Qualcomm, Inc. Decides to Advance Into The Chinese Market

The chipmaker has had a tough year and plans to enter China

In the most recent quarter, the earnings of Qualcomm, Inc. fell by 24%. This fall in the earnings makes it evident that the low-demand of the smartphone is not just affecting Apple Inc. and other smartphone makers but also the component suppliers. The San Diego based chip maker has shared its expectations for the second quarter of fiscal year 2016 and expects the sales and profit to fall short of analyst’s estimations.

According to the calculations of the chip-maker, the revenue for the quarter that ends on March is likely to be somewhere between $4.9 billion to $5.7 billion while the earnings could be between 69 cents to 79 cents per share. As per the compilation by analysts at Bloomberg, the earnings could be of 84 cents on sales of approximately $5.66 billion.

The most revenue of the company comes from its division that makes processors and modems for smartphones. This division is likely to face a hit as the market is slowing down; additionally other chip makers who are rivals of Qualcomm are coming out with better prices and better performing chips. Also because of low-demand for smartphone, technology giants including Apple Inc., Samsung Electronics and Huawei technologies prefer to make their own components now.

An analyst at Sanford C. Bernstein, Stacy Rasgon stated that the market is saturating and the competition in the market is worsening, he added the company’s issues are mainly structural and are not going away anytime soon. Currently, Stacy has given a Hold rating to the stock of the chip manufacturing giant.

After the earnings report surfaced, Qualcomm stock fell by 2% and was being traded at $47.53 per share – this decline in the share price brought the total decline to 34% throughout out the year. Subsequently, Steve Mollenkopf, the chief executive officer of the company stated that the smartphone market is growing but the major players in the market are facing trouble which includes Samsung and Apple. He added that due to the market saturation, many of the organization’s customers are facing trouble in growing.

For example: Apple Inc. for the first time reported the slow growth in iPhone’s sales ever since it launched back in 2007 – and the report also suggested that for the upcoming quarter the sales might even see the first ever decline.

The CEO of Qualcomm is trying his best to make its technology available in other areas of the market including cars, serves and medical devices. 

On the other hand, the year did not entirely end on a bad note as it also announced its plans of advancing in the world largest country, China. According to the announcement of the company, it will work on a joint venture with the regional government of Guizhou China which, according to the deal, will work on the production of chips. This new joint venture will be known as Guizhou Huaxintong Semi-Conductor Technology Co.