Qualcomm Owns 75% Share of ‘Processor Volume’ in Galaxy S22, Says CEO

“Continued traction” with top smartphone OEMs Samsung, Xiaomi, Oppo, Vivo and Honor drove Qualcomm’s handset revenue 56% higher to $6.3 billion in fiscal Q2 ended March 27, said CEO Cristiano Amon on an earnings call Wednesday. The stock closed 9.7%% higher Thursday at $148.19.

Qualcomm now has about 75% share “of the premium tier processor volume for Samsung's Galaxy S22 smartphones, up from approximately 40% in the Galaxy S21,” said Amon. “We continue to see Snapdragon as probably synonymous” with premium and “high-tier” Android flagship phones, he said. “The design pipeline is very strong.”

Though the low-end handset market is “a little bit more soft” than the premium tier, “we're not that exposed to lower-tier units because of our strategy to be really focused on premium,” said Amon. “Content on the processor side has been the biggest driver” of higher average selling prices and gross margin in handsets, he said.

Qualcomm’s handset revenue is “on track” to surpass 50% growth in the fiscal year ending late September, despite the “seasonal reduction” sequentially that’s expected in fiscal Q3 ending late June, said Chief Financial Officer Akash Palkhiwala. The forecast assumes a “recovery” from the impact of COVID-19 lockdowns in China toward the end of the June quarter, he said. “Obviously, that's an evolving situation and we're going to continue to closely monitor it.”

For fiscal Q4 ending late September, “it's kind of the quarter where we start seeing the second inflection point of the year for us, where we have flagship launches late in the August, September time frame going into holiday season,” said Palkhiwala. “We still expect that to happen, and that's going to help our performance.”

Android demand “continues to be strong,” said Palkhiwala. “We have obviously significant demand visibility in terms of the information we're getting from all of our customers, even with reconciling their demand signal for the market changes. So we're pretty confident as we look forward.”

From a “content perspective,” as OEMs progress from one generation of their smartphones to the next, “the amount of computing that consumers are demanding keeps going up,” said the CFO. “That provides an opportunity for us, not just from a competitive differentiation perspective, but also additional content per phone,” he said. “Even if you look at one generation 5G phone to the next-generation 5G phone, because of the increase in content on the processor side, you're seeing the benefits show up in our numbers.”

The increasing amount of processing that's required in successive generations of smartphones, whether it's for the CPU, AI, camera, audio, video or security, “each of these vectors are being pushed hard in terms of performance and the competitive landscape between the OEMs,” said Palkhiwala. Consumers are “demanding that all these capabilities get added to the handset,” he said. That’s “helping us from a content increase perspective,” he said.

Qualcomm still thinks there’s further “opportunity to gain share, especially as supply improves,” said the CFO, when asked if the recent Samsung share gains are sustainable. Samsung “is actively advertising Snapdragon as an ingredient brand” with the Galaxy S22, said Amon. “I think that's a very significant data point,” he said. “We're very confident that Samsung relationship is going to continue to be an expanding relationship for us.”

UScellular, partnering with Qualcomm and Inseego, a smart device-to-cloud vendor, launched 5G millimeter-wave high-speed internet service in portions of 10 U.S. cities, said Qualcomm Friday. They plan to expand the fixed wireless access service to “dozens” of cities throughout 2022, they said. “With its massive capacity and quick deployment time compared to other wireline options, 5G mmWave is an affordable and accessible solution to expand broadband services to help bridge the digital divide,” said Qualcomm.