Turnaround for Smartphone AP-SoC Market in 2024; TSMC to be Key Beneficiary of Node Transition, Premium Segment Growth

Growth: AP-SoC shipments will rebound 9% YoY in 2024 after two years of declines.
Driver: Advanced nodes will be the key driver in this growth due to the migration of Apple- and Qualcomm-powered flagships from 5/4nm to 3nm. TSMC will be the key foundry beneficiary in the long term.
Driver: 5/4nm offers support as OEMs switch to entry-level 5G from older nodes.
Outlook: MediaTek and Qualcomm will reap benefits from the 6/7-to-5/4 transition; Qualcomm will dominate through 2025.
Outlook: SMIC will gain some share in 6/7nm but advanced node challenges will persist.
Outlook: Key 3nm flagship transition likely to push H2 up. 2nm will be likely delayed till late 2026.

Taipei, Seoul, Hong Kong, Boston, New Delhi, London, Hong Kong – April 4, 2024

After two years of significant declines, the smartphone semiconductor market is likely to turn the corner, with 2024 smartphone AP-SoC shipments rebounding 9% YoY, according to Counterpoint Research’s latest Smartphone AP-SoC Long-term Shipment Forecast by Node and Foundry. The key driver of this growth will be the transition from 5/4nm chips to 3nm chips across flagships, as well as expected growth in premium and ultra-premium smartphones. TSMC will be the key foundry beneficiary here in the long term.

“With all the growth coming from the advanced nodes this is positive for TSMC through the long term” says Brady Wang, Associate Director for Counterpoint Research’s Foundry and Semiconductor 360 research services. “And with the surge in AI semiconductors the short term view looks even brighter.”

Supporting the growth of advanced nodes will be 5/4nm, which is set to become another long-term node as smartphone OEMs switch more of their portfolios to entry-level 5G, thanks to growth in emerging markets, growing consumer awareness, and rise in demand for 5G as a feature in line with expanding network coverage.

“For fabless, it is a given that both MediaTek and Qualcomm are going to be the big winners in the 4G-to-5G transition,” said Parv Sharma, Senior Analyst at Counterpoint’s Semiconductor 360 research service. “It is a good opportunity for MediaTek to capitalize on its leading-edge sweet spot, but we still see Qualcomm dominating through 2025 when it will have almost 50% share of the 5/4nm segment.”

SMIC will see increasing relevance in 7/6nm but will likely face challenges in any shift towards more advanced nodes as DUV equipment bans slow progress.

2nm continues to be elusive but will likely emerge in 2026 with the arrival of Apple’s iPhone 18 series.

*Note: We have updated the last sentence of this PR to reflect 2nm will likely emerge in 2026 with the arrival of Apple’s iPhone 18 series; it was originally stated as the ‘iPhone 19 series’.

Background

Counterpoint Technology Market Research is a global research firm specializing in products in the TMT (technology, media and telecom) industry. It services major technology and financial firms with a mix of monthly reports, customized projects and detailed analyses of the mobile and technology markets. Its key analysts are seasoned experts in the high-tech industry.

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press(at)counterpointresearch.com

Global Smartphone AP-SoC Market Share: Quarterly

Our quarterly data for global smartphone chipsets market share. This data is based on smartphone AP/SoC shipment numbers.

Counterpoint Quarterly

SEMICONDUCTORS Q1 2024

Global Smartphone AP (Application Processor) Shipments Market Share: Q3 2022 to Q4 2023

Published Date: Mar 11, 2024

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Brands	Q3 2022	Q4 2022	Q1 2023	Q2 2023	Q3 2023	Q4 2023
MediaTek	35%	33%	33%	31%	38%	36%
Qualcomm	32%	19%	27%	29%	26%	23%
Apple	16%	28%	26%	19%	17%	20%
UNISOC	9%	11%	8%	15%	12%	13%
Samsung	8%	8%	4%	6%	5%	5%
HiSilicon (Huawei)	0%	0%	0%	0%	1%	1%
Others	1%	1%	1%	1%	1%	1%

Source: Global Smartphone AP-SoC Shipments & Forecast Tracker by Model – Q4 2023

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Highlights:

• Apple: Apple’s shipments grew in Q4 2023 due to the launch of the iPhone 15 and iPhone 15 Pro series.

• MediaTek: MediaTek had a strong Q4 with inventory restocking by smartphone OEMs. Growing demand for 5G and 4G SoCs and the successful ramp-up of the company’s third-generation flagship SoC, Dimensity 9300, contributed to the growth.

• Qualcomm: Qualcomm’s shipments increased in Q4 2023 due to restocking and design wins for flagship chipsets Snapdragon 8 Gen 3 and 8 Gen 2 from Chinese smartphone OEMs.

• Samsung: Samsung’s shipments slightly increased in Q4 2023 due to the launch of Exynos 2400 with the Galaxy S24. The Samsung Galaxy M14 series’ launch with Exynos 1330 and the Galaxy A54 series’ launch with Exynos 1380 have added volumes to the overall Samsung numbers.

