Qualcomm, the leading chipset maker for smartphones, has released its financial results for the fiscal third quarter ending on June 25, 2023.
The company reported a significant 23 percent drop in revenues, amounting to $8,451 million. This decline was attributed to smartphone manufacturers cutting their spending on chips, leading to reduced sales in both of Qualcomm’s divisions.
Specifically, the Qualcomm CDMA Technologies (QCT) division experienced a 24 percent revenue decrease, amounting to $7,174 million. Simultaneously, the Qualcomm Technology Licensing (QTL) division saw a revenue drop of 19 percent, reaching $1,230 million.
Within the QCT division, revenues from different business segments varied. Revenue from the Handsets business dropped by 25 percent to $5,255 million, while the Automotive segment saw a positive trend with a 13 percent revenue increase, reaching $434 million. However, the Internet of Things (IoT) business reported a decline of 24 percent, resulting in revenues of $1,485 million.
The decrease in smartphone shipments globally contributed to Qualcomm’s revenue drop. According to the International Data Corporation (IDC), worldwide smartphone shipments fell by 7.8 percent to 265.3 million units in the second quarter of 2023. However, IDC’s preliminary data also suggests that the foldable smartphone market is expected to grow by nearly 50 percent in 2023, providing some hope for the industry.
Qualcomm’s fourth-quarter revenue forecast ranges from $8.1 billion to $8.9 billion. However, the company acknowledged that it does not expect any further sales to Chinese telecom giant Huawei due to a lack of a license to sell 5G chips to the company. Additionally, Qualcomm faced challenges in China as the country’s smartphone shipments declined by 5 percent in the June quarter.
Smartphone shipments in China, the world’s second largest economy were down 5 percent in the June quarter, Canalys data showed.
Huawei has emerged as the fifth smartphone supplier in China during April-June quarter of 2023 with 13 percent market share, according to IDC.
Given the uncertain market conditions, Qualcomm Chief Financial Officer Akash Palkhiwala warned of potential restructuring charges for job cuts. The company is developing plans to address this, and it is likely to include workforce reductions, leading to significant restructuring charges.
Despite the tough market environment, Qualcomm remains optimistic about the future, anticipating opportunities in the second half of the year. However, the company’s forecast assumes no material revenue from Huawei and considers the impact of macroeconomic headwinds and weak global handset units. Qualcomm also expects phone makers to continue using existing inventory instead of placing fresh chip orders through the end of the year.
