Handset demand down in Q2 but Qualcomm still bullish on 5G in 2020

Expect more traction around mmWave 5G with upcoming auctions, activations

Qualcomm was within its second quarter 2020 revenue guidance despite a significant downturn in handset demand related to the COVID-19 pandemic and associated business closures and quarantine regulations. While the company sees this softening continuing into the next quarter, Qualcomm is sticking to its 2020 5G smartphone forecasts.

This week Qualcomm reported Q2 revenue of $5.2 billion against earlier guidance of $4.9 billion to $5.7 billion; Q3 revenue guidance is between $4.4 billion and $$5.2 billion. Click here for more detailed quarterly financial information. 

Qualcomm CEO Steve Mollenkopf, based on a Seeking Alpha transcript of an April 29 call with investors, said the “overall handset market” was down around 21% in the second quarter, based mostly on a sharp drop in demand in China. He said he expects the handset market to be down around 30% in Q3 “driven by the impact of shutdowns in the rest of the world, while benefitting from the rebound we are seeing in China.”

Mollenkopf tallied 85 5G license agreements, up from 80 in Q1, including “long-term global patent license” deals with Chinese device OEMs OPPO and Vivo for “multi-mode mobile devices.” Earlier projections for 2020 anticipated between 175 million and 225 million 5G devices shipped.

The CEO commented: “Total demand will depend on the speed of the economic recovery. However, we see no change in our calendar year 2020 5G smartphone forecast. As we look to the second half of calendar 2020, while there are a few regions with minor delays in 5G network deployments, overall 5G is progressing as planned and we continue to be well positioned to drive the rapid adoption of 5G globally.”

Elaborating on demand, Qualcomm President Cristiano Amon focused on 5G metrics out of the China market. He highlighted that 30% of devices sold into the channel were 5G devices and 71% of the new devices launched are 5G devices.

Discussing the state of 5G globally, Amon said, “I think while we’ve seen some delays in places, for example, like Europe, where auctions have not yet been completed in all the countries, what we have seen is acceleration in some other places…So, you may have some puts and takes, but in general, I think the 5G story remain[s] intact. And if anything, this current environment probably underscore[s] the importance of connectivity in telecom.”