• UNISOC: UNISOC’s shipments increased in Q4 2023. We are expecting UNISOC to gain traction in the entry-level 5G segment in H2 2024 after recent management changes and a greater focus on the 5G market.

Q4 2023

Global Smartphone AP/SoC Shipment and Forecast Tracker

NEW REPORT

The global smartphone AP market share numbers are from:

Global Smartphone AP-SOC Shipment & Forecast Tracker by Model – Q4 2023

Excel File

Published Date: March 2024

This report tracks the smartphone AP/SoC Shipments by Model for all the vendors. The scope of this report is from the AP/SoC shipments from all the key vendors like Apple, Qualcomm, MediaTek, Huawei, Samsung, UNISOC and JLQ. We have covered all the main models starting from Q1 2020 to Q4 2023. We have also included a one-quarter forecast for Q1E 2024. This report will help you to understand the AP/SoC Market from the shipment perspective.

Qualcomm Posts Higher Than Guided Q4 Revenues Driven by Smartphones, Automotive

Handset revenues were driven by flagship chipsets and Chinese OEMs’ growth.
IoT inventory levels were still high. They are expected to normalize by Q2 2024.
Auto continued to gain momentum with silicon design wins and a lengthening pipeline.
Multiple key licenses got extensions, including with Apple, Samsung and Chinese smartphone OEMs.

Driven by the handset and automotive segments, Qualcomm’s revenues grew 5% annually and 15% sequentially in Q4 2023, above the high end of the guidance. Handset revenues were driven by flagship chipsets Snapdragon 8 Gen 3 and 8 Gen 2’s design wins and demand from Chinese smartphone OEMs. The automotive segment was driven by increased content in new vehicles along with smartphone digital platforms. Overall, the inventory came down to normal levels with the demand from smartphones coming back on track. IoT inventory levels were still high in the industrial and edge networking segments, with some stabilization on the consumer side. Qualcomm expects the IoT inventory to normalize by Q2 2024.

Device AI adoption at edge

CEO Cristiano Amon: “It’s not only unique to the Galaxy S24 that has a number of use cases running GenAI on the device. But we’ll also see that happening with some of our other customers from China launching a number of models. So, I think we have a large number now of models being ported into our hardware for gen AI. I think we’re starting to see the beginning of new use cases. Reviews have been positive, and we are happy with we’ve seen the results following the launch.”
Tarun Pathak’s analyst take: The share of Generative AI (GenAI) smartphones in the overall smartphone market will be in single digits in 2023. But those numbers will not accurately reflect the amount of excitement and marketing hyperbole we are expecting to see. We expect GenAI smartphones to hit an inflection point in 2026 as the devices permeate through the broader price segments. The coming year will be pivotal for GenAI smartphones with preliminary data projecting their shipments to reach over 100 million units in 2024, according to an upcoming report, ‘GenAI Smartphone Shipments and Insights’, from Counterpoint Research’s Smartphone 360 Service. By 2027, we expect GenAI smartphone shipments to reach 522 million units, growing at a CAGR of 83%.

Outlook for Smartphones in 2024

CFO Akash Palkhiwala: “We entered fiscal ’24, our view was that Android channel inventory had largely normalized. And so as we go through the year, we typically see normal build bleed cycle around handset launches.

So, that’s kind of the phase we are in from our perspective. In the first quarter, what we saw was higher demand due to the acceleration of Android flagship launches with our new chip, Snapdragon 8 Gen 3. And we saw very strong demand across all the major Android OEMs. And so happy, of course, with that traction and that momentum carries over to the second quarter as well.”

Parv Sharma’s analyst take: We are assuming Android volumes will recover somewhat, as excess inventory in finished goods, which was a drag on the market throughout 2023, allowing an inflow of new models. However, we also expect some new inventories to be built in 2024 as competitive forces (Huawei resurgence) and uncertain demand (China and Europe weakness) continue to hamper demand forecasting at OEMs. We forecast smartphone AP/SoC shipments to grow in the low single digits in 2024.

Weakness in IoT and outlook

CFO: “From an IoT inventory perspective, what we have seen is stabilization really on the consumer side. As you know, we were one of the first to call out the weakness in IoT, and now we’re seeing it go through both on the industrial and the edge networking side. And consistent with our previous comments, we think the first quarter was the bottom for our IoT revenue stream. We’re guiding second quarter up mid- to high single digits. Second half of the fiscal year, as we see the inventory channel kind of normalizing and end markets kind of benefiting from that, we’re excited about what our product portfolio can bring.”

Anish Khajuria’s analyst take: Global cellular IoT module shipments are projected to decline by 5% YoY in 2023. However, the demand is expected to revive by the second half of 2024, with substantial growth predicted for 2025, coinciding with the mass adoption of 5G and 5G RedCap. In the long term, the cellular IoT module market holds promise and applications such as smart meter, router/CPE, POS, automotive and asset tracking will be driving most of the growth for this market.

