Richer each day, home and Huawei: Apple's hunger for Snapdragon modems, smartphone recovery pays off for Qualcomm

A certain Chinese juggernaut's woes helped a bit, too


San Diego HQ'd chipmaker Qualcomm has reported [PDF] quarterly financials that impressed even the worthless stock traders, courtesy of a recovery in phone sales and a strong output in China.

Revenues for Q2 of Qualcomm's fiscal 2021 ended 28 March grew 52 per cent year-on-year to $7.9bn, and net income more than tripled to $1.7bn.

Qualcomm, along with most tech businesses connected to the smartphone space, suffered a quartus horribilis in the compatative year ago period, when China entered a nationwide lockdown to contain the virus. For the mobile sector, this was a brutal one-two punch, with factories briefly suspending production of handsets, and consumers deferring upgrades.

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On the handset front in Qualcomm's latest full quarter, revenue grew to $4.07bn, up 53 per cent on the previous year. This is indicative of the global economic recovery, as well as a rise in consumer confidence that ensued as a result, combined with the widespread adoption of 5G across segments of the mobile market.

Off to the middle market

Qualcomm has worked to sidestep Huawei’s woes. With the troubled Chinese mobile giant forced to sell its Honor sub-brand (which has since gone on to ink deals with Qualcomm and MediaTek), and unable to produce new Kirin chipsets, other vendors have rapidly encroached on the territory it once held, most notably OPPO, Vivo, and Xiaomi.

All are Qualcomm customers, and Xiaomi was selected as the launch company for its first Snapdragon 888 platform.

Speaking at Qualcomm’s earnings call last night, company president Christiano Amon claimed: “Our highly differentiated position in premium and high tiers, our modem-to-antenna leadership, and the continued transition of Huawei volume to OEMs using our solutions have positioned us to grow faster in smartphones while being able to capture the most significant portion of the revenue opportunity.”

Handsets accounted for the largest portion of Qualcomm's CDMA business, while RF front-end jumped 39 per cent to $903m, Automotive was was up 40 per cent to $240m and IoT went up 71 per cent to $1.073bn.

Again, the broader smartphone recovery played a role here, with Qualcomm benefiting from the successes of vendors that use other platforms. The best example is Apple, which uses Qualcomm’s Snapdragon modems in the latest iPhone 12 series, despite relying on its own homegrown Apple Silicon. Amon said he expected RF revenue to reach $3.6bn by the end of the year.

Qualcomm's licensing segment came in at $1.6bn, up 52 per cent in the previous year. With a significant patent portfolio in its back pocket, rival chipmakers have been forced to pay the piper, lest they fall afoul of its legal team.

Mobile chip-frying becomes an even more interesting business

It is a transformative time for the company, with CEO Steve Molenkopf expected to leave the company by the end of June, and with Amon planned to take up the reins.

Perhaps more significantly, Qualcomm is expected to join the vanishingly small group of mobile chipmakers (namely Apple, Huawei, and Samsung) that produce their own core designs in-house. Earlier this year, the company acquired Nuvia, a fabless semiconductor outfit that was previously focused on producing an ultra-low power ARM CPU for the server space.

These changes come while the broader semiconductor sector faces a shortage of production capacity. This dearth of chips has affected both firms reliant on legacy nodes (like those in the automotive and industrial space), as well as those on the cutting edge. Although this shortfall is expected to linger into next year, Amon expressed hopes Qualcomm would prove resilient.

"Despite the industry-wide semiconductor supply shortage, we're utilizing our scale and working across our entire global supply chain to maximize our ability to capture this opportunity," he said.

"We expect material improvements by the end of the calendar year due to planned capacity builds and multi-sourcing initiatives. As one of the leading drivers of advanced semiconductor technology platforms, we're also excited to see more foundry investment in the United States consistent with the United States government's strategic priorities." ®


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