Compared to Qualcomm's initial forecast of a mid-single-digit drop in handset volumes this year, the company is now projecting a low double-digit-percentage decline in phone sales, as per Reuters.
According to the company that provides chips and modems in phones, the sales of phones will decline much more than what is expected in 2022. It blames the phenomenon to uncertain economic environment.
This forecast comes after the company issued its latest earnings release, which was published on Wednesday.
Qualcomm's Forecast for Holiday-Quarter Revenue is Less than the Analyst's Estimates
The forecast of Qualcomm for holiday-quarter revenue is $2 billion lower than the analyst's estimates.
The expected revenue is $9.2 billion to $10 billion in the fiscal first quarter, according to the company. This is $2 billion short of the analyst's estimate of $12 billion.
According to Reuters, the drop in forecast is a result of a slump in sales to customers of smartphone.
Both Intel and Advanced Micro Devices also reduce their earnings estimates. This indicates that the slump in phone demand is impacting the industry in general.
Other chipmakers, such as Texas Instruments and Micron Technology, are also worried about a sharp drop in demand from electronics companies.
This is a result of the customers decision to cut discretionary spending due to decades-high inflation, fears of an economic slowdown, and rising interest rates.
To cope up with the slowdown, Qualcomm is freezing hiring, according to a company's executives.
The company said that it may take two quarters to clear up the buildup of extra inventory.
According IDC analyst Nabila Popal, smartphone market is expected to recover in the second half of 2023.
She added that demand in smartphone has dropped globally. It was observed in China and in other emerging markets.
Read Also: [RUMOR] Samsung to Switch From Exynos to Qualcomm for Galaxy S23 Series
Qualcomm Updates their Guidance for 2022
Qualcomm said that they are updating their guidance for calendar year 2022 for 3G/4G/5G handset volumes. From an initial year-over-year mid-single-digit percentage drop, they updated it to a low double-digit percentage decline.
According to the company the "rapid deterioration in demand" as well as the "easing of supply constraints" in the industry of semiconductor have led to an increased inventory
The company said that their largest customers now have to draw down their inventory.
Among the largest customers Qualcomm is referring to are Samsung and Apple.
The two companies use chips from Qualcomm in their smartphones. According to reports, Samsung and Apple are experiencing struggles because they are not selling enough phones.
According to the The Verge, Samsung had 50 million smartphones in stock in June. Meanwhile, in September, Apple made a decision not to increase production of its new flagship, the iPhone 14 lineup.
For the previous quarter, the revenue of iPhone was below estimates. This is another sign of a weak demand for the iPhone 14 lineup.
The decline in phone sales could possible continue through the holiday sales season. This is indicated by Qualcomm's updated guidance.
The company said that it will take "roughly 8-10 weeks of elevated inventory." Moreover, they are expecting that the issue "may take a couple of quarters to work itself through."
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