Result summary

Growth in revenues: Qualcomm’s revenues grew 5% annually and 15% sequentially in Q4 2023, driven by the handset and automotive segments.
Flagship Android AP/SoCs drive growth: Handset revenues grew 16% annually and 23% sequentially in Q4 2023 driven by flagship chipsets Snapdragon 8 Gen 3 and 8 Gen 2’s design wins and demand from Chinese smartphone OEMs.
Automotive continues to drive growth: The company’s automotive segment was driven by increased content in new vehicles along with smartphone digital platforms. In 2023, 75 new models were launched commercially with Qualcomm’s Digital Chassis platforms. Further, on-device AI will enable more silicon content gains in ADAS and cockpit solutions.
IoT to come back to growth: IoT revenues declined 32% annually and 18% sequentially due to weakness in demand from elevated inventory levels in the channel. Industrial and edge continued to be weak with some demand coming back in consumer IoT. Qualcomm guided that growth would come back in mid-2024.
Seasonal decline: Qualcomm guided a sequential decline in Q1 2024 revenues due to seasonality. Android revenues will be flat, IoT revenues will grow in mid-to-high single digits, and auto revenues will decline.
Inventory levels: Smartphones are now at normal inventory levels, while the IoT inventory is expected to normalize by Q2 2024.
Extension for key licenses: Apple is extending its license for baseband modems by two years to March 2027, while long-term agreements with Chinese smartphone OEMs are being renewed. A multi-year agreement with Samsung has fetched a third extension. These highlight the importance of Qualcomm’s core IP and product leadership.
Snapdragon Elite X launching in 2024: For PCs, the Snapdragon Elite X will launch in mid-2024. It offers new GenAI features and better performance and battery life for Windows-based PCs.

MediaTek Delivers Strong Q4 2023 Performance as Smartphone Market Recovers

Mobile segment fueled by strong demand for 5G and 4G SoCs.
Inventory down to a healthy level during the quarter.
We expect revenue growth in the flagship segment in 2024.
On-device Gen AI set to be adopted across multiple applications like Auto, HPC and Edge computing.
Enterprise ASIC projects to start production in late 2025, with revenue contribution expanding in 2026.

MediaTek’s revenue jumped 17% QoQ and 18% YoY in Q4 2023, largely driven by a recovery in the global smartphone market and the successful ramp up of the brand’s flagship SoC, the Dimensity 9300. The mobile segment experienced exceptional annual and sequential growth due to high demand for 5G and 4G SoCs. On-device gen AI is driving smartphone upgrade demand among flagship and high-end smartphones. Gen AI is also making its way into computing devices, specifically tablets. The Dimensity 9300, which has impressive generative AI capabilities, has been adopted by many tablet manufacturers for their flagship models.

Customer and channel-level inventory lowered to a healthy level

CEO Rick Tsai: “The inventory level right now is very healthy. Maybe at the end of Q4 2023, a bit too healthy. And you’re right that we are…Actually, in some cases, we are rushing our manufactured partners for shipments to us. Saying all that, our goal, of course, is to maintain a stable inventory. I think we have learned our lessons.”

Shivani Parashar’s analyst take: “In Q4 2023, MediaTek successfully lowered its high inventory levels to a more normalized state, with stable customer and channel inventory. According to our supply chain checks, MediaTek’s channel-level inventory is currently at a normal level. Smartphone OEMs have started restocking their inventory, but they remain cautious. The macroeconomic conditions in the US and China have somewhat stabilized, with a moderate increase in demand. For Q1 2024, MediaTek anticipates strong YoY revenue growth, reflecting a more normalized inventory situation.”

On ARM

CEO: “We work with them on our modem, but we build our partnership with them. And I cannot say whether they will succeed or not for Xiaomi, but we do know OPPO met difficulties for sure… in many ways, I think that makes OPPO now even a stronger partner with us and vice versa. Still for ARM, we understand ARM is a business objectives and the business model and the — and but if you look around the industry, MediaTek is one of the very, very few to AP really advanced AP supplier with track record. And I think it’s important, maybe even imperative that we work together as an ecosystem partner in the market share together.”

Parv Sharma’s analyst take: “It is not easy to develop chipsets. We have seen consolidation in the industry and many players have also quit the development of in-house chipsets. Building modems is another ball game as it requires IP and expertise. MediaTek has benefited from OEMs canceling their in-house development as these OEMs are now more reliant on chipset vendors. We have also seen MediaTek taking a collaborative approach by partnering with smartphone players to tweak chipsets for their smartphones.”

CEO: “I think the growth picture remains still a little uncertain. First quarter, obviously, we know well and we are having, I would say, a strong YoY growth. And we all know, one of the major driver was the restocking. However, also, I would say, our SoS, the flagship SoC for the mobile applications is also contributing a great deal to our growth. My expectation is for our flagship SoC’s growth to continue into the year the restocking momentum remains to be seen somewhat.”

