Qualcomm is now announcing its latest financial report. Qualcomm's revenue forecast for the holiday quarter (the first quarter of fiscal 2023) missed Wall Street's expectations by about $2 billion as it grappled with slumping sales to smartphone customers, sending its shares down in after-hours trading 7%. Additionally, Qualcomm said it implemented a hiring freeze earlier in the quarter.
"Given the uncertainty caused by the macroeconomic environment, we are updating our guidance for the calendar year 2022 3G/4G/5G handset sales from a mid-single-digit year-over-year decline to a low double-digit year-over-year decline. "The rapid deterioration in demand across the semiconductor industry and the easing of supply constraints have led to increased channel inventories," Qualcomm said in the report.
On Wednesday's conference call, Qualcomm CEO Ammon told the media that the semiconductor industry is facing macroeconomic headwinds "that we are not immune to." He revealed that the company had implemented a hiring freeze and was ready to cut operating expenses further as needed.
"We remain well-positioned to deal with near-term headwinds," Ammon stressed on the conference call that the company is facing a "temporary cyclical inventory drawdown."
Chip shortages and the easing of supply chain bottlenecks in recent quarters have left smartphone makers with excess inventory. Qualcomm estimates that about 8-10 weeks of "stock up" could take several quarters to resolve.
Qualcomm Chief Financial Officer Akash Palkhiwala said the holiday season could see inventories bottom out and manufacturers will run out of existing chips.
In the quarter that ended September 25 (the fourth fiscal quarter), Qualcomm’s mobile phone business revenue increased by 40%, but the revenue of chips that support WiFi and Bluetooth connections fell by one-fifth. The mobile phone business accounts for more than half of Qualcomm's total sales.
Qualcomm has won more business from Apple, and the chipmaker has been working to reduce its reliance on Apple. Qualcomm said it would begin to benefit from Samsung's increased share of chips it used in the March quarter.
Qualcomm said it expects the share of 5G modems to rise to an overwhelming majority by the time the iPhone is released in 2023, up from 20% previously. The company also said on a post-earnings conference call that it assumed Apple would make a minimal contribution in fiscal 2025.
"We believe that Apple will have some growth in the fourth quarter of last year...but the Android market is extremely weak, and many high-end foldable phones launched a few months ago have not sold well," Summit Insights Group analyst Kim Gai Chen said.
In the high-end Android market, the company also faces stiff competition from Taiwanese chipmaker MediaTek, said Canalys research analyst Runal Bjorovide.
Qualcomm expects current-quarter revenue to be between $9.2 billion and $10 billion, compared with analysts’ estimates of $12.02 billion, according to Refinitiv data. The company expects adjusted earnings per share in the range of $2.25 to $2.45, compared with expectations of $3.42.
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