Image source @ Qualcomm official website
Text | Value Institute
After the U.S. stock market on April 27, local time, Qualcomm announced its fiscal second quarter of fiscal 2022 (as of March 27, 2022, hereinafter referred to as Q1).
According to the data, Qualcomm Q1 recorded $11.164 billion, an increase of 41% year-on-year; net profit and adjusted net profit recorded $2.934 billion and $3.661 billion, respectively, the former surged 67% year-on-year. According to a previous Reuters report, Wall Street analysts expected Qualcomm Q1 earnings per share at $2.91, which is already the top level in the industry, but still below the final announcement of $3.21.
In addition to the revenue figures, Qualcomm's biggest highlight is still those two: one is the optimization of the revenue structure, and the other is that the core mobile phone chip business remains strong, especially in the Greater China market.
However, Qualcomm is not comfortable.
On the one hand, all mobile phone manufacturers with "Qualcomm dependence" are trying to break free from the constraints of the former, such as Xiaomi, OPPO, vivo, and Samsung and Apple, which still rely on Qualcomm on the 5G baseband. According to foreign media reports, Apple plans to use fully self-developed chips in the iPhone 15 in 2023, including 5G baseband chips.
On the other hand, Xiaomi, Vivo, and OPPO do not have the strong research and development capabilities of Apple, nor do they completely get rid of Qualcomm's confidence. However, the rise of MediaTek undoubtedly provides them with the dawn of breaking Qualcomm's monopoly, and it is also expected to break the balance of the power game between the two sides.
Faced with "rebellious" customers and attacking MediaTek, Qualcomm knew that it had to plan ahead.
As Qualcomm CEO Anmon said on the earnings call:
"We can no longer be defined as a communications company that serves only one industry."
01 Revenue hit a record, net profit soared, Qualcomm continued to lie and make money
After the U.S. stock market on April 27, local time, Qualcomm announced its 2022 fiscal year Q1 financial report, handing over an exceptionally excellent report card to the market: revenue hit a record high, net profit increased sharply, and diluted earnings per share far exceeded Wall Street expectations.
According to the data, Qualcomm Q1 recorded $11.164 billion, an increase of 41% year-on-year; net profit and adjusted net profit recorded $2.934 billion and $3.661 billion, respectively, the former surged 67% year-on-year. According to a previous Reuters report, Wall Street analysts expected Qualcomm Q1 earnings per share at $2.91, which is already the top level in the industry, but still below the final announcement of $3.21.
Driven by excellent performance, Qualcomm's stock price rose nearly 8% after hours, staying near $135 at press time, with a market value of $152.3 billion.
Looking at Qualcomm's Q1 financial report, it even gives people an illusion: the prospects of the consumer electronics market have been repeatedly sung down, and it seems that it has nothing to do with this semiconductor giant, and Qualcomm is still lying down to make money. In addition to the revenue figures, Qualcomm's biggest highlight is still those two: one is the optimization of the revenue structure, and the other is that the core mobile phone chip business remains strong, especially in the Greater China market.
At present, Qualcomm's revenue mainly comes from the equipment and service business and the licensing business, the former accounting for nearly 90%, which is the main revenue pillar. Q1, Qualcomm Equipment and Services revenue was $9.417 billion, up more than 30% from $6.239 billion in the same period last year.
From the specific product and business division, the revenue of handheld devices, Internet of Things, RF front-end and automotive business was 6.325 billion, 1.724 billion, 1.16 billion and 339 million, respectively, all of which achieved positive growth over the same period last year. Among them, the fastest growing is the Internet of Things business, with a year-on-year growth rate of 60.67%.
Image from Qualcomm earnings report
Of course, the handheld device business with smart phone chips as the core is still Qualcomm's most important cash cow. In particular, the orders of Samsung from South Korea and leading manufacturers such as Xiaomi, Vivo, and OPPO in China provide Qualcomm with a steady stream of revenue.