Shivani Parashar’s analyst take: “

“In 2024, we expect Android volumes to recover due to the normalization of excess finished goods inventory which weighed on the market throughout 2023. This normalization is expected to pave the way for an influx of new models. We anticipate MediaTek gaining volume as the low- and mid-market rebounds. However, we foresee increased competition in the entry-level 5G segment from Qualcomm and UNISOC. For MediaTek, 5G penetration is expected to rise more than other brands, considering its current greater dependence on LTE chipsets. Additionally, we expect revenue growth in the flagship segment in 2024.”

Result summary

Growth in revenues: MediaTek’s Q4 2023 revenue rose 17% QoQ and 18% annually to reach $4.1 billion, mainly due to recovery in the smartphone market.
The mobile segment witnessed robust growth in revenue: The mobile segment revenue climbed 45% YoY and increased by 53% QoQ in Q4 2023 to account for 64% of the company’s total revenue. Growing demand for 5G and 4G SoCs and the successful ramp up of the company’s third-generation flagship SoC, the Dimensity 9300, contributed to this growth.
New opportunities for smart edge: The smart edge segment accounted for 30% of the company’s revenue in down 20% QoQ. The decrease was mainly due to a reduction in orders from TV customers because of the pre-built inventory in H1 2023. 5G modems, automotive and ASIC categories continue to grow in Q1 2024.
Power IC: The Power IC segment accounted for 6% of the company’s total revenue, up 18% YoY and flat QoQ in Q4 2023. Data centers and Power IC witnessed strong growth while broad-based consumer electronics revenue was flattish.
Favorable guidance: MediaTek guided flat/slightly declining revenue for Q1 2024, ranging between $3.9 billion and $4.2 billion. Gross margin is expected to be around 47% in Q1 2024 while the operating expense ratio is expected to be around 28%. In Q1 2024, mobile segment revenue is expected to marginally decline following robust demand for restocking in Q4 2023. The smart edge segment will remain flat due to seasonality while the Power IC segment will decline due to seasonality and product transitions.
Auto pipeline remains unchanged: In the automotive segment, in addition to the generative AI possibilities inside vehicles, the Dimensity Auto platform is consistently gaining popularity globally. MediaTek expects e-cockpit, 5G telematics and power IC, combined with NVIDIA’s ADAS and software to position the company as a robust strategic partner for car manufacturers worldwide.
Inventory turnover: MediaTek’s inventory declined to a healthy level in Q4 2023. The brand expects the overall inventory environment to continue to improve in the coming quarters.

Infographic: Q3 2023 | Semiconductors, Foundry Share and Smartphone AP Share

Infographic: Semiconductors Top 7 in Q3 2023

Nvidia took the #1 spot in terms of global semiconductor revenue at the expense of Intel, which largely benefitted from its booming data center business. Nvidia is expected to continue its dominance in semiconductor revenue performance in the coming quarters due to solid AI server demand from tech giants. Intel reported QoQ revenue growth thanks to incremental PC orders. Samsung remained #3 in the quarter with QoQ growth coming from continuous recovery in its memory business. SK Hynix also benefited from this trend and reported sequential revenue growth.

* Qualcomm revenue excludes QTL
** Excludes pure-play foundries like TSMC to avoid double-counting of industry revenue
*** Excludes Apple and Huawei developments for in-house semiconductor chip designs

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Infographic: Global Smartphone AP Share in Q3 2023

Global Smartphone AP Share by Shipments

MediaTek dominated the smartphone SoC market in Q3 2023 with a share of 33%. MediaTek’s shipments increased in Q3 2023 as the inventory levels came down. New smartphone launches in the low- and mid-end segments have increased the shipments in the Dimensity 7000 series. MediaTek also refreshed the Dimensity 9300 with Gen AI capabilities. Qualcomm captured a 28% share during the quarter. Qualcomm’s shipments increased sequentially in Q3 2023 due to the high shipments for the Snapdragon 695 and Snapdragon 8 Gen 2 chipsets. Also, key design wins for the Snapdragon 8 Gen 2 in the Samsung Galaxy Fold/Flip series contributed to this growth.

Global Smartphone AP Share by Revenue

Qualcomm dominated the AP market in Q3 2023 with a 40% revenue share. The premium segment drove the brand’s growth due to the adoption of Snapdragon 8 Gen 2 in Samsung’s flagship smartphones and by Chinese OEMs. Apple had a 31% share in the AP SoC market in Q3 2023 in terms of revenue. Apple’s share increased by 23% QoQ due to the launch of the iPhone 15 and iPhone 15 Pro series. MediaTek captured the third position with a share of 15% in the total global smartphone AP/SoC revenues. MediaTek’s revenue increased QoQ in Q3 2023 as the inventory levels came down while the competition in the entry-level 5G segment continued to grow.

