Chipmaker Qualcomm Inc on Wednesday said that the 2019 novel coronavirus outbreak in China poses a potential threat to the smartphone industry, with a possible impact on manufacturing and sales.
The comments by Qualcomm, the world’s biggest supplier of modem chips that connect smartphones and other devices to wireless data networks, dragged down the shares of chipmakers, despite signs that an industry downturn was ending.
Qualcomm chief financial officer Akash Palkhiwala on a conference call with investors following the release of quarterly results said that the company expects “significant uncertainty around the impact from the coronavirus on handset demand and supply chain.”
Qualcomm shares fell as much as 3.75 percent in after-hours trading in New York.
The San Diego, California-based chip supplier forecast revenue for its fiscal second-quarter largely above Wall Street estimates, in the latest sign that the protracted slowdown in the global chip industry is easing.
The forecast was wider than usual because of the coronavirus outbreak in China. The company lowered the bottom end of its guidance for earnings per share by US$0.05 to account for possible disruptions, Palkhiwala said.
Qualcomm officials tried to calm analyst concerns over the coronavirus, saying that the biggest 5G markets this year are expected to be in the US, South Korea and Japan, and that the company could weather disruptions.
“If we have an issue, a supply-chain issue or demand issue in China, we tend to have the ability to have other regions to back it up,” Qualcomm chief executive officer Steve Mollenkopf said.
“So we tend to look at the business in terms of our planning. We want to make sure that we maintain that strength across different markets,” he said.
However, investors concerns about the outbreak overshadowed results that otherwise beat expectations.
While it is dominant in mobile modems and processors, Qualcomm has been pushing to win over customers with a more complex radio-frequency front-end chip used in smartphones that utilize 5G.
Even though it forecast fewer modem sales than Wall Street expected, it generated more revenue per modem shipped than in the past.
Mollenkopf in an interview said that the company’s forecast reflected strong demand for radio-frequency chips from smartphone makers, especially in China, where brands are putting 5G capabilities into cheaper devices that are likely to sell in greater quantities sooner than Qualcomm had originally anticipated.
“It’s really the first time that you’re seeing that significantly in our numbers,” Mollenkopf said.
Qualcomm left its estimate of the number of 5G mobile handsets that are to be sold this year unchanged at between 175 million and 225 million.
Qualcomm forecast total revenue in the range of US$4.9 billion to US$5.7 billion for its second quarter, with its chip segment generating revenue of US$3.9 billion to US$4.5 billion.
The company, which generates most of its profit by licensing its technology to smartphone makers and others, said the segment reported revenue of US$1.4 billion in the fiscal first quarter ended Dec. 29 last year.
On the conference call, Qualcomm said that it has signed 85 license agreements for 5G technology, up from 75 in November last year.
The company earned US$0.99 per share in the first quarter, topping analysts’ average estimate of US$0.85.
Revenue rose 5 percent to US$5.08 billion, beating analysts’ average estimate of US$4.83 billion.
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