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Qualcomm’s Bright Outlook: Smartphone Market on the Rise

Daniel Kim Views  

Reuters·Yonhap News

Qualcomm, the world’s largest smartphone processor manufacturer, has announced that the smartphone market, which had been sluggish for a while, is recovering due to Chinese demand. It’s observed that the demand for premium phones equipped with Artificial Intelligence (AI) features is increasing among Chinese consumers.

According to Reuters on the 1st of May (local time), Qualcomm’s revenue and net earnings per share in the second quarter of the 2024 fiscal year (25th of December last year to 24th of March) were $9.39 billion and $2.44, respectively, both exceeding Wall Street’s expectations.  

Qualcomm also presented a promising outlook for the future smartphone market. It forecasts revenue and net earnings per share of $9.2 billion (median) and $2.25 for the third quarter of fiscal 2024 (April to June), respectively, which exceed the analyst estimates of $9.05 billion and $2.17 per share.

In a conference call, Cristiano Amon, CEO of Qualcomm, emphasized that “Users want to buy mobile phones that can run AI features.” He explained that demand in China is reviving, with sales through Chinese smartphone manufacturers increasing by 40% in the second quarter year-on-year.

Amon said, “There are no signs of weakening in the Chinese Android premium market.” He explained that ‘AI-based smartphones’ equipped with real-time translation and virtual assistant features can be considered premium phones. He cited Samsung’s Galaxy S24 Ultra, launched earlier this year, as an example of a premium phone.

Experts have concluded that Huawei’s counterattack against US sanctions positively affected Qualcomm’s performance. Huawei launched a smartphone with its 5G chip last year, creating a patriotic consumption craze in China.

Phil Solis, an analyst at IDC, pointed out, “As the Chinese smartphone market recovers, demand is shifting to the premium mobile phone market,” and the overall smartphone market is growing based on the wave of patriotic consumption sparked by Huawei.

Qualcomm’s primary business is in the mobile phone sector, selling devices needed for Android phones and iPhones, such as processors, modems, and other smartphone parts.

However, whether Qualcomm’s recovery will extend to Apple’s iPhones is questionable. Analysts believe that Huawei’s counterattack will significantly reduce Apple’s iPhone sales. The radio frequency chip manufacturer Corvo anticipated a downturn in the smartphone market, and Corvo is more dependent on Apple than Qualcomm.

According to data submitted by Huawei Technologies to the Chinese National Interbank Funding Center (NIFC), Huawei’s net profit for the first quarter (January to March) increased by 564% to $30.8 billion. Revenue increased by 37% to $27.9 billion. Huawei, an unlisted company, did not disclose its performance by sector.

Huawei’s sales surge appears to be due to the company’s share loss in the iPhone. Counterpoint, a market research firm, pointed out that Apple’s share in the Chinese market shrank from 19.7% in the fourth quarter of last year to 15.7% in the first quarter of this year, attributed to the increase in Huawei’s market share.

Daniel Kim
content@viewusglobal.com

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