ended June 26. Previous Qualcomm 5G smartphone forecasts pegged shipments to exceed 750 million handsets for calendar 2022.

Sign up for a free preview to unlock the rest of this article

Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.

Though Snapdragon's premium-tier volume remains “resilient,” said the CFO, “our guidance assumes lower demand in other tiers, reflecting the updated global handset forecast.” The newly downgraded guidance “reflects the continuation of the trends that adversely impacted handset volumes exiting the June quarter,” he said. “We expect the elevated uncertainty in the global economy and the impact of COVID measures in China will cause customers to act with caution in managing their purchases in the second half of calendar ‘22.”

Qualcomm’s handset outlook for fiscal Q1 ending late December “remains unchanged” because the December quarter “is seasonally a strong quarter for us,” said Palkhiwala. Despite Qualcomm’s downgraded forecast for handset shipments overall, “we’re still going to see flagship device launches and holiday season increases that will benefit our financial performance,” he said.

The company is still forecasting handset growth from fiscal Q3 to fiscal Q4, “and we’ll see growth again going into the first fiscal quarter,” said Palkhiwala. “We do expect it to be calibrated by some of the same factors” that limited the growth in fiscal Q3, he said.

Qualcomm is “very familiar” with trends in the handset market, because “we’ve been doing this for years,” said CEO Cristiano Amon. “And this market, it changes with the economy.” Looking at the “combination of the macroeconomic environment and the China lockdowns,” Qualcomm exited the quarter mindful that handset shipments are “likely to be smaller than we originally forecasted,” he said. Amon thinks Qualcomm’s strategy of staying focused on Android’s premium and high tier “is proving to be a resilient one,” he said.

Qualcomm’s handset business in Q3 recorded a 59% year-over-year revenue increase to $6.1 billion, “driven by the strength of our Snapdragon product portfolio, especially in the premium and high tiers,” said Palkhiwala. RF front-end revenue of $1 billion grew 9% compared with the year-earlier quarter “on increased adoption of our broad product portfolio,” he said.

Qualcomm's new multiyear agreement with Samsung takes effect in 2023 and expands the use of Snapdragon platforms for future premium Samsung Galaxy products globally, said Amon. In addition to Galaxy smartphones, the agreement includes PCs, tablets, extended reality “and more,” he said.

Qualcomm also agreed to a seven-year extension of its patent license agreement with Samsung, “taking the license through the end of 2030 with the same royalty terms,” said Amon. “The extension encompasses 3G, 4G and 5G technologies and devices and will also include future 6G standards and products,” he said. “Samsung is the world’s largest smartphone supplier by unit volume with a well-developed portfolio of patents.” Qualcomm’s existing agreement with Samsung was signed in 2009 and was due to expire in 2023, said Alex Rogers, president of Samsung’s licensing business.

The Samsung extension “is probably my favorite thing in the quarter,” said Amon. “It provides incredible stability for our mobile business. I cannot think of anything better to validate our strategy.” The agreement also affords Qualcomm “the opportunity for growth tied up with our diversification” beyond Galaxy smartphones, he said. “So a very significant agreement.”