QUALCOMM MAPS KEY POINTS ON GROWTH INTO 5G

San Diego wireless giant’s shares surge as execs lay out path

For years, Qualcomm has talked about diversifying its business beyond smartphones and into cars, drones, virtual reality headsets and myriad other connected devices.

Executives for San Diego’s largest public company fleshed out that diversification strategy at its Investor Day in New York earlier this week. The bottom line: Qualcomm has enough established growth catalysts in its sights to post hefty financial gains even if Apple drops its chips from iPhones.

The growth is expected to be driven by the transition from 4G to 5G in Android smartphones, more Qualcomm semiconductor content per 5G handset and continuing traction as a technology supplier to automakers and Internet of Things markets.

“You know us from mobile, but we’re no longer defined by that single endmarket or a single customer relationship,” said Chief Executive Cristiano Amon. “There’s more to Qualcomm.”

Investors — long spooked by Apple’s efforts to ditch Qualcomm as a supplier — liked what they heard. The company’s shares have jumped nearly 9 percent so far this week. The stock is up more than 40 percent in the past month as Qualcomm’s growth path comes into better focus.

Here are four key takeaways from the event.

Apple forecast

Apple hasn’t said when its efforts to develop an inhouse cellular modem — which drove the Cupertino company to establish an engineering hub in San Diego — will be ready.

But for forecasting purposes, Qualcomm assumed that its cellular chip share would fall to just 20 percent when the 2023 iPhone launches, and zero thereafter, said Chief Financial Officer Akash Palkhiwala.

Even so, Qualcomm ex

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pects to deliver its roughly $47 billion in revenue for fiscal 2024 and adjusted earnings in the $12-$13 per share range.

That’s up $33 billion in revenue and $8.54 per share in earnings in fiscal 2021, which ended in September.

Some Wall Street analysts think Qualcomm is being pessimistic about how soon it will be out of the iPhone.

“We believe share loss will be less severe and happen more gradually than these assumptions indicate,” said Matthew Ramsey, an analyst with Cowen, in a research report.

PCs going mobile

Qualcomm plans to challenge Apple in the personal computer market when it brings a new highperformance ARM-based central processor to Windows laptops in 2023. It would compete with Apple’s touted M-series ARM processors used in Macs.

Last year, Qualcomm acquired startup Nuvia, founded by former top Apple chip designers, for $1.4 billion to boost its prowess in CPUs.

“In our view, the PC industry needs to mount a response to the performance and battery life of M-1-based Macs,” said Chris Caso, who is an analyst with Raymond James. “Microsoft seems to be on board, and Qualcomm is the logical partner.”

Car tech

Qualcomm sold $975 million to automakers last year, mostly for the digital cockpit and telematics.

But it forecast auto sales jumping to $3.5 billion in five years and $8 billion in 10 years, largely based on its current order backlog.

Qualcomm is making a push into Advance Driver Assistance Systems through its Snapdragon Ride technology. It announced this week that BMW Group’s next-generation automated driving system will be based on Snapdragon Ride.

Internet of Things

Last year, Qualcomm had 14,000 customers buying its products for Internet of Things applications, which range from connected cameras in commercial truck f leets to 5G-based home broadband gear. It expects revenue to grow from $5.1 billion in fiscal 2021 to $9 billion in 2024.

“It is really an opportunity to connect everything that is supported by the cloud economy in what we call the connected intelligent edge,” said Amon. “It’s about billions of devices that are becoming smarter. They’re becoming connected. They have efficient processing and they’re enabling the cloud economy. We are the company that will power the connected intelligent edge.”