Qualcomm Hampered by Semiconductor Supply Bottlenecks... Falls Short of Q4 Earnings Forecast

Semiconductor Supply Bottlenecks and Antitrust Lawsuits Cited as Causes
Stock Closes 7% Lower in After-Hours Trading Following Earnings Announcement

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] The fourth-quarter earnings of Qualcomm, the world's largest telecommunications chip manufacturer, fell short of market expectations. The surge in orders for automotive semiconductors recently impacted smartphone chip shipments, and increased external risks such as antitrust lawsuits from the U.S. government also negatively affected the results, analysts say.

On the 3rd (local time), Qualcomm announced that its fourth-quarter revenue reached $8.23 billion (approximately 9.2 trillion KRW), a 62% increase compared to the same period last year (about 5.65 trillion KRW). Operating profit was $2.455 billion (about 2.73 trillion KRW), growing 118% from the previous year's quarter (about 1 trillion KRW). Earnings per share stood at $2.17, surpassing the market forecast of $2.10.

This revenue growth is attributed to the expanded adoption of 5G communications, which increased demand for communication chips. In fact, revenue related to communication chips in the fourth quarter of last year was $4.216 billion (about 4.7 trillion KRW), marking a 79% increase compared to the same period last year (about 2.62 trillion KRW).

However, since the revenue fell short of the market expectation of $8.27 billion (about 9.23 trillion KRW), some evaluations consider the performance somewhat lackluster. With the recent distribution of vaccines signaling recovery from the COVID-19 crisis, global automobile production has increased, and demand for automotive semiconductors has surged explosively. Market research firm IHS Markit stated, "The surge in demand for automotive semiconductors is causing production bottlenecks," and predicted, "This will continue through the first half of this year."

It is interpreted that foundry companies reduced smartphone chip production volumes to respond to this automotive semiconductor demand, which had an impact.

A Qualcomm official said during the earnings announcement, "The backlog in smartphone chip supply is likely to continue until the first half of this year," adding, "If production volume can be increased, revenue can naturally increase as well."

Additionally, the slowdown in growth of royalty-related revenue, known as Qualcomm's 'cash cow,' also impacted the earnings. Bloomberg reported, "After the U.S. government's sanctions on Huawei, Qualcomm was expected to gain a windfall benefit, but this fell short of market expectations," and analyzed, "The ongoing U.S. government antitrust lawsuit will also affect Qualcomm's royalty business growth potential."

According to statistical analysis firm FactSet, Qualcomm is expected to earn $1.35 billion (about 1.5 trillion KRW) from the royalty segment in the first quarter of this year (January to March), which is likely to fall short of the market forecast of $1.43 billion (about 1.6 trillion KRW).

Meanwhile, Qualcomm's stock price dropped about 7% in after-hours trading following the earnings announcement.

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