Fri, Apr 27, 2018 - Page 10 News List

Qualcomm optimistic as Chinese demand picks up


A display in Qualcomm Inc’s booth shows the journey of early 5G phone chipsets have made out of the lab, starting as a suitcase full of outsized prototype components, left, which has now been shrunk into a smartphone the size of a very thick chocolate bar, right, at the Mobile World Congress in Barcelona, Spain, on Feb. 27.

Photo: Reuters

Qualcomm Inc on Wednesday issued an optimistic forecast for this quarter, a sign demand is beginning to improve in China, the world’s largest smartphone market.

Sales would be US$4.8 billion to US$5.6 billion in the fiscal third quarter, the San Diego-based company said in a statement.

Analysts on average expected revenue of US$5.45 billion, data compiled by Bloomberg showed.

Qualcomm said that smartphone chip orders are showing signs of life in China after slumping at the end of last year. Concern about the market deepened in recent weeks after lackluster results from other suppliers to handset makers, especially Apple Inc.

Even as global smartphone growth slows — causing pain for Apple, a top smartphone vendor — Qualcomm benefits because it is supplying manufacturers in China that are growing by taking market share from Apple.

Sales of phones in China have been good enough to shift a buildup of unused components, Qualcomm chief financial officer George Davis said.

“You’ve seen inventory go down pretty rapidly,” he added.

Profit in the fiscal second quarter was US$0.80 a share, excluding certain items. Adjusted revenue was US$5.2 billion.

While Qualcomm still supplies some chips to Apple, a legal dispute has soured relations between the two firms and Apple has started using chips from other suppliers.

Qualcomm on Wednesday said that it experienced a large decline in orders for modems from one customer.

One of the cornerstones of the company’s plan to reignite earnings growth is its acquisition of NXP Semiconductors NV. That deal was announced in 2016 and is still awaiting regulatory approval in China.

The company is confident it can close the transaction ahead of a July 25 deadline.

While trade tension between the US and China suggests permission is unlikely to come soon, the two sides are likely to settle into calmer negotiations starting next month, CEO Steve Mollenkopf said.

“We’re obviously not immune to the difficult environment that exists between the countries,” he said. “From a timing perspective, this is not the best time to take the temperature.”

Should the chipmaker fail to close the acquisition, it is prepared to buy back US$20 billion to US$30 billion of its own stock.

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