Qualcomm sees surge in Chinese smartphone market, AI technology key contributor

Qualcomm chip sales: On Thursday, Qualcomm's shares surged by 4 per cent in premarket trading, propelled by signals of a resurgence in demand for smartphone chips, particularly in China, buoyed by advancements in artificial intelligence (AI) technology after a two-year downturn.

The chipmaker reported a significant 40 per cent increase in sales to Chinese smartphone manufacturers during the first half of its fiscal year, a testament to the growing preference among consumers in the region for higher-priced devices equipped with AI capabilities, notably AI chatbots.

According to IDC analyst Nabila Popal, Chinese smartphone makers, traditionally reliant on MediaTek chips, are increasingly turning to Qualcomm's high-end chips to embrace the AI agenda. This shift is anticipated to drive Qualcomm's growth, particularly given the significant recovery expected from Chinese original equipment manufacturers (OEMs) following a challenging period in the past two years.

Qualcomm's positive outlook extends beyond the smartphone market, with projected third-quarter sales exceeding estimates, driven by growth in its Internet of Things (IoT) and automotive segments.

The company's upbeat performance resonated across the semiconductor sector, with other industry players like Arm and Broadcom witnessing premarket gains of 2.8 per cent and 2.4 per cent, respectively.

Preliminary data from research firm IDC underscores the impact of AI technology and innovative products like foldable smartphones in driving differentiation among Android vendors, particularly in the high-end segment, garnering increased interest from Chinese consumers in the first quarter of 2024.

Analysts at Wolfe Research express optimism about Qualcomm's prospects, foreseeing the potential for further growth, especially considering the subdued Android cycle last year and anticipated improvements in IoT as inventory normalises.

Reflecting the positive sentiment, at least 14 analysts have raised their price targets on Qualcomm, according to LSEG data.

Qualcomm's shares have experienced a notable 13.5 per cent surge year-to-date, building on a 31.5 per cent increase in 2023. Meanwhile, shares of Apple, set to report earnings after market close on Thursday, also saw a premarket uptick of 1.05 per cent.

(With Reuters inputs.)