Qualcomm Issues Bleak Outlook on "Smartphone Market Contraction"... Stock Drops 8%

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Qualcomm, the world's largest smartphone AP (application processor) semiconductor company based in the United States, has issued a bleak earnings forecast for October to December this year, significantly below market expectations. This is due to the sharp deterioration in global smartphone demand caused by China's economic downturn and rising inflation. Qualcomm plans to tighten its belt through measures such as a hiring freeze.

According to Bloomberg and other sources on the 2nd (local time), Qualcomm forecasted its revenue for the first quarter of fiscal year 2023 (October to December) to be between $9.2 billion and $10 billion. This is far below the market expectation of $12.02 billion. The company also projected earnings per share to be up to $2.45, compared to the market expectation of $3.40.

Qualcomm assessed that the macroeconomic environment continues to worsen and that China's COVID-19 lockdown measures persist, weakening broad demand. Qualcomm initially expected the 3G, 4G, and 5G smartphone market size to shrink by mid-single digits year-over-year this year, but revised this to a low double-digit percentage decline. The company explained that the semiconductor industry's sudden drop in demand and easing of supply constraints are increasing inventory levels.

Revenue for the fourth quarter of fiscal year 2022 (July to September) was $11.39 billion, nearly meeting market expectations. Qualcomm's products and services (QCT) segment revenue increased 28% year-over-year to $9.9 billion, while the licensing (QTL) segment declined 8% year-over-year to $1.44 billion.

Christiano Amon, Qualcomm's CEO, stated, "Despite the difficult macroeconomic conditions, we achieved the highest earnings in the third quarter," emphasizing, "The semiconductor industry is facing headwinds that no one can avoid. We are in a strong position to manage these short-term headwinds."

However, Qualcomm announced it would undertake significant cost-cutting measures given the challenging market conditions. CEO Amon said, "We are prepared to further reduce operating expenses, including a hiring freeze." Qualcomm confirmed that it has already implemented a hiring freeze starting this quarter.

Following the earnings announcement after market close, Qualcomm's stock price plunged nearly 8% in after-hours trading on the same day.

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