Qualcomm Slides After Forecast Signals Phone Slump Will Drag On
Qualcomm Inc., the largest maker of smartphone processors, tumbled in late trading after a disappointing forecast signaled that demand for mobile devices remains sluggish — especially in China.
Revenue will be $8.1 billion to $8.9 billion in the fiscal third quarter, Qualcomm said Wednesday in a statement, falling well short of the $9.25 billion average analyst estimate. That sent the shares down as much as 7.5% to $104.35.
The outlook shows the challenge Qualcomm faces in navigating an industrywide downturn. Weak demand for phones has led to a buildup in handset chips — the company's main source of revenue. Chief Executive Officer Cristiano Amon has promised investors that once phone makers have worked through their inventory, the orders will bounce back. But that's taking longer than feared.
The company now expects the total market for phones to shrink by a percentage range in the high single digits in 2023. Inventory reductions by customers will likely continue for two more quarters, Qualcomm projected. Demand in China hasn't returned to the levels that Qualcomm and others had expected, Amon said.
“Common sense and the overall expectation was that the China market was going to bounce back,” he said on a conference call with analysts. “We've not seen those signs yet.”
The company's main product is the processor that runs many of the world's best-known phones. It also sells the modem chips that connect Apple Inc. 's iPhone to high-speed data networks. An additional chunk of Qualcomm's profit comes from licensing the fundamental technology that underpins all modern mobile networks — fees that phone makers pay whether they use Qualcomm-branded chips or not.
The company's “modem-only” customer, which is how Qualcomm refers to
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