- Qualcomm is extra optimistic concerning the international chip scarcity than lots of its semiconductor rivals.
- Qualcomm CEO Cristiano Amon says it is as a result of the corporate deliberate for shortages earlier this yr and was capable of finding a number of factories for 3 completely different components it sells.
- Qualcomm additionally mentioned that when smartphone makers cannot discover sufficient secondary components, they prioritize utilizing probably the most superior and most costly Qualcomm processors.
Qualcomm inventory rose greater than 12% on Thursday, sooner or later after it reported September quarter earnings that not solely beat what Wall Road anticipated, but in addition included bullish steerage for the December quarter.
A part of the explanation for the robust steerage is that Qualcomm, a number one semiconductor firm, is extra optimistic concerning the international chip scarcity than lots of its rivals. For instance, Apple says chip shortages will price it greater than $6 billion within the December quarter.
Qualcomm CEO Cristiano Amon mentioned on Wednesday that it anticipated its personal provide points to be materially higher by the top of December and the corporate can have sufficient provide to fulfill demand by the second half of subsequent yr.
That is earlier than predictions concerning the finish of world chip scarcity from Intel, which predicts that shortages will persist by way of 2023, and nearer to AMD’s forecast, which says that challenges associated to chip provide will persist till the second half of 2022.
“We had been cautious on Qualcomm forward of provide points however these are fading into the rear view now,” Goldman Sachs analyst Rod Corridor wrote in a observe on Wednesday.
Amon mentioned Qualcomm’s capability to extend chip income 56% throughout a world scarcity was the results of the corporate’s strikes from earlier this yr, and that new capability from suppliers that was deliberate months and years in the past is beginning to come on-line.
“Provide labored precisely as we deliberate,” Amon instructed CNBC on Thursday. “Scale helps, we addressed the difficulty early … we put capability plans in place and it is working precisely as we deliberate.”
Here is why Qualcomm was capable of navigate the continuing chip scarcity and why it is optimistic about subsequent yr.
A number of suppliers
Qualcomm’s greatest particular person line of enterprise is in systems-on-a-chip, or SoCs, that mix central processing with mobile connectivity, and are the costliest and most vital element in an Android smartphone. Almost each top-tier Android smartphone makes use of a Qualcomm Snapdragon chip.
Gross sales for handset chips grew 56% yearly within the September quarter, Amon mentioned.
These chips are made utilizing what is known as main node processes, or probably the most superior and capital intensive chip manufacturing strategies. Main node processes create smaller transistors, which might be packed tightly collectively, creating quicker chips that use much less energy and due to this fact extra fascinating smartphones.
It seems, Qualcomm is ready to manufacture its processors utilizing two completely different foundries, or chip factories. At the moment, Samsung and TSMC are working probably the most superior main node, referred to as 5-nanometer, so Qualcomm is shopping for from each.
“We’re one of many few corporations which have the flexibility to do multi-sourcing on the main node, and we’ve achieved quite a lot of that with our roadmap,” Amon mentioned in April.
That is compared to corporations like Apple, which depends on one provider — TSMC — for its personal SoCs.
On Wednesday, Amon credited double sourcing as a serious motive that it was capable of enhance chip gross sales, and mentioned that the corporate had three completely different components on sale that have been coming from two sources.
“We act early, we put quite a lot of issues in place, multi-sourcing, capability expansions, and we mentioned that we anticipate to see materials enchancment in our provide in the direction of the top of the calendar yr,” Amon mentioned Wednesday on a name with analysts.
Match points and shifting upmarket
Nevertheless, different executives have mentioned up to now month the primary subject is not with main node chips, however as an alternative on the less-advanced however nonetheless important chips, like show or energy chips.
Each Intel and AMD’s CEOs have referred to as this a “match set” subject, the place PC makers “could have the CPU, however you do not have the LCD, or you do not have the Wi-Fi,” as Intel CEO Pat Gelsinger mentioned in an interview final month.
Qualcomm provides extra smartphone makers than PC authentic gear producers, however it’s dealing with the identical points, mentioned Qualcomm CFO Akash Palkhiwala.
“We’re positively seeing some mismatch of components within the short-term at a few of our clients,” Palkhiwala mentioned. “However it is best to consider these as actually timing points.”
Qualcomm officers went on to say that when smartphone makers haven’t got sufficient components, they prioritize dearer fashions. Premium telephones use Qualcomm’s most superior processors, which price extra, and the corporate is ready to “allocate” its provide capability to prioritize extra worthwhile chips.
Unit gross sales of premium gadgets with probably the most superior Qualcomm chips elevated 21% within the September quarter, Qualcomm mentioned.
“We’re focusing actually on the premium and high-tier models, and so when our clients have provide mismatch, they really find yourself supplying the premium in high-tier gadgets,” Palkhiwala mentioned, saying that match points are usually not “a giant issue” for Qualcomm within the quick time period.
Qualcomm says it nonetheless has provide constraints, and that whereas the corporate would nonetheless “ship extra” if it might make extra, it sees the worldwide chip scarcity going based on its plans.
“We do have constraints actually across-the-board and it’s a must to work out how the demand would have performed out if there was provide throughout the trade,” Palkhiwala mentioned. “However we really feel fairly snug that the general provide image is taking part in out precisely as we had deliberate.”