Qualcomm’s Premium Portfolio Leads Record Revenues in Handsets

After some big gains in 2021, the semiconductor space has seen volatility recently thanks to war, inflation, growing inventory in some segments and shortages in others. However, Qualcomm had a very strong Q1 2022, its third consecutive quarter to see record revenues, including in its handset segment. All business units grew between 28% and 61%.

Qualcomm’s strategy to diversify from being a handset communications company to a connected processor company servicing the connected edge continues to move forward. The company reiterates that its “one technology” road map can expand its total addressable market by seven times. Despite a blowout quarter of its handset business, Qualcomm’s other business units contributed 34% of its Q1 2022 revenues.

Qualcomm Revenues CY Q1 2022

Source: Qualcomm Investor Relations

Some key highlights from the quarter:

  • The handset business grew 56% YoY to $6.3 billion — tremendous growth despite the headwinds of a sales slowdown and further COVID-19 shutdowns in China. The company acknowledged it saw a slowdown in the low- and mid-price segments. But this was more than offset by very strong premium-tier sales. Supply improved and Qualcomm made flagship design wins with all major Chinese brands. These devices are now hitting the market. It is a feather in Qualcomm’s cap that Samsung has increased the variants of its Galaxy S22 line-up powered by Snapdragon. Qualcomm claims it now drives 75% of the S22 family sales – up from 45% of the S21 family. According to Counterpoint Research’s Global Smartphone AP-SoC Shipments & Forecast Tracker, premium-segment Snapdragon 700 and 800 series contributed to around 57% of the AP/SoC shipments in Q1 2022.

AP SOC Shipment share by Tier Q1 2022

Source: Counterpoint Research’s Global Smartphone AP-SoC Shipments & Forecast Tracker

  • The IoT business grew 61% YoY and reached $1.7 billion with growth coming from all three segments — consumer, edge networking and industrial.
    • In the consumer segment, IoT adoption in the high-end Android tablets and demand from entry-level to premium tiers, like the adoption of the Qualcomm 8 Gen 1 by the Samsung Galaxy S8 series and OEMs like Lenovo, HP and Opel, pushed the shipments. Also, some momentum came from Windows on ARM adoption in the Qualcomm 8CX Gen3-powered Lenovo ThinkPad X13S. The adoption of the NUVIA team’s new CPU designs is expected to be implemented in late 2023. This will enable more powerful, always-connected PC designs.
    • The edge networking and industrial segments are being driven by the migration to Wi-Fi 6 and 6E mesh technologies. 5G Fixed Wireless Access (FWA) is another segment that is gaining momentum. According to Counterpoint Research’s latest Global FWA+CPE Forecast, 2019-2030, H1 2021, FWA will have a 36% share of the global fixed broadband subscriptions by 2030. Qualcomm’s 5G FWA solution has 125 designs announced or in development by more than 40 OEMs. The industrial segment growth is being driven by connectivity and advanced processing at the edge in applications like ruggedized handhelds, robotics and hospital handhelds. Qualcomm has also announced its Wi-Fi 7 solutions to drive the next growth opportunity for connectivity.
  • The automotive business grew 41% YoY and reached $339 million driven by the adoption of the Snapdragon digital chassis. Digital chassis includes solutions like telematics, connectivity, digital cockpit, ADAS, and autonomy and cloud services. It will be the key revenue segment going forward, with the design win pipeline now exceeding $16 billion. Further, the incorporation of Arriver’s computer vision, drive policy and driver assistance assets into the Snapdragon Ride Platform will enable Qualcomm to win more semi content in vehicles. OEMs like BMW and Stellantis are adopting Snapdragon Ride and Snapdragon automotive cockpit platforms in their vehicles.

