Qualcomm forecast rises as China records strong chip sales amid AI boom

Qualcomm China sales: Qualcomm has exceeded Wall Street expectations with its forecast for quarterly sales and adjusted profit, driven by increased sales of higher-priced chips for Android smartphones featuring artificial intelligence capabilities. Following a downturn in smartphone sales last year, Qualcomm noted a resurgence in the Chinese Android market, particularly in the demand for premium devices capable of supporting AI chatbots.

The company reported a 40 per cent growth in sales to Chinese smartphone manufacturers during the first half of its fiscal year, signalling a rebound in the Chinese market. CEO Cristiano Amon attributed this growth to the increasing demand for smartphones with enhanced computational capabilities to accommodate AI functionalities, reflecting consumers' preference for more capable devices.

Despite facing competition from Huawei Technologies Co, Qualcomm appears to be benefiting from a broader trend towards more advanced devices in the Chinese market. While Huawei's flagship 5G smartphone posed competition, Qualcomm's position in the market remains robust, driven by the overall expansion of the premium smartphone segment.

Qualcomm's forecast for the third quarter, with midpoints of $9.2 billion in sales and $2.25 per share in adjusted profit, exceeded analyst estimates. The company's dominant position as the world's leading supplier of smartphone chips, with customers including Apple and Samsung, continues to contribute to its strong performance.

However, Qualcomm's optimistic outlook for the Chinese smartphone market may not extend to Apple's iPhone, which is facing fierce competition in China from Huawei and other manufacturers offering more affordable alternatives.

While Qualcomm anticipates a recovery among Android handset customers such as Oppo and Vivo, wireless connectivity chipmaker Qorvo has forecasted weaker quarterly results due to sluggish demand from the flagship smartphone market, particularly impacting Apple sales.

In the fiscal second quarter ended March 24, Qualcomm reported sales and adjusted profit of $9.39 billion and $2.44 per share, respectively, surpassing analyst expectations. The company aims to capitalise on consumer demand for devices capable of running AI applications directly on the device, rather than relying on external data centers.

In a bid to challenge Apple, Qualcomm plans to release a chip designed for laptops starting this summer, although initial sales are unlikely to significantly impact the third-quarter forecast.

Within Qualcomm's chip business, mobile handsets generated $6.18 billion in sales in the second quarter, while automotive and Internet-of-Things chip revenues reached $603 million and $1.24 billion, respectively, demonstrating strong demand across all product segments.

Analysts remain optimistic about Qualcomm's performance, particularly highlighting the growth in the auto business amidst ongoing struggles faced by competitors in the sector.

(With Reuters inputs)