Qualcomm Sees ‘Much More Favorable’ Chips Supply Heading Into 2022

Qualcomm expects “material improvements” in semiconductor industry supply by calendar year-end, and “a much more favorable supply environment” in 2022, “due to planned capacity builds and multi-sourcing initiatives,” said President Cristiano Amon on a fiscal Q2 call Wednesday. He succeeds retiring CEO Steve Mollenkopf June 30. “As one of the leading drivers of advanced semiconductor technology platforms, we’re also excited to see more foundry investment in the United States,” consistent with the “strategic priorities” of the Joe Biden presidency, he said.

The company continues experiencing “unprecedented demand across all of our technologies and businesses,” as the pandemic environment “is accelerating the scale of connectivity and processing at the edge,” said Amon. “Despite the industrywide semiconductor supply shortage, we’re utilizing our scale and working across our entire global supply chain to maximize our ability to capture this opportunity.”

The “supply constraint” in semiconductors “is really across all product lines,” not “unique to one thing or the other” like smartphones, said Amon. “It’s a good position to be in that we actually have more demand than supply across all of our business,” because it “gives us confidence” about Qualcomm’s “growth position,” he said. By leveraging Qualcomm’s scale, “we have the ability to be supporting our suppliers’ capacity planning,” he said. “We can provide stability of demand and in turn get stability of capacity.” Qualcomm is one of the few companies with ability to do “multi-sourcing” of the leading semiconductor nodes, “and we have done a lot of that with our road map,” he said.

Chief Financial Officer Akash Palkhiwala said Qualcomm stands by its February forecast that the industry will ship 450 million to 550 million 5G handsets globally in calendar 2021. Qualcomm estimates the industry shipped 225 million 5G smartphones worldwide in calendar 2020. “Years of repressed refresh cycles with a boost from 5G” helped propel a 25.5% global increase in first-quarter smartphone shipments to 346 million handsets of all generations, reported IDC Wednesday.

Qualcomm’s latest-generation Snapdragon 888 5G mobile platform gained adoption in more than 40 smartphone models shipped or announced globally, said Amon. “We expect to see more than double this number come to market in the coming months from future product announcements,” he said. As 5G millimeter-wave technology expands more broadly throughout the world, “we expect significant expansion of our opportunity due to increased silicon content,” he said.

MmWave is commercially available in the U.S. and Japan, and “we also see a lot of investment in Korea as the next market,” said Amon. There also are “the initial signs” of mmWave adoption in Europe, where “auctions have completed in some states,” he said.

Qualcomm is “excited” about Chinese mmWave adoption, “just given the scale of the China market,” said Amon. “China Unicom and companies like ZTE are working to have a lot of millimeter-wave activity and coverage and services around the Winter Olympics, and we think that’s the beginning of starting to get more traction in China.” The breadth of Chinese adoption “will significantly change the dynamics of millimeter wave, getting it faster to more markets,” he said.

The company is well-situated as a supplier to premium-tier devices, and the “continued transition” of Huawei unit volume to other OEMs using Qualcomm solutions “have positioned us to grow faster in smartphones, while being able to capture the most significant portion of the revenue opportunity,” said Amon. Qualcomm sees a $10 billion addressable market revenue opportunity in its Huawei replacement business, he said: “If you look at a market such as mobile, which is mature, you don’t see that very often.”

Qualcomm’s licensing revenue in the quarter ended March 28 increased 51% from a year earlier to $1.6 billion. Its 5G patent portfolio has more than 130 5G license agreements signed to date, “with all major handset manufacturers around the globe licensed,” he said. “We continue to develop and patent new essential innovations for future releases of 5G, which we expect to have a longer lifecycle than prior generations due to its impact on multiple industries.”