Qualcomm (QCOM) beat Wall Street’s expectations with its third quarter earnings report, and said future growth will be driven by smartphone adoption in emerging markets and by upgrades in the developed world. As the world’s leading supplier of applications processors for smartphones, Qualcomm’s growth is often seen as a barometer of the smartphone market. It’s a market that is clearly booming worldwide, but here in the U.S. some industry observers have suggested that it may be nearing saturation.
“I’m often asked about the potential slowing pace of innovation in smartphones,” said CEO Paul Jacobs yesterday on Qualcomm’s earnings call. “I can assure you that we do not see it here at Qualcomm. The breadth of technology being developed and the demand for new features and device capabilities from our customers remains extremely strong.” Jacobs went on to say that Qualcomm continues to see significant advancement in almost all areas of smartphone technology: the modem, RF, CPUs, GPUs, DSPs and multimedia, connectivity, sensors and displays.
In emerging markets, Jacobs noted that wireless devices represent the only chance many people have to connect to the Internet. “3G and 4G technology are still in the early stages of adoption in many parts of the world and have a very long runway of attractive growth potential,” he said.
Qualcomm reported revenue of $6.24 billion, up 35% from the third quarter of last year. Net income was $1.58 billion, up 31% from the year-ago period. The company shipped 172 million MSM chips, up 22% from the year-ago quarter.
Smartphone applications processors are the biggest contributor to Qualcomm’s revenue. According to estimates from Strategy Analytics, the company had almost 50% of the $3.6 billion global smartphone applications processor market during the first quarter. The firm expects Qualcomm to maintain this market share in the near term.
“Provisionally we estimate Qualcomm to finish the year 2013 with 45-50% revenue share,” Strategy Analytics senior analyst Sravan Kundojjala told RCR Wireless News earlier this month. “Qualcomm’s LTE Snapdragon chips will help maintain its share for the rest of the year, despite increasing competition from MediaTek, Spreadtrum and Broadcom.”
Strategy Analytics estimates that the smartphone applications processor market grew 37% year-on-year during the second quarter, after growing 50% year-on-year in Q1. The firm expects growth rates to deteriorate somewhat during the remainder of 2013 as average selling prices (ASPs) for processors come down. Qualcomm noted during its earnings call yesterday that it is forecasting a slight decline in processor ASPs over the next five years, but that it expects higher sales volumes to counter the impact of lower ASPs.
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