5G demand helps Qualcomm avoid chip market woes

(Image credit: Shutterstock)

Demand for 5G technology is helping Qualcomm to avoid the slump anticipated by other chip manufacturers due to the coronavirus pandemic.

The vast majority of Qualcomm’s revenue comes from licences for its mobile processor and wireless technology, meaning it is susceptible to any downturn in the smartphone market. It has invested heavily in 5G, with the first compatible devices launched last year.

Global smartphone sales have been hit by government restrictions on people’s movement while the supply chain has been affected by factory closures. Just 61.8 million devices were sold in February 2020, down from 99.2 million last year. This 38 per cent decline is the biggest fall off in smartphone market history.

Qualcomm results

The San Diego-based firm did admit it anticipated a 30 per cent drop in handset shipments during the quarter as consumers either abandon or delay device purchases. However, crucially, it does not expect 5G forecasts to change significantly.

Amid wider market challenges, Qualcomm posted positive Q2 figures with revenues up 5 per cent to $5.2 billion – in line with expectations – and believes Q3 revenues will be in line with previous estimates.

“We executed extremely well in the second fiscal quarter, with strong Non-GAAP results in line with our guidance, demonstrating the strength of our business model and the resilience of our team to respond quickly to the unique challenges presented by the global pandemic,” said Qualcomm CEO Steve Mollenkopf.

There is no doubt that 2020 will be a difficult year for the industry but supply chain disruption has been eased by the reversal of some restrictions in China and it is believed there will be an upturn in 2021.

CCS Insight says delayed purchases and the wider availability of 5G are set to see sales increase by 12 per cent in 2021, outpacing 2019 by four per cent, while in 2022 there will be a growth rate of 13 per cent, leading to sales surpassing 2 billion.

Qualcomm, with its 5G technology portfolio, stands to benefit from this increase. However there are concerns that coronavirus could delay the rollout of next-generation-networks in Europe.

Steve McCaskill is TechRadar Pro's resident mobile industry expert, covering all aspects of the UK and global news, from operators to service providers and everything in between. He is a former editor of Silicon UK and journalist with over a decade's experience in the technology industry, writing about technology, in particular, telecoms, mobile and sports tech, sports, video games and media.