Qualcomm’s Results Quantifies the Global Handset Slowdown Due To COVID-19, but Limited Impact to 5G Expectations

Qualcomm announced its March quarter earnings. Results were quite solid considering the once-in-a-lifetime global economic slowdown caused by COVID-19. The quarterly numbers and forecasts align with those of Counterpoint Research. Despite the gravity of COVID-19, there were no changes to 5G guidance. Here are the key takeaways from the quarter.

  • Qualcomm expects full year 2020 volumes to be down 10% year-over-year. It appears many regions will see COVID-19 improvements during the summer, but economic recovery is trickier to forecast. (for more on global forecast insights, see here)
  • Qualcomm has not changed its 5G forecast for 2020, 175m – 225m. Counterpoint forecasts have taken into account that many postponed LTE purchases during the March through June period could ultimately result in a 5G device sale, as many consumers are putting off purchases until COVID-19 dangers are reduced.
  • Other 5G notes:
    • 5G license agreements have grown to 85. Oppo and Vivo were the latest to sign long-term 5G licensing agreements.
    • 375 5G devices have been announced. 5G has carried an ASP 1.5x higher for Qualcomm.
    • The company re-iterated that virtually all licensees are also designing in Qualcomm’s RF front-end, a full modem to RF solution which optimizes performance. Except for Huawei, all 5G flagships have Qualcomm components inside.
    • In an remark likely aimed at Apple, Qualcomm CEO Steve Mollenkopf mentioned that handset OEMs are working hard to stick to launch timings. This is especially true of Chinese OEMs.
    • 5G rollouts continue almost as planned. US carriers have reported limited to no slowdowns in 5G rollouts (for more, see How are US carriers dealing with COVID-19 in 1Q20?). Japan is launching mmWave and Korea Telecom is planning to launch mmWave in 2020. Many other markets holding to 2021 mmWave rollouts.
    • China remains aggressive and the leading country selling 5G devices. 71% of devices launching in March were 5G devices. 30% of sell-in volumes were 5G.
  • Revenues from Huawei are not in the company’s guidance. EVP of QTL, Alex Rogers commented that both companies have the right to seek arbitration, but both companies continue to negotiate. The Phase 1 trade agreement between China and the US is a positive. Rogers believes a need for arbitration is months away.
  • The appeal of the FTC lawsuit continues and Qualcomm remains positive that the ruling will be overturned.
  • The IoT business continues to pass new milestones with new solutions. Qualcomm remains optimistic that the joint venture and eventual purchase of TDK will be valuable. Qualcomm re-iterated its guidance that the IoT market will grow 8% and that Qualcomm’s IoT revenues will grow faster than the overall IoT market.
  • Qualcomm believes IoT and networking businesses will get a boost from the increases in work-from-home and school-from-home.
  • Qualcomm’s COVID-19 response is similar to many other large US companies:
    • Vast majority of employees are working remotely.
    • Reiterated job stability; instated remote onboarding.
    • 24/7 emergency response team in place.
    • Monetary and in-kind donations from the company and encouraging employees to do the same.
    • Enabled remote access to labs, remote device testing.
    • Continues to deliver products on time.

Counterpoint continues to have weekly updates covering the global impact of COVID-19. For more, see here.