Digital Chassis design win pipeline Qualcomm

Source: Qualcomm

  • The RFFE business grew 28% YoY and reached $1.2 billion driven by the adoption of the 5G modem RFFE advanced features like AI integration, mmWave and Sub6GHz dual connectivity, and 5G Sub6GHz CA for FDD and TDD spectrum. Handsets contribute a significant share in the RFFE business, while expansion in the IoT and automotive segments will drive further growth in the RFFE revenues. Qualcomm is also the dominant player for 5G mmWave RFFE in smartphones, 5G FWA CPE, and more.
  • Guidance for Q2 2022 sees revenues at $10.5 billion to $11.3 billion, non-GAAP EPS at $2.75 to $2.95, QTL revenues at $1.4 billion to $1.6 billion, EBT margins at 69% to 73%, QCT revenues at $9.1 billion to $9.6 billion and EBT margins at 31% to 33%. On a sequential basis, seasonal decline in the handset and RFFE businesses and mid-single-digit growth in the IoT and automotive businesses are seen. Overall, a weak global macroeconomic situation, slowdown in China, COVID-19 and supply chain issues will impact the handset and PC markets. Also, the shift towards the premium segment will continue to drive revenues for the handset business. Qualcomm is focusing on the high-tier segment for bigger margins and the addition of RF and other categories to gain more content in Android devices.

We expect Qualcomm to benefit from its positioning in the premium segment driven by the revenues from the Snapdragon 700 and 800 series against the backdrop of tough macroeconomic conditions and weak China market. Q3 2022 will see an inflection point driven by premium launches, Apple and RFFE, which are tied to handset revenues. For 2023-2024, automotive, IoT and RFFE will sustain growth. Automotive design wins will take 2-3 years to materialize due to long cycles. Adoption of 5G, digital chassis and autonomy will drive semi content across the automotive segment. Also, RFFE will see growth across IoT and automotive with the adoption of 5G connectivity. Revenues from consumer IoT, like 5G FWA, Windows on ARM and Wi-Fi migration, and enterprise will sustain growth in the coming years.

Entry Into Flagship Segment, 5G AP/SOCs Lead to Strong Growth for MediaTek in Q1 2022

