Updated Nov 2, 2022 - Technology

Qualcomm slashes forecast amid chip glut, weak smartphone market

Photo: Bing Guan/Bloomberg via Getty Images

Qualcomm, a leading maker of wireless chips used in cell phones, cars and other devices, slashed its forecast for the current quarter amid both weaker demand and an excess of inventory already in customers' hands.

Why it matters: Qualcomm is a bellwether for the smartphone industry and its challenges highlight just how quickly the semiconductor industry has shifted from unprecedented supply shortage into a glut of chips.

  • Qualcomm shares dropped more than 5% in after-hours trading, changing hands recently at $106.65, down $5.85. The stock had already lost nearly $5 per share, or more than 4% in regular trading on Wednesday, amid a broader market downturn.

The big picture: Qualcomm said the main factor in its dimmed outlook is a dramatically weaker smartphone market. The company, which had seen smartphone sales dipping by a mid-single-digit percentage for the calendar year, now expects a drop in the low double digits.

  • "The rapid deterioration in demand and easing of supply constraints across the semiconductor industry have resulted in elevated channel inventory," it said in a statement. As a result, it now expects its earnings for the current quarter to be 80 cents per share lower than its prior expectation.
  • Intel, AMD and Microsoft have all warned of a significant drop in PC demand.

Yes, but: Qualcomm now believes it will supply the "vast majority" of iPhone modem chips next year. It had previously anticipated it might only supply modems for one-fifth of 2023 iPhone models as Apple looked to switch to an internally designed chip.

What they're saying: Qualcomm says it is well positioned to ride out the challenging situation.

  • "While our financial outlook is being temporarily impacted by elevated channel inventory, our diversification strategy and long-term opportunities remain unchanged,” CEO Cristiano Amon said in a statement.
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