QUALCOMM, Inc. (NASDAQ:QCOM) was reported to have decreased its entire annual revenue and earnings forecast back in January after Samsung (the largest Smartphone manufacturer in the world) dropped the Snapdragon 810 chip from its smart phones.
In its latest manufacturers of Galaxy S6, Samsung utilized its very own Exynos 7420, a 64-bit ARM based SoC instead of Qualcomm chip. The reason for doing so was basically overheating issues with Qualcomm’s 810 chip in the S5 last year. But that move certainly does not mean Samsung to be not benefiting from Qualcomm in its non-flagship smartphones.
Looking ahead at the S7, Samsung is expected to replace the Exynos which runs on stock ARM Cortex CPU cores with its own custom ARM-based design. This would give it tighter control over APIs, functionality, performance, and power efficiency. That robust performance could encourage other OEMs to buy Samsung’s SoCs instead of Qualcomm’s. Over the past few years, companies like Apple, Lenovo, and Meizu have all used Samsung SoCs at one time or another.
Not to mention, attracting more SoC and foundry customers would strengthen Samsung’s semiconductor business, which could offset its ongoing declines in mobile revenue and profit. Last year, revenue at Samsung’s semiconductor business rose 6% year over year and accounted for nearly a fifth of its top line. The division’s operating profit, which accounted for 35% of Samsung’s bottom line, improved 78%.
Keeping in consideration, After Samsung booted Snapdragon from the S6; Qualcomm slashed its full-year revenue guidance to a range between US$ 26 billion and US$28 billion, down from an earlier forecast of US$26.8 billion-US$28.8 billion. Qualcomm also revised its full-year EPS to between US$4.75- US$5.05, down from a prior forecast of US$5.05- US $5.35. That would represent a 4% to 10% year-over-year decline in earnings.
Losing Samsung and Apple will inevitably hurt Qualcomm’s top- and bottom-line growth. However, investors should remember that Qualcomm chipsets and modems still power the majority of smartphones worldwide.
