Why Qualcomm’s supply issues are ‘in the rear view’
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Qualcomm CEO Cristiano Amon.
Carlo Allegri | Reuters
QualcommStocks rose by more than 12 percent on Thursday, just one day after the stock market reported. September quarter earningsThis not only exceeded Wall Street’s expectations, but included bullish guidance in the December quarter.
Qualcomm, which is the world’s largest semiconductor company, has a stronger outlook on the shortage than most of its peers. Take, for example: AppleIt claims that chip shortages will cause it to lose more than $6 billion during the December quarter.
Cristiano Amon CEO Qualcomm said Wednesday that its supply issues would be significantly better at the end of December, and that there will be enough stock to supply demand for the second half.
It’s quicker than any predictions of the global end to chip shortages IntelThe report predicts that there will be shortages through 2023. AMDAccording to a forecast by, challenges in chip supply will continue until 2022’s second half.
Rod Hall, an analyst at Goldman Sachs wrote Wednesday that “we had been cautious about Qualcomm ahead of supply concerns but these are gradually disappearing into the rearview now,” he said in a note.
Amon stated that Qualcomm was able to raise chip revenue by 56% in a world shortage because of its moves earlier this year. And that the new capacity that has been planned for months or years is now starting to arrive online.
Amon said that Supply worked exactly the way we had planned. “Scale helps, we addressed the issue early … we put capacity plans in place and it’s working exactly as we planned.”
This is how Qualcomm managed to overcome the chip shortage. And this is why Qualcomm remains optimistic for next year.
Multiple suppliers
Qualcomm has its largest individual business line in systems-on a chip, or SoCs. These SoCs combine central processing and cellular connectivity and are the most valuable and important part of an Android smartphone. The Qualcomm Snapdragon chips are used by nearly all top-tier Android smartphones.
Amon reported that sales of handset chips increased by 56% per year during the September quarter.
These chips can be made with what are known as the leading node process, which is one of the most sophisticated and expensive chip manufacturing processes. The leading node process creates smaller transistors that can be tightly packed together. This allows for faster chips and makes them more attractive to consumers.
Qualcomm can manufacture processors with two different factories or foundries. Currently, TSMC is operating 5-nanometer which is the most advanced leading Node. Qualcomm buys both.
Amon explained that one company has the capability to multi-source at the top node.
That’s in comparison to companies like Apple, which relies on one supplier — TSMC — for its own SoCs.
Amon, who credited double-sourcing for its ability to boost chip sales on Wednesday, stated that three parts of the company’s sale were from different sources.
Amon spoke Wednesday to analysts on a conference call. “We acted early and put a lot in place. Multi-sourcing, capacity expansions. We said we expect to see material improvements in our supply towards end of the calendar.
Move upmarket by matching issues
However other executives have said in the past monthThe main problem is not with the leading node chip, but rather the more basic but essential chips like power or display chips.
The CEOs of AMD and Intel have both called it a match set issue. PC manufacturers may have the CPU but not the LCD or Wi-Fi, as Intel CEO Pat Gelsinger stated in an interview last month.
Qualcomm has more smartphones makers than the PC OEM manufacturers but is still facing similar problems, according to Akash Palkhiwala, Qualcomm’s Chief Financial Officer.
Palkhiwala stated that there is a mismatch in parts at certain customers. These are timing problems, however.
Qualcomm officials stated further that smartphones manufacturers are more likely to choose expensive models when they lack the necessary parts. Qualcomm uses the most powerful processors in premium phones, so it can allocate its resources to prioritizing more profitable chips.
Qualcomm reported that premium smartphones with Qualcomm’s most powerful chips saw an increase of 21% in unit sales during the September quarter.
Palkhiwala explained that Qualcomm does not consider match issues to be a major issue in short-term.
Qualcomm claims it has still got supply limitations and would ship more if possible, but it believes the world’s chip shortage is going as planned.
Palkhiwala explained that “we do have some constraints all-over-the-board” and had to work out what the demand would look like if there was sufficient supply. We feel quite comfortable with the fact that overall, we have a supply picture exactly like we planned.
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