After more than two years of doldrums, the global smartphone market is seeing a rebound in sales, catalytic to 5G, with orders from upstream chipmakers sugging from the current quarter. In the early hours of November 5, chip giant Qualcomm (QCOM.US) reported fourth-quarter and annual results for the fiscal year ended September 27, 2020. The company reported revenue of $8.346 billion, compared with $4.814 billion a year earlier, up 73 percent from a year earlier.
Q4 net profit was $2,960 million, compared with $506 million a year earlier, up 485 per cent year-on-year. Diluted earnings per share were $2.58, compared with $0.42 a year earlier.
Across business segments, mobile-based chip (QCT) revenue was $4,967 million, up 38% year-on-year, and MSM chip shipments were 162 million, up 7% year-on-year. The Technology Licensing Business (QTL) generated revenue of $1.507 billion, up 30 percent from a year earlier.
Steve Mollenkopf, Qualcomm’s chief executive, said at the earnings conference that mobile chip sales were the main driver of the company’s earnings for the quarter, but that growth in other devices using its 5G chips, such as Internet of Things devices and networking devices, had also helped Qualcomm.
Qualcomm expects smartphone sales to surge next year as more consumers buy Apple’s new iPhone 12 and other 5G handsets, with 5G smartphone shipments reaching 450m-550m in 2021, at least double this year’s total.
Flora Tang, a research analyst at Counterpoint Research, told First Financial that several handset makers have begun to increase handset production next year.
“E.g. Xiaomi, Samsung, HMD, Motorola and so on. Some Chinese manufacturers are more aggressive in increasing their orders, not only to prepare for market share, but also to avoid risk in an uncertain environment, and the share of others is expected to grow significantly from the first quarter of 2021. Flora Tang told reporters that if Huawei’s parts supply does not improve, offline channels OPPO and vivo are expected to reap the best dividends with extensive coverage from first-tier to low-tier cities. Online channels Xiaomi and Realme are expected to reap the largest share. Apple will be the biggest beneficiary of China’s high-end smartphone market.
According to reporters, OPPO has increased mobile phone production in the second half of the year to 110 million units, meaning that OPPO mobile phone production will reach 170 million units, far exceeding OPPO’s shipments over the years, OPPO sales in 2019 only 120 million units. In 2021, Xiaomi and OPPO will increase their production capacity to 200 million units, an increase of about 50%.
It is worth noting that Q4’s financial results also include the licensing fees paid by Huawei as a result of Qualcomm’s previous one-time licensing settlement agreement with Huawei. Excluding the cost of this licensing agreement, Qualcomm’s revenue for the quarter also rose 35 percent from a year ago.
Qualcomm shares rose $3.52, or 2.81 percent, to $128.97 in regular trading on the Nasdaq. Qualcomm was up 12.97 percent in after-hours trading as of the time of writing.