Amid the strong rebound in the smartphone market, chip giant Qualcomm's performance has also improved.
On July 31st, local time in the United States, Qualcomm released its financial results for the third quarter of fiscal year 2024 (ending on June 23rd). In the third quarter, Qualcomm's adjusted revenue was $9.39 billion, a year-on-year increase of 11%; Adjusted earnings per share (EPS) were $2.33, a year-on-year increase of 25%; The net profit was 2.129 billion US dollars, an increase of 18% compared to the same period last year's 1.803 billion US dollars..
At the same time, Qualcomm also released its Q4 revenue outlook, with the company expecting Q4 revenue of $9.5 billion to $10.3 billion, and analysts expecting $9.7 billion; Expected fourth quarter adjusted earnings per share of $2.45 to $2.65, with analysts expecting $2.45.
Qualcomm's optimistic outlook for future revenue seems to further prove that the global smartphone market is emerging from its slump. The latest data released by Canalys shows that in the second quarter of 2024, the global smartphone market shipped 289 million units, achieving double-digit growth again. This is the third consecutive quarter of positive growth in the global smartphone market. Qualcomm believes that the smartphone market shipments will remain stable or slightly increase this year, and artificial intelligence has expanded the scale of high-end products.
After the financial report was released, Qualcomm's US stock rose more than 6%, but then fell back. As of press time, it fell more than 1% in after hours trading.
Photo by journalist Wang Jing
The smartphone market is recovering, benefiting Qualcomm chips
From the perspective of business structure, Qualcomm's main business can be divided into two major segments: semiconductor business (QCT) focused on chip products, and technology licensing business (QTL) responsible for intellectual property authorization. Among them, the QCT department is Qualcomm's main source of revenue, consisting of three major business segments: mobile terminal chips, automotive, and Internet of Things (IoT).
Specifically, in the third quarter of 2024, Qualcomm QCT's revenue increased by 12% year-on-year to $8.069 billion. Among them, revenue from mobile phone chips was $5.9 billion, a year-on-year increase of 12%, higher than the 1% growth rate in the second quarter; The revenue of the automotive chip business was $811 million, a year-on-year increase of 87%. Although the scale is small, the company believes that this is one of its biggest opportunities for growth and diversification; IoT related revenue decreased by 8% year-on-year to $1.359 billion.
Qualcomm's performance is closely related to the smartphone industry. Recently, many institutions have released reports showing that the smartphone market is rebounding well. For example, data released by the international data company IDC shows that in the second quarter of 2024, the shipment volume of China's smartphone market was about 71.58 million units, a year-on-year increase of 8.9%. Throughout the first half of this year, the shipment volume of China's smartphone market exceeded 140 million units, a year-on-year increase of 7.7%.
In addition, under the influence of factors such as generative AI and industry cycles, the prices of the entire mobile phone supply chain products have significantly increased, with the main raw materials for mobile phones, such as screen modules, processors (system level chips), and memory, experiencing the most significant price increases. With the advancement of process technology and the improvement of performance and AI capabilities, the cost of each generation of flagship chips is rising. With the continuous price increase of chips and memory, many products and manufacturers will choose to raise prices in the future, which is a common situation in the industry. "At the end of June this year, Li Jie, the president of OnePlus China, told media including reporters from the Daily Economic News.
In terms of licensing business (QTL), Qualcomm's revenue for the third quarter of fiscal year 2024 was $1.273 billion, a year-on-year increase of 3%.
Revocation of Huawei's export license affects revenue
It is worth noting that Qualcomm stated during its financial report that it had previously obtained a US license to export products to Huawei, but the license has been revoked, which will affect the company's revenue.
According to public information, in November 2020, Qualcomm announced that it had obtained a license to sell 4G chips to Huawei. But on May 7th of this year, the United States further tightened its export restrictions on Huawei, revoking Qualcomm's license to export 4G and certain other integrated circuit products (including Wi Fi products) to Huawei Terminal Co., Ltd. and its affiliates and subsidiaries.
In August 2023, Huawei Mate 60 Pro was suddenly launched on Huawei Mall. Subsequently, discussions about Huawei Mate 60 Pro sparked a heated discussion across the internet. Through network speed testing software, it can be seen that Huawei's flagship phone has returned to "5G network speed". In early September last year, Guo Mingchi, an analyst at Tianfeng Securities, shared his views on Huawei's adoption of Kirin processors on social media, stating that Qualcomm was the main loser.
Huawei purchased 23-25 million and 40-42 million mobile SoC (System on Chip) from Qualcomm in 2022 and 2023, respectively. However, Huawei expects that from 2024 onwards, new phones will fully adopt its own designed new processors. Therefore, Qualcomm will not only completely lose Huawei orders from 2024, but also face the risk of declining shipments from non Huawei Chinese brand customers due to the increase in Huawei's mobile phone market share. It is expected that Qualcomm's SoC shipments to Chinese mobile phone brands in 2024 will decrease by at least 50-60 million compared to 2023 due to Huawei's adoption of the new Kirin processor, and are expected to decrease year by year, "said Guo Mingchi.
However, during the financial report meeting, when discussing how to offset the decline in revenue from Huawei, Qualcomm stated, "Our mobile business is growing, and we are also seeing the strength of industrial edge networks and consumers, whether it is the Internet of Things or automobiles, have increased compared to our previous expectations
