Last Update: May 04, 2023, 15:05 IST
Chip makers and the industry as a whole aren’t convinced the situation will change
Qualcomm Inc reported third-quarter revenue and profit below Wall Street’s estimates on Wednesday, citing concerns that it will take longer for the smartphone industry to exhaust excess supply before new orders arrive.
(Reuters) – Qualcomm Inc on Wednesday reported third-quarter revenue and profit that beat Wall Street estimates, amid concerns the smartphone industry will take longer to exhaust excess supply before new orders arrive.
Shares of the chip designer declined 4% in extended trade after it said its forecast also accounted for macroeconomic headwinds, weaker global sales of handsets and channel inventory drawdown.
“As we navigate this challenging environment, we are focusing on the important factors we can control to emerge stronger from this downturn,” Qualcomm CEO Cristiano Amon said in a statement. “Our top priority is executing on our diversification strategy and investing in areas that drive long-term value.”
The company said the larger-than-usual decline in its chip revenue forecast from the previous quarter was primarily due to “the timing of purchases by the modem-only handset customer”.
Qualcomm didn’t name the customer, but analyst Qinghai Chan of Summit Redstone Partners said it was Apple. Apple is the biggest buyer of its standalone modem chips, which include a modem and an application processor, rather than Qualcomm’s main flagship chip. Apple makes its own application processor.
Qualcomm forecasts chips revenue of $6.9 billion to $7.5 billion.
The smartphone market was one of the first hit by a slump in demand after high inflation curbed consumer spending on discretionary goods such as electronics, resulting in vendors slashing new chip orders.
Smartphone demand remains weak despite promotions and price cuts. According to research firm Canalys, global smartphone shipments declined by 13 percent in the first quarter.
The easing of COVID-19 restrictions in China hasn’t significantly boosted demand, with first-quarter sales falling for Apple and its Android rivals in the world’s second-largest economy.
Broad economic weakness has also forced device makers to limit chip orders. Especially increasing competition from Taiwan’s MediaTek is a matter of concern.
The company forecast revenue of $8.1 billion to $8.9 billion in the third quarter. Analysts polled by Refinitiv expected revenue of $9.14 billion.
It forecast adjusted earnings per share of $1.70 to $1.90, compared with analysts’ expectations of $2.16.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)