Plummeted 630 billion! The chip giant suddenly announced: big layoffs! More dangerous signal exposure

The American chip giant suddenly announced a big layoff.

Recently, the US chip giant Qualcomm announced that it plans to cut about 1,258 jobs in California, affecting positions including engineers, legal affairs and human resources.

According to documents disclosed by the company, this round of layoffs will officially start in mid-December this year.

Affected by the news of layoffs, on October 13, local time, Qualcomm's US stock price fell by 2.51%, and the total market value shrank to 121.26 billion US dollars (about 886.2 billion yuan), compared with the beginning of 2022, the stock price fell by 41.5%, and the total market value shrank by 86 billion US dollars (about 630 billion yuan).

Qualcomm warned that fourth-quarter sales are expected to be lower than market expectations due to slowing global economic growth and continued weak consumer spending on electronic products such as smartphones. It said further layoffs were likely. Qualcomm last reported a global workforce of 51,000.

Since 2023, Qualcomm's revenue and profit have declined for two consecutive quarters. According to Qualcomm's financial report for the third fiscal quarter of fiscal 2023 (Q2 2023), under non-GAAP, Qualcomm's revenue was $8.442 billion, down 23% year-on-year, and net profit was $2.105 billion, down 37% year-on-year.

Analysts pointed out that the chip giant, with a total market value of more than $120 billion, had to cut labor costs through layoffs after experiencing the pain of reducing inventory and cutting prices.

It is reported that the smartphone chip business is Qualcomm's "first pillar" business, accounting for more than 50% of revenue. From April to June this year, mobile phone revenue fell by 21.6%, which brought a big impact to Qualcomm's performance.

The downturn in the global smartphone market is one of the main factors dragging down Qualcomm's performance. The latest report released by market research agency IDC lowered its global smartphone shipment forecast for 2023, estimating that global smartphone shipments in 2023 will be 1.15 billion units, down 4.7% year-on-year, hitting a decade low, lower than the previous forecast of 3.2% decline.

It is worth noting that since 2023, Qualcomm has laid off employees in many office locations around the world.

In June, the San Diego headquarters in the United States was reduced by about 415 personnel. In addition, market sources pointed out that Qualcomm's branch in Taiwan, China, will cut about 200 employees in October, mainly involving personnel in the fields of product engineering, testing and verification, accounting for about 11.8% of Qualcomm's total number in Taiwan. In addition to layoffs, Qualcomm Taiwan also plans to implement cost-saving measures with no annual salary increase and a seven-fold discount on dividends.

The Great Withdrawal?

It is worth noting that Qualcomm also suddenly sent a "retreat" signal in the Chinese market.

Recently, a news about "Qualcomm will carry out large-scale layoffs in Shanghai" has aroused attention and heated discussions.

A person familiar with the matter posted on the social platform that Qualcomm's Shanghai branch launched a layoff in R&D posts, involving multiple businesses such as Wifi.

According to media reports, the layoffs are mainly concentrated in the wireless business R&D department, and the compensation standard is N+4 for ordinary employees (including newly hired employees), N+7 for senior employees with no fixed term, and there is no triple cap limit.

In response, Qualcomm officially responded that the market's "large-scale layoffs", "office closures" and "evacuation from Shanghai" are exaggerated.

While the company does plan to lay off workers, the scale and scope of impact are not as large as the market rumors. In addition, Qualcomm said it will continue to maintain a certain scale of business in Shanghai and continue to work closely with local partners and customers.

According to Qualcomm's official website, Qualcomm has been operating in China for more than 20 years, with offices in six cities in Chinese mainland, namely Beijing, Shanghai, Shenzhen, Xi'an, Wuxi and Chengdu, R&D centers in Beijing and Shanghai, and its world's first innovation center in Shenzhen.

In addition, according to Tianyan, Qualcomm Information Technology (Shanghai) Co., Ltd. (hereinafter referred to as "Qualcomm Shanghai") was established on August 16, 2010 and is registered in China (Shanghai) Pilot Free Trade Zone. The business scope includes, regional network chips, wired and wireless communication terminal chips and their software testing and maintenance. According to the industrial and commercial registration, Qualcomm Shanghai currently has 393 insured people.

Huawei stirs up mobile phones

For Qualcomm, China is the most important market, and there is no one.

Qualcomm has a large scale of business and partnerships in China. According to its financial report, Qualcomm's revenue in the Chinese market in fiscal 2022 reached US$28.1 billion, accounting for 64% of the total revenue; Chinese mobile phone manufacturers such as Xiaomi, OPPO, Huawei, vivo, and Honor, as well as most new energy vehicle manufacturers, are Qualcomm's customers.

However, the current situation is changing dramatically.

At the end of August this year, Huawei suddenly threw a bombshell, Huawei Mate 60 Pro did not develop the conference without warming up the publicity in advance, and directly went on sale, 6999 yuan. And known as "Kirin + 5G return", the network map shows that it is equipped with a 5nm process Kirin 9000S.

In the earnings conference, talking about Huawei, Qualcomm CFO Akash Palkhiwala said that in the expectation for the next two quarters, it is not assumed that there will be a large amount of revenue related to Huawei. Qualcomm currently has a license to supply 4G chips to Huawei, but not a license to supply 5G chips.

Recently, Tianfeng Securities analyst Guo Mingxi shared an analysis report on Huawei's self-developed Kirin processor, which believes that Qualcomm has been hit the most.

According to Guo Mingxi's analysis, Huawei plans to fully adopt its own design of the new Kirin processor in its new mobile phones from 2024, which will cause Qualcomm to lose Huawei's orders. Moreover, due to Huawei's increased share of the Chinese market, other Chinese brand customers may also reduce the purchase of Qualcomm chips, which will put great pressure on Qualcomm's supply.

Guo Mingxi expects that Qualcomm's SoC shipments to Chinese mobile phone brands will decrease year by year after 2024. Qualcomm has reduced shipments by at least 50 million to 60 million compared to 2023 due to Huawei's adoption of new Kirin processors.

Guo Mingxi said that the latest survey shows that in order to maintain its market share in the Chinese market, Qualcomm may start a price war as soon as the fourth quarter of 2023, which may further impact its profits.

At the same time, Apple plans to launch self-developed 5G baseband chips, which will also have a huge impact on the market structure. The semiconductor industry is full of variables, and Qualcomm must respond to the changing market environment to find new growth opportunities and competitive advantages.

At present, in the global smartphone camp, Apple has been using its own chips, Huawei is likely to abandon Qualcomm after the increase in production capacity, Samsung is Qualcomm and self-developed chips mixed, but the bad news is that the newly released Samsung Exynos 2400 in Samsung mobile phones will be higher than expected.

This means that Qualcomm's future days will only get harder.