"Qualcomm, Short-Term Business Slowdown Concern Due to COVID-19 Impact... Expectation for 5G Momentum to Gain Full Steam in Second Half"

[Asia Economy Reporter Eunmo Koo] Concerns have been raised that Qualcomm's business conditions may contract in the short term due to the novel coronavirus infection and seasonal factors. However, the growth momentum of 5th generation mobile communication (5G) is expected to accelerate from the second half of the year.

According to Shinhan Financial Investment on the 9th, Qualcomm's revenue for the first quarter of fiscal year 2020 (October to December 2019) increased by 5% year-on-year to $5.1 billion, and its non-GAAP earnings per share (EPS) recorded $0.99, exceeding market consensus.

The chip design division (QCT) posted solid results with revenue of $3.6 billion, down 3% year-on-year. MSM (Mobile Station Modem, including mobile AP and communication chips) shipments reached 160 million units, in line with guidance, and the average selling price (ASP) slightly exceeded expectations due to increased adoption of the Snapdragon 5G platform following the launch of 5G smartphones.

The licensing division (QTL), which acts as a cash cow, drove overall performance with revenue of $1.4 billion, up 38% year-on-year. The number of 5G license agreements with major smartphone manufacturers, excluding Huawei, increased to 80, and extensions of existing contracts were also secured.

The guidance for the second quarter of fiscal year 2020 projects revenue between $4.9 billion and $5.7 billion, in line with consensus. The wider guidance range is believed to reflect the impact of the novel coronavirus. The annual shipment forecast for 5G smartphones remains unchanged at 175 million to 225 million units.

Although concerns about short-term business contraction are highlighted, the 5G growth engine is expected to gain momentum in the second half. Hyungtae Kim, a researcher at Shinhan Financial Investment, explained, “The increase in 5G smartphone shipments is expected to raise the average ASP in the QCT division, and the growth in QTL division license contracts demonstrates Qualcomm's sustained technological superiority. Additionally, orders in the future growth sector of automotive electronics have increased to $7 billion, maintaining growth momentum.” He added, “Considering that the recently announced autonomous driving platform has not yet been reflected, expectations for external growth in the second half are likely to expand.”

This content was produced with the assistance of AI translation services.