On January 31, local time, Qualcomm (QCOM. US), the world's largest mobile chip company, released its financial report for the first quarter of 2024 (as of December 24, 2023).
According to the financial report, Qualcomm's revenue for the first quarter was $9.935 billion, a 5% increase from $9.463 billion in the same period last year; Net profit increased by 24% year-on-year from $2.235 billion in the same period last year to $2.767 billion; Not in accordance with Non GAAP, Qualcomm's adjusted net profit for the first quarter was $3.101 billion, a 16% increase from the same period last year of $2.684 billion. Qualcomm stated in its performance outlook that it expects total revenue in the second quarter (as of March) to reach between $8.9 billion and $9.7 billion.
As of the close on January 31 local time, Qualcomm closed at $148.51 per share, up 1.73%, with a total market value of approximately $165.9 billion.
The Messenger of the Recovery Cycle
Qualcomm's main business units are QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm Technology Licensing), among which QCT is responsible for semiconductor business mainly focused on chip products, which is Qualcomm's main source of revenue. It consists of three major business segments: mobile terminals, automobiles, and Internet of Things (IoT), and is a supplier to globally renowned mobile phone manufacturers such as Apple and Samsung; The QTL department is mainly responsible for the technology licensing business of Qualcomm's patent licensing. In addition, Qualcomm also generates some profits from the QTL division, which is primarily responsible for licensing the basic technologies of all modern mobile networks.
As the world's largest chip supplier upstream of smartphones, Qualcomm's performance in the mobile phone business has become a barometer of the entire mobile phone market. The good news brought by Qualcomm this time is that revenue from mobile phones increased by 16% year-on-year in the previous quarter, reversing the year-on-year decline trend in the past year; In contrast, it decreased by 27% in the first three months ending in September.
Qualcomm also stated in a conference call that despite a decline in global smartphone shipments in 2023, it is expected that smartphone shipments will remain "flat or slightly increase" in 2024. But Qualcomm also warned that although the entire smartphone industry is entering a recovery cycle, some customers are still digesting the excess chip inventory.
Specifically, Qualcomm's revenue related to global smartphones in the previous quarter was $6.687 billion, a year-on-year increase of 16%, higher than analyst expectations; The revenue from the automotive business was $598 million, a year-on-year increase of 31% from $456 million in the same period last year, exceeding analyst expectations; The revenue from the IoT business has decreased compared to the same period last year, dropping 32% from $1.682 billion to $1.682 billion, which is in line with analyst expectations.
In addition, for the first quarter ending December 24th, excluding certain items, Qualcomm's adjusted earnings per share were $2.75, exceeding the average analyst expectation of $2.36. Equally noteworthy is that according to IT Home, Qualcomm announced for the first time at its financial report conference in 2024 that Apple has extended the license agreement for modulation and demodulation chips (baseband chips) with Qualcomm until March 2027, and therefore expects to see Qualcomm modems in future generations of iPhones. However, Apple needs to avoid infringing on Qualcomm's patents during the modem development process. The upcoming iPhone 16 Pro series models this year are expected to use Qualcomm's Snapdragon X75 modem, which has improved carrier aggregation and more energy-efficient transceivers.
The data from different market research institutions also jointly indicate that the smartphone market is about to usher in a recovery trend. According to an IDC report, the total shipment volume of China's smartphone market in 2023 was approximately 271 million units, a decrease of 5.0% year-on-year, marking the lowest shipment volume in nearly a decade. However, in the fourth quarter of 2023, the shipment volume of China's smartphone market rebounded, increasing by 1.2% year-on-year to 73.63 million units. This is the first time that domestic smartphone shipments have rebounded after a continuous year-on-year decline of 10 quarters; According to Canalys data, in the fourth quarter of 2023, global smartphone market shipments increased by 8% year-on-year, reaching 320 million units, ending seven consecutive quarters of decline.
The Future of AI Promise
From a product perspective, although disruptive innovations in screens and cameras are difficult to break through, with the development of AI technology and the development of end side large model products, mobile phone manufacturers have seen new hope. For example, Samsung's bet on the Galaxy S24 series products will be equipped with the Qualcomm Snapdragon 8Gen3 mobile platform.
Qualcomm stated that the Snapdragon 8Gen3 (for Galaxy) flagship mobile platform will provide global support for Samsung's latest flagship Galaxy S24Ultra, and support for Galaxy S24Plus and S24 in some regions. It is reported that the Qualcomm Snapdragon 8Gen3 is Qualcomm's first mobile AI inference chip specifically designed for AI acceleration. It supports multiple model generative AI models, including Meta Llama2, and can handle 10 billion parameter scale end-to-end AI models. It can execute up to 20 tokens per second. According to a report by Zhitong Finance, Qualcomm CEO Cristiano Amon stated at CES 2024 earlier this year that smartphones that integrate generative artificial intelligence (AI) capabilities may create a new upgrade cycle in 2024. According to market research firm Counterpoint Research, it is expected that by the end of 2027, the shipment volume of AI smartphones with built-in generative artificial intelligence functions will exceed 500 million units. Counterpoint predicts that 2024 will be a crucial year for global AI smartphones, but estimates that shipments will only reach 100 million units, resulting in a compound annual growth rate of 83% for the AI smartphone market between 2023 and 2027.
In addition, Qualcomm is attempting to reduce its high dependence on the smartphone market by entering the electric vehicle and personal computer chip markets.
Amon stated at the performance briefing, "Looking ahead, we will leverage the momentum of Snapdragon platform and connectivity, computing, and device side generative artificial intelligence technology to differentiate technology in fields such as mobile phones, cars, personal computers, augmented reality, and industrial IoT." According to NetEase Technology, Qualcomm has stated that by 2026, the automotive chip division's sales will reach approximately $4 billion, and by the end of the 1920s, the automotive chip business revenue will increase to $9 billion. Amon said in an interview at the CES exhibition earlier, "I think we have surpassed these goals."