  • MediaTek recorded an impressive set of numbers for Q1 2022 with revenues growing 32% YoY and 10.2% QoQ to reach $4.8 billion. The company’s mobile phone segment achieved a revenue of $2.7 billion, growing 29% YoY. According to Counterpoint Research’s Smartphone, AP/SOC Shipment Tracker, the addition of the Dimensity 9000 to the premium segment has added meaningfully to the overall revenues that have also been driven by 5G AP/SOCs in the mid-tier segment. LTE AP/SOCs are still attracting high demand and will be in tight supply throughout 2022. Based on our data, LTE AP/SOCs contributed to one-third of the total AP shipments in Q1 2022.
Counterpoint Research MediaTek revenue by segment
MediaTek Revenue by segment
  • The smart edge segment contributed 39% to MediaTek’s Q1 2022 revenues. This segment is mainly driven by the Wi-Fi 6/6E migration and higher-end solutions for smart TVs and tablets. Technology migration trends in smart edge platforms have led to a higher blended ASP in this segment.
  • The power IC segment accounted for 8% of the total revenues, growing 52% YoY and 21% QoQ. A large part of the PMIC segment’s revenue is coming from displays and smartphones. Automotive and industrial applications contribute to 10% of the PMIC revenue and will drive growth for this segment in 2022.
  • MediaTek guided revenues to be in the range of $5-$5.3 billion in Q2 2022, up 3~10% QoQ and 17~25% YoY. The mobile phone segment will show the strongest growth due to the shifting of demand from LTE to 5G AP/SOCs. As the China market is slowing, the revenue growth will come from other regions like India and Europe. Also, the Dimensity 9000 and 8000 series will continue to add to the revenues in Q2 2022. However, due to the slowdown in China and deteriorating macroeconomic conditions, we have reduced our H2 2022 forecast for the Dimensity 9000.
  • Revenues from Wi-Fi 6, 5G SIM modem, 5G tablet, 10G-PON and 4K smart TV are also expected to grow strongly in H2 2022. Also, MediaTek’s mmWave SOC is on schedule to ship in the second half of 2022. It will pave the way for MediaTek’s further expansion in the global market.
  • According to Counterpoint Research’s Smartphone AP/SOC Shipment Tracker, MediaTek will continue to lead the smartphone AP SOC market with a volume share of 41% in Q2 2022, followed by Qualcomm with 27%. The company’s strategy of 5G, Wi-Fi 6, focused product migration, geographic expansion with global customers, and penetration into high-end and flagship segments will allow MediaTek to retain and even improve its strong market position.
  • China slowdown, COVID-19 lockdowns and macroeconomic conditions will affect the global smartphone market. MediaTek guides flat growth for the smartphone market in 2022 and 5G penetration (660-680 million units) reaching 50%. Further, 5G penetration is expected to reach 70% in the next two years.
  • Smartphone OEMs like OPPO, vivo and Xiaomi currently have inventories with distributors and also for components like AP/SOCs, PMICs and DDICs. This has led to a drop in AP/SOC orders for MediaTek for H2 2022. But MediaTek is keeping a high inventory reserve this quarter to sustain its OEM and ODM partners during the worsening COVID-19 situation. MediaTek normally runs with around 90 days of inventory. But it has now raised this to around 100 days to manage potential supply constraints.
  • MediaTek sought to reassure investors that it would not follow a low pricing strategy to counter slowing demand. Instead, it will invest in future growth. Its pricing strategy will also leverage its high capacity and will manage profitability by maintaining similar pricing as the previous quarter. We expect overall 5G AP/SOC ASPs to be flat compared to last year. If the competition reduces the prices, it will be challenging for MediaTek to maintain growth in H2 2022. Due to the strong demand for LTE AP/SOCs, the ASPs will not decline this year. Overall, 5G AP/SOCs will have a premium pricing over LTE. The company is now focusing on developing 5G AP/SOCs for low-end phones priced less than $150. We believe this will happen two years down the line. However, based on our estimates, LTE is going to dominate the less than $100 smartphones, driven by regions like LATAM, Africa and APAC.
  • Presently, MediaTek is not a big player in the PC business, having only a few Chromebook-type devices in the market. The company played down its expectations for substantial growth in the PC sector while confirming that it was interested in the potential of the Arm-based PC market.
  • Smartphones still contribute 53% of the revenues for MediaTek. For longer-term growth, MediaTek has to reduce dependence on smartphones and expand into areas like the smart edge, automotive, connected PCs and AR/VR.

Related Posts

Infographic: Q3 2021 | Semiconductors

Semiconductor Top 7 by revenues, Q3 2021:

  • Intel and Broadcom are two companies reported QoQ revenue decline in top 7
  • SK Hynix and Micron reported over 30% YoY in Q3 2021 (SK Hynix 48%, Micron 36%)

Foundry Industry Share by revenues, Q3 2021

TSMC maintains its market share leadership with strong sales growth in Q3 2021 driven by HPC and smartphone clients. Samsung also delivers strong Q3 from major clients. UMC is benefited from wafer price increases.

Smartphone AP Market Share by shipments, Q3 2021

MediaTek maintained its market leadership in units during Q3 2021. Qualcomm, on the other hand, improved slightly on its shipment with better component supply. The major market share shifts during the quarter, were from UniSOC’s strong penetration of 4G SoC market, and Samsung’s further decline of shares suffering from IC shortage in its own brand and more outsourcing orders of 4G SoC.

Counterpoint Research Infographic Q3 2021 Semiconductors


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Infographic: Q2 2021 | Semiconductors

Semiconductor Top 7 by revenues, Q2 2021

  • Intel leads on laptop & server growth
  • NVIDIA enters as GPU sales at all-time high
  • Top 7 take 55% share

Foundry Industry Share by revenues, Q2 2021

  • TSMC unchallenged with 58%
  • Samsung Electronics grabs UMC & GF share
  • Top 5 account for 90% share

Global Smartphone AP Market Share by shipments, Q2 2021

  • MediaTek maintains lead at 43%
  • Qualcomm rises to 24% on high-mid end 5G
  • Apple gets third with iPhone 12 momentum
  • UNISOC has strong 1H with HONOR, realme 5G design wins

Counterpoint Research Infographic-Q2-2021--Semiconductors

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