Qualcomm and Samsung are hurting from lower demand for chips

What you need to know

• On Wednesday, Qualcomm announced its financial earnings for the second quarter of 2023.
• Revenue decreased 17% year-over-year due to weak demand for headphone chips.
• Qualcomm’s headphone outlook has been lowered due to ongoing macroeconomic challenges.

Times are tough in the mobile industry, and Qualcomm’s recent financial earnings show that. The company announced its financials for the second quarter of 2023 on Wednesday, revealing revenues of $9.28 billion, a whopping 17% drop compared to the same period last year.

The company’s QCT business, which makes up the majority of its revenue, posted $7.94 billion for the quarter. That consisted mostly of headphone chip sales, which were also down 17% year over year to $6.11 billion.

“As we navigate this challenging environment, we remain focused on the critical factors we can control to emerge stronger from this downturn — our leading technology roadmap, best-in-class product suite, strong customer relationships, and operational efficiencies,” Qualcomm CEO Cristiano said. Amon in a statement. “Our top priority remains implementing our diversification strategy and investing in areas that create long-term value.”

The company launched the Snapdragon 8 Gen 2 chip at the end of 2022, but the number of flagship smartphones using the flagship SoC has grown throughout the quarter. There has also been an influx of devices using the Snapdragon 8+ Gen 1 launched in mid-2022, particularly in new foldable phones. Despite this, Qualcomm continues to see weak demand due to low customer inventory.

Demand will continue to affect the company in the current quarter, as Qualcomm expects headphone units to be lower than it previously forecast.

“Given the weaker phone outlook, until demand normalizes and visibility improves, we expect customers to remain cautious in their purchases and reduce channel inventory risk further,” Qualcomm CFO Akash Palkhiwala said during the earnings call.

On the plus side, cars saw 20% growth “driven by increased adoption of our digital Snapdragon chassis,” according to Amon.

Qualcomm isn’t the only company suffering from weak chip demand. Samsung recently announced its latest quarterly financials, which saw the company’s profits drop by a staggering 95%. In response to the massive drop, Samsung has stated that it will reduce its chip production.

Meanwhile, both companies benefited from sales of the Galaxy S23 series, particularly those of the Galaxy S23 Ultra, which accounted for the majority of Samsung’s recent flagship phone sales. This is good news for Qualcomm, the global chip supplier for phones, as well as many of the best Android phones on the market.

However, it appears that this may not be enough as Qualcomm is feeling the pressure of weaker smartphone shipments in global markets.

“Fiscal headwinds have increased significantly relative to our initial forecasts in the fiscal year with a combination of an uncertain macro outlook, persistent inflation, and a slower recovery in China, which continues to weigh on demand globally,” Palkhewala says.

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