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Infographic: Foundry Revenue Share in Q3 2023

Foundry Companies’ Share by Revenue

In Q3 2023, the global foundry industry witnessed a clear hierarchy in market share. TSMC dominated the landscape with an impressive 59% market share driven by N3 ramp-up and smartphone restocking demand. At the second position was Samsung Foundry with a 13% share. UMC, GlobalFoundries and SMIC had similar market shares with each contributing around 6%. TSMC’s significant lead underscored its technological prowess and market leadership, setting the tone for the industry’s trajectory in Q3 2023. However, some mature node foundries such as UMC started to face headwinds in Q3 2023 due to muted LDDIC and PMIC demand.

Foundry Industry Share by Technology Node

In Q3 2023, the market was prominently led by the 5/4nm segment, which had a 23% share. This dominance resulted from strong demand, particularly from AI and iPhone. The 7/6nm segment’s market share remained steady, showing early signs of order recovery in the smartphone market. On the other hand, the 28/22nm segment encountered challenges due to inventory corrections in networking applications, while the 65/55nm segment experienced a downturn due to decreasing demand in automotive applications.

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MediaTek Strengthens Premium Push With Gen AI Capabilities

The Dimensity 9300 is integrated with the 7th-gen APU 790 processor, which supports a broad generative AI ecosystem and models including Meta Llama 2, Baidu ERNIE 3.5 SE and Baichuan 2.
It can run with 13 billion parameters, which are scalable up to 33 billion, on-device at a processing speed of up to 20 tokens per second.
The Dimensity 9300 will debut with the vivo X100 smartphone in mid-November

MediaTek recently launched its third-generation premium chipset Dimensity 9300. The company has emerged as a strong competitor in the premium smartphone chipset market after launching the Dimensity 9000 in Q1 2022. Currently, MediaTek leads the low-mid segment and drives significant volumes both for 4G and 5G in this tier.
Adopting a non-traditional CPU core design, the Dimensity 9300 focuses on raw performance. It has four large cores (Cortex-X4) and four performance cores (Cortex-A720 cores), thus enabling it to excel in raw computing power and advanced AI capabilities.

Dimensity 9300 key specifications

Like the last two generations, the Dimensity 9300 SoC is built on a TSMC 4nm process node. It is more efficient and performs better than the Dimensity 9200. There is a 40% improvement in the multi-core performance and a 15% improvement in the single-core performance. The Dimensity 9300 combines an octa-core CPU with the company’s second-generation hardware raytracing engine, enabling smartphones to achieve console-level global illumination effects at a smooth 60 FPS. Besides, the chipset supports seamless multitasking, allowing users to simultaneously play games and stream videos or watch a video while gaming.

Four ARM Cortex-X4 CPU. Prime core clocked at up to 3.25GHz
Four ARM Cortex-A720 CPU clocked at up to 2.0GHz

7th-gen APU 790 processor

The chip is equipped with MediaTek’s next-generation APU 790 processor, which reduces power consumption by 45% while improving performance. Its processing speed is eight times that of the APU 690. It also offers significant improvements in generative AI performance and energy efficiency for edge computing. The APU 790 is specifically designed for generative AI tasks, marking a substantial upgrade over its predecessor. It accelerates processing through the Transformer model and supports image generation within one second using Stable Diffusion. The APU 790 also supports large language models with up to 33 billion parameters. MediaTek has also implemented mixed-precision INT4 quantization technology and NeuroPilot memory hardware compression to optimize memory usage for large AI models.

The Dimensity 9300 has a strong AI generative ecosystem, which supports language models like Llama 2, Baichuan 2 and Baidu AI LLM. It helps developers to efficiently deploy multi-modal generative AI applications for users.

Immortalis-G720 GPU

With the integration of ARM’s latest GPU, the Immortalis-G720, the Dimensity 9300 offers almost a 46% boost in GPU performance and 40% power reduction compared to the Dimensity 9200.

The Dimensity 9300 chipset supports the new Ultra HDR format in Android 14, improving mobile photography with vibrant images and compatible JPEG files. It also offers ambient light adaptive HDR recovery technology for enhanced photography. It supports 100% pixel-level autofocus, dual lossless zoom and 3-microphone HDR audio recording.

The chipset’s display system is equipped with the MiraVision Picture Quality (PQ) engine which dynamically adjusts the contrast, sharpness and color of primary objects, resulting in lifelike video experiences similar to high-end TVs. It uses on-device AI to detect primary objects and background images in real time.

Enhanced connectivity

The Dimensity 9300 offers Wi-Fi 7 speeds up to 6.5 Gbps and improved long-range connectivity with Xtra Range 2.0 Technology. It also enhances smartphone tethering speeds by up to three times using Multi-Link Hotspot technology. The Dimensity 9300 also supports up to three Bluetooth antennas and features dual Bluetooth flash connection technology for an ultra-low latency Bluetooth audio experience.