At the China International Import Expo held in Shanghai last November, Meng Zhu, chairman of Qualcomm China, defined the relationship between Qualcomm and the Chinese market as follows:
"How important is China to Qualcomm? It is so important that it is not only the market, Qualcomm has been integrated with China's industrial chain. ”
This statement is definitely not a compliment, looking at Qualcomm's revenue share in various regions and the list of important customers, you can find out what the Greater China market and Chinese mobile phone manufacturers mean to Qualcomm. Qualcomm CEO An meng has also publicly admitted that revenue from China accounts for nearly 50%, and chips are still in short supply.
According to media reports, Song Yiwen, director of the Glory Supply Chain Management Department, said in a recent interview with the media that the supply of mobile phone main chip SOCs is slightly better than last year, but individual categories are still in a state of extreme shortage, "especially when it comes to advanced processes, such as 4nm, 5nm chip supply is still tight." ”
The supply chain crisis that has swept the world, as well as the epidemic and war, has led to a more serious global core shortage crisis, which undoubtedly provides Qualcomm with a good external environment. Focusing on the Chinese market, Xiaomi, OPPO and other head mobile phone manufacturers have complained more than once about the shortage of chips, and Qualcomm is not worried about business at all.
Statistics show that Xiaomi, Huawei, OPPO, vivo, Honor, OnePlus, Meizu and Realme, eight leading domestic mobile phone brands, the existing more than 20 flagship models, 87% of them use Qualcomm chips. More than half of them use Snapdragon 888 chips, including Huawei P50 series, vivo X70 series, Xiaomi Mi 11 Ultra, Honor Magic series and OPPO Find X3 series.
It is worth mentioning that in December last year, Qualcomm released a new generation of Snapdragon 8 chips, OPPO, vivo and Xiaomi invariably shouted for their platforms, the first time to update the warm-up posters, promotional videos and other materials.
Take the initiative to incarnate tap water for the Snapdragon chip to do publicity, domestic mobile phone manufacturers with practical actions to tell us, they really can not do without Qualcomm.
02 Qualcomm's double worries: "rebellious" customers, attacking MediaTek
Of course, Huami OV does not want to leave Qualcomm. On the contrary, all mobile phone manufacturers with Qualcomm dependence are trying to break free from the constraints of the former, and Xiaomi, OPPO, vivo, Samsung and Apple are still dependent on Qualcomm on the 5G baseband.
According to foreign media reports, Apple plans to use fully self-developed chips in the iPhone 15 in 2023, including 5G baseband chips. According to the news from suppliers, TSMC's 5nm and 3nm advanced process chips will take the lead in undertaking Apple's 5G chip orders, which is an important step in Apple's "de-qualcommization" plan.
On the Samsung side, the Exynos 2100, which has spent a lot of money on research and development, has also become a replacement for the Qualcomm Snapdragon 888, and has begun to be applied to a number of Samsung's mobile phones on a large scale, including the new flagship galaxy S22.
Apple and Samsung want to get rid of Qualcomm, it is not a matter of a day or two. At the end of the day, it's risky for chips to rely too much on Qualcomm.
After the snapdragon 8 starter was cut off by Lenovo last year, Xiaomi, which has been working with Qualcomm, received a wave of ridicule. All because before the release of Qualcomm Snapdragon 8, Lei Jun had warmed up on Weibo, clearly writing that Xiaomi 12 would become the world's first new generation of Snapdragon 8 mobile platform, and the excitement between words was abnormal.
This time being pigeoned by Qualcomm not only stung Xiaomi's heart, but also hurt the self-esteem of all peers: the initiative has always been in qualcomm's hands, and although the downstream mobile phone manufacturers are customers, they live more like a humble "B B".
All along, Qualcomm and domestic mobile phone manufacturers have been looking for a delicate balance in this mutual game and mutual dependence. However, as the bond between each other deepens and the conflict of interest intensifies, the rift between the two sides is also enlarged. For Qualcomm, which has dominated the mobile phone chip market for many years, the crisis has actually been lurking.
Indeed, Xiaomi, vivo, and OPPO do not have the strong research and development capabilities of Apple, nor do they completely get rid of Qualcomm's confidence. However, the rise of MediaTek undoubtedly provides them with the dawn of breaking Qualcomm's monopoly, and it is also expected to break the balance of the power game between the two sides.
