Qualcomm Inc. is witnessing a significant rebound in its fortunes, driven by a resurgence in the Chinese smartphone market and an increasing demand for AI capabilities. On Wednesday, the San Diego-based chipmaker reported a substantial 40% increase in sales to Chinese smartphone manufacturers in the first half of its fiscal year, signaling a recovery from a two-year market slump.
This resurgence is largely fueled by the shift among Chinese consumers towards higher-priced devices that are equipped to handle advanced AI features, such as chatbots. This trend is reshaping the competitive landscape, with Qualcomm gaining a competitive edge over rivals like MediaTek, as noted by IDC analyst Nabila Popal. "Chinese vendors are going to start leveraging Qualcomm's high-end chips more as they push hard into the AI agenda," Popal stated.
In response to the increased demand, Qualcomm's shares rose 4% in premarket trading on Thursday. The company has also adjusted its third-quarter sales projections upwards, reflecting a broader optimism not just limited to smartphone chips but extending to its Internet of Things (IoT) and automotive segments.
The growth in Qualcomm's market share comes amid a challenging period for the global tech industry, particularly the semiconductor sector. Analysts are particularly optimistic about the role of AI in driving sales of more capable devices. "AI is driving a lot of silicon content in those devices because of the expected computational capability to run those models," said Qualcomm CEO Cristiano Amon during an analyst call. This reflects a broader industry trend where AI integration is becoming a critical selling point for consumer electronics.
Despite the positive outlook for Qualcomm, the overall smartphone market remains complex, especially with the looming competitive threats from companies like Huawei. Although Huawei has been pushing its own chips made by subsidiary HiSilicon, especially in high-end 5G smartphones, the overall expansion of the market benefits Qualcomm significantly. "While HiSilicon takes share with flagship Huawei phones, the total market is growing, especially where Qualcomm gets most of its revenue from," noted IDC analyst Phil Solis.
However, this resurgence does not seem to extend to all tech giants. Apple Inc., which is also a customer of Qualcomm, is reportedly facing its deepest quarterly revenue decline in over a year as it grapples with stiff competition in China. The Cupertino-based company is set to report its earnings later on Thursday, with analysts expecting a tough quarter as cheaper smartphones from competitors continue to eat into its market share.
In contrast, Qualcomm's robust performance in the fiscal second quarter, with sales and adjusted profits topping expectations, highlights its successful navigation of the shifting tech landscape. The company reported sales and adjusted profit of $9.39 billion and $2.44 per share, respectively, surpassing the analyst forecasts.