DRAM support and security

The Dimensity 9300 is the first SoC that supports the LPDDR5T up to 9600 Mbps. Also, it integrates two SUPs, one for boot security and one for computing security.

Dimensity 9300 vs Snapdragon 8 Gen 3

In terms of specifications, the Dimensity 9300 uses all big core architecture 4 prime cores (Cortex-X4) and 4 big cores (Cortex-A720), whereas the Snapdragon 8 Gen 3 uses one prime (Cortex-X4), five big (Cortex-A720) and two small cores (Cortex-A520). MediaTek with its all-big core design is addressing generative AI and gaming applications. On paper, the Dimensity 9300’s AI performance is competitive. The Dimensity 9300 supports large language models that can run with 13 billion parameters, whereas the Snapdragon 8 Gen 3 can run with 10 billion parameters on-device.

The fact that MediaTek now offers performance and efficiency gains that are comparable to Qualcomm’s latest-generation flagship offerings, shows MediaTek wants to directly compete with Qualcomm in the premium segment. Overall, this is going to be a win-win for the industry, as it will raise the bar and, in turn, benefit the end users.

Expected timeline

The vivo X100 will be the first smartphone to carry the Dimensity 9300 chipset. It will be available in the market by the end of 2023. We expect that the Dimensity 9300 will have better adoption among Chinese OEMs compared to the Dimensity 9200. China will be the first target market for smartphones with the Dimensity 9300, followed by India, SEA and Europe.

Qualcomm Guides Recovery in Handset Market, Channel Inventory Improving

Total revenues declined by 24% annually in Q3 2023 to reach $8.6 billion. The revenues slightly increased sequentially due to the recovery in the smartphone market and improving channel inventory.
The company’s handsets business captured revenues of $5.5 billion, declining 27% annually but growing 4% sequentially.
Overall, we expect the premium handset market to drive revenues for Qualcomm while focusing on mixed shifts toward the low- to mid-end 5G market will drive further growth.

Qualcomm’s total revenue in Q3 2023 declined 24% YoY to reach $8.6 billion. However, the revenue increased slightly QoQ due to recovery in the smartphone market and improving channel inventory. The company’s handset-related business grew 4% sequentially on recovering Android demand.

During the earnings call, Qualcomm CEO Cristiano Renno Amon discussed the company’s performance and outlook on key areas like ARM PC and Huawei comeback.

ARM-based PC opportunity

CEO Cristiano Renno Amon: “…I think Snapdragon X Elite represents the results of this Microsoft-Qualcomm collaboration… if you look at the announcements of other computing companies talking about having an ARM-based PC processor, that is validation that that’s our TAM now. It is going to be part of the expansion of TAM for Qualcomm. We are a new player, and we look at this as a growth opportunity. We are excited about it.”

Analyst take: The AI PC market is witnessing a surge, underpinned by Intel and Qualcomm’s new PC CPU platform, which is just around the corner. These AI-enabled PCs will likely be available around mid-2024. We expect AI PCs to have an over 50% 10-year CAGR from 2020, and after 2026, they will dominate the PC market. Intel, Qualcomm and other PC CPU makers are working closely with PC OEMs for the next-generation mainstream models, marking a new chapter for the PC industry.

Outlook and headwinds

CEO Cristiano Renno Amon: “…as we indicated in the last earnings call, …we don’t have any more projection of selling our 4G… SoCs to Huawei. And going forward, we do not expect (it) to have any significance – it’s going to be a very small contribution from Huawei. I think the more interesting answer to your question, and that’s the reason I provide the 35% data point (QCT handset forecast includes sequential revenue growth of greater than 35% from Chinese OEMs), is as Huawei launched the device, what we are seeing from our customers is …growth… on the Android side. We see a mixed improvement of our customers, moving towards flagship, and it’s kind of reflected in our numbers. So it does not change the trajectory that we have with our Android customers in China. And there is a possibility that Huawei is upgrading its existing customer base. There was a data point – there are about 100 million Huawei former customers with a 4- to 5-year-old Huawei phone, and that could have an impact on increasing the TAM.”

Analyst take: Qualcomm did not consider any material revenues from Huawei due to Huawei’s in-house chipset adoption. Huawei’s aggressive comeback will increase competition in the Chinese market and affect the overall 5G TAM. However, sequential revenue growth from Chinese OEMs and increased silicon content because of AI adoption will have a positive impact on the blended ASP and units.

CEO Cristiano Renno Amon: “…in fiscal ’23 that just ended, we had a share increase both globally and in China of sell-through. And we like, I think, the direction that we have been going …as we said, we will continue to retain a majority share at Samsung. We feel good about that relationship going forward. And we have seen traction from premium and high-tier Chinese OEMs. This is in spite of the launch of and the successful initial sales of a newcomer. And that’s kind of also reflected in the sequential 35% growth.”

