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on February 1th

The demand for mobile phone chips is starting to rebound, and Qualcomm predicts a mild recovery in the industry in 2024

Qualcomm, the world's largest seller of smartphone processors, expects the industry to recover moderately in 2024, with strong smartphone shipments, but the market for connected devices remains sluggish.

Qualcomm stated that mobile phone shipments have decreased in 2023 and will remain stable or slightly increase in 2024. Analysts say this indicates that Qualcomm's market share in China is being taken away by competitors. Although most mobile phone manufacturers have already addressed the issue of excess inventory, oversupply remains a problem for Qualcomm's second largest business (providing chips for connected devices).

Qualcomm CEO Cristiano Amon stated that the company is working hard to "prepare for growth while addressing industry wide inventory declines.".

Qualcomm's revenue for the first quarter of fiscal year 2024 (as of December 24, 2023) was $9.935 billion, a 5% increase from $9.463 billion in the same period last year; Net profit of 2.767 billion US dollars, an increase of 24% compared to the same period last year of 2.235 billion US dollars; Not in accordance with Non GAAP, Qualcomm's adjusted net profit for the first quarter was $3.101 billion, an increase of 16% compared to the same period last year of $2.684 billion.

Investors have been searching for signs that consumers are upgrading their smartphones at a faster pace. In this regard, Qualcomm stated that its chip business revenue in the first quarter was $8.42 billion, a 7% increase compared to the same period last year of $7.892 billion, higher than analysts' estimate of $7.99 billion. Among them, the revenue of its mobile phone business increased by 16% to $6.69 billion, while the previous quarter saw a decrease of 27%.

Qualcomm also stated that Apple will extend the patent license agreement for two years. The current plan will continue until March 2027. Qualcomm has also signed a new agreement with Samsung Electronics, in which Samsung agrees that future devices will use Qualcomm chips.

Qualcomm's main product is processors, providing support for most smartphones in the world, including the Samsung Galaxy series. It also provides a modem chip for Apple iPhone.

Although Qualcomm is attempting to reduce its reliance on the mobile phone market by entering the automotive and personal computer (PC) chips, its profits are still severely affected by the demand for mobile phones, especially in China.

Chips for Internet connection devices are still weak. Qualcomm's revenue from its IoT business in the first quarter was $1.138 billion, a 32% decrease from $1.682 billion in the same period last year; The revenue of the automotive business was 598 million US dollars, an increase of 31% compared to the same period last year of 456 million US dollars.

Another part of Qualcomm's profits come from licensing the foundational technologies that support all modern mobile networks - mobile phone manufacturers pay fees regardless of whether they use Qualcomm branded chips or not. Qualcomm's first quarter authorized business revenue was $1.46 billion, a 4% decrease from $1.524 billion in the same period last year.

Qualcomm stated that it expects its revenue to reach 8.9-9.7 billion US dollars in the second quarter of the 2024 fiscal year. This is consistent with the analyst's average expectation of $9.36 billion. Excluding one-time items, the second quarter earnings per share will be between $2.20 and $2.40, while the average forecast is $2.26.

The median revenue estimate for Qualcomm's chip business in the second quarter was $7.9 billion, higher than analysts' estimate of $7.86 billion; The median revenue from patent licensing business was $1.3 billion, which was in line with expectations.
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