MediaTek has taken advantage of the momentum in the past two years, which is quite a bit of a hero of the times: Huawei HiSilicon fell due to well-known reasons, and MediaTek became the biggest beneficiary.
Bloomberg statistics show that after Huawei HiSilicon fell behind, Qualcomm's high-end flagship mobile phone market above $500 has been difficult to meet the opponent, and the market share has risen to 55% in 2021, and the gap between it and Samsung has become wider and wider. But to take over the vacancy in Huawei's HiSilicon market is MediaTek , especially in the Chinese market.
According to a report released by Counterpoint, MediaTek's share of the smartphone application processor market rose to a peak of 40% in the third quarter of last year, compared with Qualcomm's only 27%. Two years ago, Qualcomm led the way with a market share of 31%.
What bothers Qualcomm the most is that MediaTek, which has been ridiculed and only spins around in the low-end market, has successfully entered the high-end market.
In terms of performance, the evaluation agency Lei Technology previously evaluated the high-end flagship chips of MediaTek Tianji 9000 chips and Qualcomm Snapdragon 8 (inserted hyperlinks) and found that MediaTek's technical strength in high-end chips is catching up.
According to the test of Lei Technology, the excellent performance and low power consumption of Tianji 9000 are even more impressive. Lei Technology believes that "the emergence of Tianji 9000 means that there are more options in the high-end market, and the high-end chip market has re-entered the track of healthy competition." Attack on MediaTek is now playing the role of Qualcomm's "challenger".
In terms of mass production scale, the order data undertaken by TSMC can confirm the rise of MediaTek. According to digitimes statistics, as of December last year, MediaTek was TSMC's second largest customer, after Apple.
Considering that Qualcomm still has a large part of the orders manufactured by Samsung, it is not surprising that the business left for TSMC is not as good as MediaTek. However, it should be noted that MediaTek's OEM demand for TSMC's advanced process chips has risen sharply, and the Tianji 9000 has become the world's first 5G SOC using 4nm advanced technology.
Looking back now, Qualcomm is no longer the only god of domestic mobile phone manufacturers.
OPPO's high-hope Find X5 Pro is equipped with MediaTek Tianji 9000 Soc, and according to Nikkei News, the number of chips purchased by Huawei from MediaTek has quadrupled compared with the past few years.
Faced with "rebellious" customers and attacking MediaTek, Qualcomm knew that it had to plan ahead. In fact, in the past two years, the strategic planning of MediaTek and Qualcomm has begun to show obvious differences, and the latter is no longer satisfied with whirlwind in the mobile phone circle.
As Qualcomm CEO Anmon said on the earnings call:
"We can no longer be defined as a communications company that serves only one industry."
03 AI, intelligent driving, meta-universe, Qualcomm attacked on all sides for growth
As mentioned earlier, Qualcomm's transformation has begun to bear fruit, and the gradual diversification of revenue structure is the best evidence. Since the third quarter of last year, qualcomm's revenue has come from non-mobile phone business, and businesses such as automobiles, wireless home broadband, PCs, and VR/AR hardware are sharing the revenue pressure of mobile phone business.
To some extent, Qualcomm and Apple are now in contrast to each other: Apple wants to get rid of Qualcomm dependence and fully develop A-series chips, and Qualcomm is also trying to get out of Apple's shadow and develop into automobiles, AI and other fields.
At last year's Snapdragon Technology Summit, Qualcomm released three new chips in one go, aiming at the PC and game markets. Among them, the snapdragon third-generation 8cx computing platform is the world's first 5nm advanced process Windows PC platform, and the computing power performance has been significantly improved.
Overall, Qualcomm's expansion plans are not blind. Ai, intelligent driving potential is amazing, Nvidia, Intel and other competitors have long been in the game. Last year's popular meta-universe concept is a must for technology giants. Qualcomm's current transformation goals are also placed on the three popular tracks of AI, intelligent driving, and meta-universe.
Qualcomm's expansion in these new tracks follows two strategies: one is to quickly strengthen its shortcomings by buying and buying, and the other is to give full play to the advantages of chip research and development and 5G technology to integrate 5G with AI and automatic driving.