Analyst take: With the launch of the Exynos 2400, Samsung may adopt an in-house chipset in its Galaxy S series. However, Qualcomm has highlighted it will have the majority share in the Samsung flagship. Based on our smartphone sell-through tracker, Qualcomm leads the Chinese market and has increased its share in the past few quarters. Overall, we expect the premium market to drive revenues for Qualcomm while focusing on mixed shifts toward the low- to mid-end 5G market will drive further growth.

Results summary

Signs of recovery: Total revenues declined by 24% annually in Q3 2023 to reach $8.6 billion. The revenues slightly increased sequentially due to the recovery in the smartphone market and improving channel inventory.
Handset revenues increased sequentially: The company’s handsets business captured revenues of $5.5 billion, declining 27% annually. The segment grew 4% sequentially due to the early stages of recovery in Android demand.
IoT revenues decline: IoT revenues were recorded at $1.4 billion, declining 7% sequentially due to the weak demand from industrial IoT customers and inventory drawdown.
Auto revenues: Auto revenues in Q3 2023 grew 23% sequentially to reach $535 million. The company has expanded its auto platform by entering two-wheelers and having design wins with Gogoro, Harley-Davidson and others. Qualcomm has also entered into a strategic partnership with AWS to integrate cloud and AI into vehicle development.
Agreement with Apple: Apple and Qualcomm have reached an agreement to supply Snapdragon 5G Modem-RF systems for smartphone launches in 2024, 2025 and 2026, reinforcing their ongoing relationship. The iPhone model launched in 2026 will have a 20% Qualcomm baseband share.
Inventory turnover: Inventory levels are coming down to a normal level. We expect the overall inventory environment to reach normal levels by the end of Q1 2024.
Positive outlook for Q4 due to seasonality: For Q4 2023, Qualcomm guided revenues to be between $9.1 billion and $9.9 billion, growing 5%-15% sequentially. The company forecasted a sequential double-digit growth in handset revenues in Q4 2023, driven by launches in the premium segment and seasonality.

Infographic: Q2 2023 | Semiconductors, Foundry Share and Smartphone AP Share

Infographic: Semiconductors Top 7 in Q2 2023

Intel maintained #1 place in Q2 2023 amid memory market slow down, which dragged down major memory players performance such as Samsung, SK Hynix and Micron. In addition, Nvidia took over the second place from Samsung due to the revenue booming on its data center business supported by strong AI server demand. Nvidia expects to see another wave of revenue growth in the upcoming quarter which could make its revenue expand again. Qualcomm’s revenue was capped by looming handset revenue and thus ranked #4 in the quarter. Broadcom and AMD’s revenues were relative resilient amid demand uncertainty.

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Infographic: Global Smartphone AP Share in Q2 2023

Global Smartphone AP Market Share by Shipments

MediaTek dominated the smartphone SoC market with a share of 30% in Q2 2023. MediaTek’s shipments slightly increased in Q2 2023 as the inventory levels came down and the competition is growing in the entry level 5G. New smartphone launches in the low and mid-end segments have increased the shipments in Dimensity 6000, Dimensity 7000 series. Qualcomm captured a 29% share in the quarter. Qualcomm shipments increased by 14.5% sequentially in Q2 2023 due to the high shipment for flagship chipset Snapdragon 8 Gen 2. Also, Key design wins for the Snapdragon 600 and 400 series have also contributed to the growth of Qualcomm’s shipment in Q2 2023.

Global Smartphone AP Market Share by Revenue

Qualcomm dominated the AP market in Q2 2023 with a 40% revenue share. This growth is coming from the premium segment due to the adoption of snapdragon 8 gen 2 in Samsung flagship smartphones and Chinese OEMs. The launch of the Samsung Flip and Fold series has also contributed to this growth. Apple had a 33% share in the AP SoC market in Q2 2023 in terms of revenue. Apple’s share declined by 24% QoQ due to seasonality. The iPhone Pro series is doing better. MediaTek captured the third position with a share of 16% in the total global smartphone AP/SoC revenues. MediaTek revenue remained flat in Q2 2023 due to the weak demand and slow China market.

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Infographic: Foundry Revenue Share in Q2 2023

Foundry Companies’ Share by Revenue

TSMC maintained its leadership in the foundry market with a stable 59% market share in Q2 2023. In contrast, Samsung Foundry’s market share dipped by nearly 1% to 11%, primarily due to ongoing smartphone inventory adjustments and the loss of smartphone AP SoC orders from a US client. On the other hand, UMC saw an increase in market share, driven by the continued strength of DDICs and automotive applications in Q2 2023.

Foundry Industry Share by Technology Node

In Q2 2023, the 5/4nm segment continued to dominate the market, holding a significant 21% market share. This strength was driven by robust demand, particularly in the field of AI, with key customers like Nvidia and Broadcom fueling this momentum. In contrast, the 7/6nm segment experienced weakness due to a slower-than-expected recovery in the smartphone market. On the other hand, the 28/22nm segment remained robust, as demand for primary applications, including DDIC and automotive-related applications, remained strong throughout Q2 2023.

