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Qualcomm forecast beats estimates as diversification efforts pay off

:Qualcomm Inc on Wednesday forecast better-than-expected profits and revenue for its current quarter on soaring demand for chips used in phones, cars and other internet-connected devices.

The San Diego company, still the biggest supplier of chips for mobile phones, has worked to diversify its chip portfolio. Its optimistic forecast came even as smartphone makers such as Apple Inc have been struggling with supply chain issues and reporting uneven results.

Those global snarls have benefited Qualcomm because they have forced profit-hungry phone makers to focus their limited supplies on their most lucrative premium handsets, the market segment where Qualcomm is strongest. Qualcomm has also benefited from Huawei Technologies Co Ltd's exit from the smart phone market. The Chinese firm's Android phones had used proprietary chips, but many of the handsets replacing them use Qualcomm's chips.

Following Qualcomm's forecast, the company's shares rose 3.6per cent in after-hours trading.

Qualcomm said it expects adjusted earnings per share to grow between US$2.90 and US$3.10 per share for its first quarter, beating estimates of US$2.59 according to IBES data from Refinitiv.

Qualcomm Chief Executive Officer Cristiano Amon told Reuters that efforts undertaken earlier this year to secure additional chip supplies have been successful and are on track.

"It's reflected in our record Q1 guidance - it means we have supply," Amon said in an interview.

During a conference call with investors, Chief Financial Officer Akash Palkhiwala said Qualcomm expects fiscal 2022 adjusted profit growth of more than 20per cent, compared with Wall Street estimates of 12.5per cent growth, according to Refinitiv IBES estimates.

The company also said it expects revenue with a midpoint of US$10.40 billion for its fiscal first quarter, which includes the holiday shopping season in the United States and Europe, compared with analyst estimates of US$9.68 billion.

The upbeat forecast could signal the easing of a global chip shortage that has hit production for a number of major Qualcomm customers, including Apple and Samsung Electronics Co Ltd.

Qualcomm defied broader supply chain issues, even as one of its biggest customers, Apple, missed Wall Street expectations for iPhone sales. Apple Chief Executive Tim Cook told Reuters https://www.reuters.com/technology/apple-results-hit-by-supply-chain-woes-cook-says-holiday-quarter-impact-will-be-2021-10-28 the issues were poised to grow worse on a dollar basis during the holiday shopping quarter.

Qualcomm has worked to diversify its chip manufacturing partners, which are called foundries. It is one of few chip designers that uses both Samsung Electronics Co Ltd and Taiwan Semiconductor Manufacturing Co to make dueling versions of its cutting-edge chips. For older technologies it leans of a network of suppliers including TSMC, United Microelectronics Corp and China's Semiconductor Manufacturing International Corp.

"Some have said that Qualcomm's multi-foundry approach was too complex, but now it's looking very smart," said Patrick Moorhead, head of Moor Insights & Strategy.

Amon told Reuters the booming chip results were driven in large part by the Android phone market, where Qualcomm customers such as Xiaomi Corp are snapping up former Huawei users.

The chipmaker said revenue rose 43per cent to US$9.32 billion for the quarter ended Sept. 26, compared with estimates of US$8.86 billion, according to Refinitiv data. It earned US$2.55 per share, on an adjusted basis, exceeding analyst expectations of US$2.26.

Its chip segment had fourth quarter revenues of US$7.73 billion, above analyst expectations of US$7.27 billion, according to data from FactSet.

For decades, Qualcomm's biggest business was selling the modem chips that connect smart phones to wireless data networks. While that market remains its biggest, other markets such as radio-frequency chips, automotive chips and internet-of-things chips accounted for more than US$10 billion of its US$27 billion of chip revenue in fiscal 2021.

"If 38per cent (of chip revenue) doesn't do it, I don't know what does," Amon told Reuters about the company's diversification effort.

(Reporting by Stephen Nellis in San Francisco and Nivedita Balu in Bengaluru; Editing by David Gregorio)

Source: Reuters

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