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Q'Comm reports dismal sales, smartphone decline to persist

Posted: 06 Nov 2015 ?? ?Print Version ?Bookmark and Share

Keywords:Qualcomm? smartphone? Samsung? OEM?

Qualcomm Inc. has predicted that the slow-down in smartphone growth will persist until next year, as China's OEMs will attain a dominating share of the market and the prices of chips going into handsets will continue to fall though less steeply than this year. Consequently, the company reported declining revenues and profits for its latest quarter and fiscal year.

The market dynamics hit Qualcomm especially hard for two reasons. It is still reeling from the loss of a design win in top-tier smartphones from Samsung, the market's second largest vendor. And it is still re-negotiating licensing deals with individual OEMs in China at lower rates agreed on with the China government.

Global sales of 3G and 4G phones will expand 7-13 per cent next year, down from 11-17 per cent last year, Qualcomm forecasted as part of its fiscal Q4 report. Growth will be higher at about 15-16 per cent among China's OEMs, it said. However it expects revenue growth at low single-digit per centages due to declining prices.

"We expect further declines [in average selling prices (ASPs) in 2016] but probably at half the rate we saw in 2015 for a lot of reasons including further concentration [of the market] in China OEMs and more evidence China's ASPs are increasing to come in line with non-China suppliers and that will continue," said Derek Aberle, Qualcomm's president.

3G/4G device shipment forecast

Qualcomm's forecast agrees with one from IDC that expects about ten per cent growth in smartphone sales in 2016.

Qualcomm reported revenues of $5.5 billion for the quarter, down 18 per cent from last year and six per cent from the prior quarter. Profits of $1.1 billion were down 44 per cent from a year ago and 10 per cent from the last quarter. For its fiscal year, Qualcomm reported $25.3 billion in sales, down five per cent from the prior year and $5.3 billion in profits down 34 per cent.

Despite the declines, the numbers were slightly ahead of the company's guidance to Wall Street. Seeing the storm ahead, the company announced in July a major restructuring, laying off 15 per cent of its workforce. It foresees its fiscal 2016 as a transitional year with return to revenue and profit growth starting next fall.

One of the bright lights for the company is its recently announced Snapdragon 820 processor for which it claims "60 broad-based design wins." However it could not say if one of those design wins is in Samsung's next-generation high-end smartphone that is second only to the Apple iPhone in sales.

Aberle characterised Qualcomm's relationship with Samsung as "getting stronger versus moving the other direction" on a variety of fronts including as a user of Samsung's foundry services.

In China, Qualcomm so far has signed deals with three large smartphone makers: Huawei, TCL and ZTE. But many more contracts are still in negotiations including ones with "fewer than a handful" of China OEMs who "in a negotiating tactic have stopped reporting sales and paying royalties," said Aberle

Qualcomm doesn't expect to get all its customers in China to agree to the new terms laid out with the government in 2016. "In the end we will get these agreements concluded, but we are taking a cautious approach because the timing remains uncertain," he added.

- Rick Merritt
??EE Times

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