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STMicro Beats Q1 2023 Earnings Expectations Despite Chip Shortages

STMicro expects 2023 revenue of $17.0 billion-$17.8 billion, representing a 5%-10% growth over 2022.
Silicon carbide (SiC) substrate manufacturing facility in Catania will fulfill the continuing demand as Silicon Carbide (SiC) in EVs is growing substantially.
In 2023, revenue from SiC is expected to be around $1.2 billion, with a significant portion of its substrates internally sourced by 2024.

STMicro’s Q1 2023 net revenue rose 19.8% YoY to reach $4.25 billion, primarily driven by strong demand from the automotive and industrial segments and partially offset by lower revenue in personal electronics. Revenue from factory automation, robotics and building control grew while new orders normalized. STMicro will have a significant portion of its substrates internally sourced by 2024 as it continues to ramp up silicon carbide front-end device production in its Singapore facility. The company’s gross margin improved to 300bps YoY and 220 bps QoQ in Q1 2023 driven by favorable pricing and improved product mix, net of hedging, but was partially offset by an increase in manufacturing input costs.

Automotive: The automotive sector has maintained its momentum helped by a surge in EV adoption and semiconductor integration. STMicro has secured multiple design contracts for SiC, silicon MOSFETs, onboard charging MCUs and zonal controller solutions from several electric vehicle manufacturers. STMicro won several design contracts in vehicle dynamics, airbags and anti-theft applications, as well as SPC5 microcontrollers for vehicle body control in the legacy automotive sector. The legacy automotive sector remains dynamic for now, as silicon integration continues to grow.

Industrial: The industrial segment experienced a surge in demand, driven by the digitalization of devices and the need for improved power and energy efficiency. STMicro secured several design contracts in the industrial sector, offering system solutions that consist of power discrete, power management and STM32 microcontrollers for use in renewable energy applications, multi-product solutions for smart meters, smart grid applications, intelligent power switches, motor drivers, industrial sensors and secure solutions for applications such as industrial automation, asset tracking and server power supplies. STMicro has also introduced the MCU Edge-AI Developer Cloud which includes an online benchmarking service for Edge-AI models on STM32 boards.

Personal Electronics: STMicro’s products, such as NFC controllers, secure elements, wireless charging, MEMS sensors and time-of-flight sensors have been chosen by leading smartphone and wearable device manufacturers. In the communications and computer equipment sector, STMicro has secured several design contracts for LEO satellites, as well as for computer peripherals including secure solutions, time-of-flight sensors, microcontrollers and ASICs for communications infrastructure.

Segment Revenue

Automotive and Discrete (ADG): Q1 2023 revenue of $1,807 million, up 43.9% YoY in both automotive and power discrete segments.
Analog, MEMS & Sensors (AMS): Q1 2023 revenue was $1,068 million, with a marginal decrease of 0.9% YoY in analog, MEMS and imaging segments.
Microcontrollers & Digital ICs (MDG): Q1 2023 revenue was $1,368 million, increasing 13.2% year-on-year growth in both microcontrollers and RF communications segments.

Forecast: Net revenue for Q2 2023 is projected to be around $4.28 billion indicating a 0.8% QoQ increase, with a possible deviation of 350 basis points. Moreover, the projected revenue for FY2023 is expected to be $17.0 billion-$17.8 billion, reflecting 5%-10% YoY growth, primarily driven by the automotive and industrial sectors.

Demand and Supply: The high demand for the automotive, industrial power and energy sectors persisted in Q1 2023, propelled by the continued integration of semiconductors and the normalization of orders from the factory and automation sectors. However, at the end of Q1 2023, inventory was at $2.87 billion compared with $2.15 billion in the year-ago quarter. The days of sales in inventory at the end of the quarter were 122, compared with 104 days in Q1 2022. The automotive segment witnessed a surge in demand across all regions, primarily due to the growing use of semiconductors and inventory replenishment. The backlog has now extended to about six quarters at the mid-point of 2023 which is higher than usual but remains consistent with the diverse end-market segments.

Capex and Investment: Capex stood at $1.09 billion in Q1 2023, up from $840 million in the year-ago quarter. The company plans to invest about $4.0 billion with 80% of the investment directed towards the expansion of the 300mm wafer production and the continued ramp up of SiC front-end device manufacturing in Catania and Singapore. The company also intends to increase its back-end manufacturing capacity in Morocco and China.

Conclusion

STMicro is making significant progress by capitalizing on its impressive portfolio and benefiting from the strong demand in the automotive sector despite the supply chain constraints. The partnership between STMicro and Global Foundries is expected to increase the production capacity to 620,000 wafers annually by 2026. Additionally, STMicro has signed a multi-year supply contract with ZF to provide silicon carbide for its modular inverter architecture which is scheduled to commence production in 2025. To further diversify its raw material procurement, STMicro is implementing smart technology to reduce the cost of the solution at the substrate level.

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