Crazy buy buy buy, Qualcomm is committed to reinforcing the short board
Taking the autonomous driving track as an example, Qualcomm will not hesitate to spend money in order to compete for an admission ticket. Earlier this month, the dust settled on Qualcomm and SSW Partners' joint acquisition of Veoneer, whose self-driving software business, Arriver, merged into Qualcomm, reinforcing its shortcomings in self-driving software.
When laying out the metaverse, Qualcomm also attaches great importance to the strong alliance with other Internet and technology companies. One of the representative works is the XR Industry Investment Alliance led by Qualcomm.
At the MWC2022 conference, Qualcomm announced that it would invest $100 million to establish the Snapdragon Yuan Universe Fund, and cooperate with ByteDance in the development of XR hardware and software platforms and equipment research and development. Qualcomm said that by providing funds and technical support for high-quality start-up teams, it is possible to create an active developer community and help the landing of the meta-universe concept.
R & D technology has been upgraded, and Qualcomm has continued to accelerate the speed of iteration
Of course, Qualcomm has not lost its own research and development, technical advantages.
In the field of intelligent cockpit, under the long-term high investment in research and development, Qualcomm has become the industry leader, and the fourth-generation Snapdragon digital cockpit platform 8295 launched last year was well received. Qualcomm official data shows that among the top 25 car companies in the world, 20 have chosen Qualcomm's third-generation Snapdragon digital cockpit platform, including Xiaopeng, Weilai, Geely, Roewe, WEY Mocha, Weima and so on.
It is worth mentioning that the launch time of Snapdragon 888 and Snapdragon SA8295P is only one month apart, which shows Qualcomm's super strong research and development strength and ability to promote multiple businesses at the same time. According to the statistics of Anxin Securities, from the first generation of Snapdragon 600 to the fourth generation of Snapdragon SA8295, the iteration time has been shortened from 12 months to 1 month.
Image courtesy of Essence Securities
Qualcomm can sit in the head position in the smart cockpit market, relying on the leading edge on the Soc master chip. From the timeline point of view, since cutting into the smart cockpit track in 2014, qualcomm Snapdragon series of smart cockpit chip computing power has been at the forefront of the industry. The world's first 7nm process chip is the Snapdragon SA8155P released in 2019, and the first 5nm process chip is the Snapdragon SA8295P, which was launched in January last year.
What cannot be ignored is that Qualcomm's research and development strength is very prominent. In addition to having high-end technologies such as Adreno GPUs, Qualcomm's share of the 5G baseband market is also as high as 62%, according to a Counterpoint report.
It should be known that 5G, AI, intelligent driving and other cutting-edge technologies do not exist in isolation, and mutual integration between each other can lead to future trends. Gao's R&D and technical experience accumulated over the past few years, especially in the leading position in the field of 5G, will become an important weapon.
04 Write at the end
In the first quarter of last year, the four-year Qualcomm antitrust case came to an end, and Kelly Sloter, the acting chairman of the U.S. Federal Trade Commission (FTC), publicly waived the appeal, "I agree with the ruling of the grassroots court, Qualcomm did violate the U.S. antitrust law, but we face serious difficulties in overturning the court of appeal's ruling." ”
The FTC's waiver of the appeal means Qualcomm can continue to rely on the patent fee model to lie back and count money in the 5G era. Of course, it is also the inaction of the court and the FTC that has strengthened the determination of apple and other large customers to flee. Today, Qualcomm has realized that it can't make money from 5G patents all its life, and it is not willing to just circle around the phone.
Last June, Steve Mollenkov, who had led Qualcomm for seven years, retired, and Christiano Ammon, who had just turned fifty, became his successor.
Ammon, an engineer, has no such excellent strategic vision as Mollenkov, but it is certain that the former is well aware of the development trend of semiconductor technology, and also understands that Qualcomm cannot miss the outlets of AI and automatic driving.
Also early last year, Intel appointed Pat Kissinger as its new CEO, and the two semiconductor giants began a new chapter. Intel was passively beaten for more than a decade because it missed the window of transformation from PC to mobile Internet, which is a historical legacy that Kissinger needs to solve and a lesson for Ammon.
Now that smartphones seem to be about to bid farewell to the golden age, Qualcomm must be vigilant and plan ahead.