Qualcomm outlook clouded by Huawei’s gains in China
NEW YORK: Qualcomm Inc’s quarterly revenue and profit forecast fell short of Wall Street targets, driven by Huawei Technologies Co Ltd’s strong gains in the Chinese smartphone market, the US company said.
In an interview, Qualcomm Chief Executive Steve Mollenkopf told Reuters Huawei had stolen market share mainly from its domestic rivals such as Xiaomi Corp, Oppo and Vivo, all of which are major Qualcomm customers.
Huawei’s advance has spurred other phone makers to cancel 4G models planned for the rest of this year and instead focus on 5G models for release early next year that could drive growth for Qualcomm, he added.
“Huawei was very aggressive in terms of making sure they built their market share there because they couldn’t sell things internationally,” Mollenkopf said. “And the reaction of the (other Chinese phone makers) was, ‘Let’s go as fast as we can to 5G, because there’s a great opportunity there,’ even to the point of saying, ‘Let’s cancel 4G models.’”
Mollenkopf said Qualcomm will not see benefits from that shift until early 2020 but said 5G rollouts by carriers appeared to be on track, including in China where Huawei is also a major telecommunications gear supplier. Kinngai Chan, an analyst at Summit Insights Group, called Qualcomm’s outlook a “pause in 4G ahead of the transition to 5G.”
Huawei’s effect on Qualcomm’s forecast underscores the extent to which the Chinese company has become more of a rival than a customer to the San Diego-based company. Huawei, which was the subject of US sales restrictions imposed in May, continues to buy a small number of Qualcomm chips.
But the companies, which are among the world’s largest holders of patents related to 5G technology, are in a protracted licensing dispute. Huawei had been making good-faith payments and negotiations have inched forward, but Mollenkopf said no further payments are included in Qualcomm’s fiscal fourth quarter guidance.
“The companies are talking and we’re focused on a final agreement, but we don’t have it yet,” Mollenkopf said.
Huawei supplies many of its own chips for smartphones, and it grabbed market share from Chinese companies over the past quarter, according to market research firm Canalys. Those companies’ higher-end phones, which compete against directly with Hauwei’s models, tend to use Qualcomm chips.
Mollenkopf said the Us-china trade war and a slow smartphone market drove Qualcomm to lower its outlook for 2019 sales of smart devices to a range of 1.7 billion to 1.8 billion, down from a previous estimate of 1.8 billion to 1.9 billion.