Qualcomm said Wednesday that an outbreak of China’s coronavirus poses a potential threat to the mobile phone industry and could have an impact on manufacturing and sales, Reuters reported. Qualcomm Chief Financial Officer Akash Palkhiwala said on an investor conference call after the quarterly results that the company expected “a lot of uncertainty about the impact of coronavirus on mobile phone demand and supply chain.”
Qualcomm’s forecast for second-quarter revenue was much higher than Wall Street’s, the latest sign that the long-term slowdown in the global chip industry is easing.
The forecast is broader than ever, as outbreaks in China have killed hundreds of people and caused panic around the world. Akash Palkhiwala said it lowered its earnings per share forecast by 5 cents in response to possible disruptions.
In a conference call, Qualcomm executives sought to allay analysts’ concerns about the outbreak, saying the biggest 5G market this year is expected to be in the U.S., South Korea and Japan, and that the company could weather the disruption.
“If we have problems in China, whether it’s supply chain issues or demand issues, we tend to be able to get support from other regions,” said Steve Mollenkopf, Qualcomm’s chief executive. So we tend to look at the business from a planning perspective. We want to make sure that we maintain this advantage in different markets. “
But investors’ concerns about the virus overshadowed better-than-expected results.
While Qualcomm dominates mobile modems and processors, the company has been trying to win customers with a chip called the RF front end, which is more complex in 5G phones. Although Qualcomm’s sales forecast for its modems is lower than Wall Street’s, sales of each modem it ships are higher than it used to be.
Steve Mollenkopf said in an interview that Qualcomm’s forecast reflected strong demand for RF chips from mobile phone makers, particularly in China. In China, brands are bringing 5G capabilities to cheaper end devices that will sell heavily faster than Qualcomm had expected.
Qualcomm’s estimate for 5G handset sales in 2020 remains unchanged at between 175 million and 225 million units.
Qualcomm forecast second-quarter revenue of between $4.9 billion and $5.7 billion, according to IBES data from Refinitiv, which was well above analysts’ average estimate of $5.08 billion. According to Refinitiv, the company forecast revenue in its chip division at between $3.9 billion and $4.5 billion, compared with an average analyst estimate of $3.8 billion.