New Qualcomm CEO Cristiano Amon held his first earnings conference call with a great first quarter at the helm. Qualcomm is best known for its Snapdragon mobile phone chips. However, the quarter’s highlight was the growth of other divisions — RF front-end, automotive and IoT. These three divisions are expected to deliver $10 billion in revenue during 2021 and grow over 80% YoY, which is 1.6 times faster than Qualcomm’s mainstay Snapdragon chips. These results were set in motion years ago by former CEO Steve Mollenkopf. It was not long ago that Qualcomm was in the midst of courtroom battles with governments and customers, and also saw a hostile takeover attempt. Today, because of its focus and leadership in 5G, there are growing, new business units that are taking the pressure off the mobile chips and licensing business.
Other takeaways from Qualcomm’s quarter ended June 27:
- Qualcomm expects it will become the largest RF front-end supplier by revenue this year. The joint ventures and investments made years ago are paying off. A modem-to-antenna system becomes more important in 5G due to the increased complexities. Most of Qualcomm’s 5G SoC customers are choosing the company’s RF front-end systems.
- Impressive quarter for the latest high-end Snapdragon, the Snapdragon 888. Its design wins increased more than 20% QoQ.
- Further, the company noted the strength of its high-end 8-series mobile platform’s momentum. More than half of the 5G smartphone design wins are taking the high-end 8-series route. This is partly because high-end/high-margin smartphones were prioritized due to component shortages. Despite this, it was a solid quarter for the 8-series. Qualcomm’s customer base is growing here.
- Multi-sourcing strategies have helped. Qualcomm has multi-sourced the production of the 778G between Samsung and TSMC. The company says it is on track to materially improve supply by the end of 2021.
- Qualcomm has 155 5G license agreements, up 33% QoQ. It expects 5G handset sales in 2021 to land between 450 million and 550 million.
- On its fourth generation of mmWave, Qualcomm continues to lead in the 5G mmWave space. To date, it has mainly seen volumes in the US and Japan. However, there are over 180 mobile operators in the world investing in 5G mmWave. The key country to watch is China. China is expected to have a limited 5G mmWave launch ready for the 2022 Winter Olympic Games. The scale China would bring to mmWave would help other countries and regions roll out the technology more aggressively.
- IoT revenues grew 83% to $1.4 billion. The growth was fueled by industrial platforms and consumer EDGE networking hardware.
- Qualcomm’s automotive division has grown to a $1 billion per quarter business. These products include digital cockpit and cellular vehicle-to-everything (C-V2X) solutions, automotive telematics, and connectivity platforms. Qualcomm is riding the wave of more connected cars and more infotainment systems being added to cars.
- There are other areas with rich potential. They are in the development stages and seldom attract as much attention as mobile chips:
- Qualcomm is in a good position with 5G mobile XR, PC-tethered XR and ‘boundless XR’. The company is a supplier to key XR OEMs with its Snapdragon XR2 platform and Snapdragon X55 5G modem – RF system. As XR grows, Qualcomm is positioned to grow with it.
- Qualcomm is riding the wave of increased wearables growth. With Google and Samsung teaming up and hardware performance leaps continuing, there will be better diversification of smartwatches. Expect more optimized designs for children, seniors, sports/fitness, enterprise/B2B and fashion.
- As mobile networks become virtualized, flexible and disaggregated, Qualcomm has solutions for 5G RAN platforms, including those for small cells.
- Qualcomm will be able to ride the growth of 5G mobile gaming. The mobile gaming experience is vastly improving with 5G due to its better reliability and lower latency. Qualcomm Elite Gaming offers quick touch with 20% improvement on input response, supports over one billion shades of color, and is available on Android streaming platforms.
As chip shortages continue, demand will be stronger than supply in all of Qualcomm’s business units. 2021 continues to look very promising for Qualcomm’s Snapdragon SoCs for smartphones, as well as for all of the other growing business units.