Qualcomm Quarterly Sales Surge on 5G
The 5G ramp up and “significant design wins” with OEMs drove a 73% surge in Qualcomm revenue to $8.3 billion for the quarter ended Sept. 27, said CEO Steve Mollenkopf on an investor call. The company has over 110 5G agreements, including all major handset makers and forecasts 175 million-225 million units for calendar 2020.
Its revenue range for total handset revenue in 2020 is $200 million, said Chief Financial Officer Akash Palkhiwala. Its forecast for 2021 is $450 million-$550 million, which he said after regular U.S. markets closed Wednesday are “reasonable data points to think about mix between 4G and 5G for the market.”
Beginning in Q4, Qualcomm broke out its QCT segment by revenue stream, based on industry or application. Handsets, including revenue from products sold for use in mobile handsets and excluding RF front-end components, were $3 billion; RF front-end revenue from sales of 4G, 5G sub-6 GHz and 5G millimeter-wave products were $852 million; automotive revenue including telematics/connectivity and digital cockpit was $188 million; and IoT revenue from consumer, computing, industrial, fixed wireless broadband, voice and music and wireless networking products was $926 million.
Qualcomm generated $2.4 billion of RF front-end revenue for the fiscal year, up 60%. It supports 4G, sub-6 GHz, mmWave or both 5G bands in smartphones, embedded PC modules IoT solutions and mobile hot spots, said Mollenkopf. Scale will allow the company to “make multiple profitable bets in areas where we expect a tailwind” such as automotive: “Next-generation 5G telematics design wins, in addition to our 3G and 4G design wins, solidify our position as a leader in connected cars.”
In Q&A, Palkhiwala wouldn’t break out how much mmWave is contributing to the RF front-end business, but said, “You should not really think of our revenue being driven by millimeter-wave.” The company has a broad portfolio across 4G, 5G sub-6 GHz and 5G mmWave, and “our design traction reflects the strength of our portfolio” across the technologies. President Cristiano Amon said 130 operators globally are investing in mmWave. With price points of devices becoming “very reasonable” with mmWave, “that opportunity for attach is going to be a significant tailwind for our business.”
Qualcomm’s automotive design win pipeline is about $8 billion, up from $6.5 billion at the beginning the fiscal year. The automotive industry is moving at an “unprecedented rate,” said Mollenkopf, and the company expects to expand its dollar share of content in the space “as we have done in smartphones.”
Strong growth in IoT was driven by demand for connected devices. The work-from-home trend is creating a higher need for connectivity, said Palkhiwala, and the company expects those trends to carry into fiscal Q1.
Year over year, invention disclosures were up over 60%, and 5G-related invention disclosures doubled, said Mollenkopf, eyeing adoption of wireless technology “broadly beyond smartphones” into other industries.
On possible future impact from Huawei, Amon said it's not selling to Huawei and doesn’t have a license to do so, but the opportunity creates an expansion of the addressable market for QCT. Qualcomm is “hedged” in its position given its high traction with premium and high-tier OEMs, but if, long term, it receives a license to sell to Huawei, it would be a “net positive.” Qualcomm is “very well hedged regardless of who wins in the marketplace,” said Amon. China’s price-driven transition to 5G will have an impact on how 5G unfolds in emerging markets, he said.
Commenting on industry chatter about possible supply chain disruption ahead, Palkhiwala said guidance for fiscal Q1 is “constrained by what we can supply.” Qualcomm's fiscal Q1 revenue guidance is $7.8 billion-$8.6 billion; the QCT segment guidance is $6.2 billion-$6.8 billion. The company estimated total Q4 handset shipments dropped 5% and forecasts high single-digit growth for fiscal Q1. Shares closed 12.8% higher Thursday at $145.41.