Qualcomm to Return to the Server Market by Launching New Chips

Qualcomm is returning to the server market with a new chip in its bid to decrease its reliance on smartphones.

After the announcement on Thursday, Aug. 18, the shares of the company increased 3% in trading.

Qualcomm's Chip BId

According to Bloomberg, the chipmaker is seeking customers for a product stemming from its purchase of Nuvia Inc., adding the Amazon cloud division, Amazon Web Services or AWS, has agreed to take a look at Qualcomm's offerings.

In 2021, the chipmaker acquired Nuvia, a chip startup founded by Apple veterans, with plans to put the company's technology into its smartphone, laptop, and automotive processors.

Amazon confirmed that it has agreed to check the offering, while Qualcomm directed Reuters to its press release when it closed the Nuvia deal in 2021.

Qualcomm's Sales Hit

The San Diego-based chipmaker also released its forecast fourth-quarter revenue in its Wall Street targets, bracing for a difficult economy and a slowdown in smartphone demand that could affect its mainstay handset chip business.

Shares of Qualcomm fell 2.8% in extended trading, deepening the drop in 2022 of about 18% amid a broader selloff in growth stocks, according to Reuters.

Akash Palkhiwala, the Chief Financial Officer of Qualcomm said that they expect the elevated uncertainty in the global economy and the impact of COVID-19 measures in China will cause customers to act with caution in managing their purchases in the second half of the year.

The Ukraine war and China lockdowns have also worsened supply-chain snags and hurt demand, forcing a lot of phone makers to cut orders for chips.

The company now expects smartphone sales to fall 5% in 2022, compared with its prior outlook for flat growth. Meanwhile, IDC had projected a 3.5% drop in smartphone shipments.

More than half of Qualcomm's total sales come from the handset segment, which makes semiconductors for Apple iPhones and semiconductors that power the Samsung Galaxy S series.

Company executives reiterated that the company's focus on supplying chips to premium phones and its push to diversify into other sectors like automotive would cushion the hit from cooling smartphone demand.

In the third quarter, the semiconductor designer beat expectations for adjusted revenue, driven by growth of 59% at its handset chip business, according to Times of San Diego.

Cristiano Amon, the Chief Executive of Qualcomm, said that the revenue from the automotive business reached a record in the third quarter and would surpass that in the next.

The company forecast current-quarter revenue between $11 billion and $11,8 billion, compared with the estimates of the analysts of $11.87 billion, according to Refinitiv data.

Qualcomm expects adjusted earnings per share of between $3 and $3.30, compared with the estimates of $3.23.

Adjusted revenue for the quarter ended June 26 was $10.93 billion, compared with the estimates of the analysts of $10.88 billion.

Revenue for Qualcomm's chip designing business was $9.38 billion, up 45% on the year while its licensing business produced $1.52 billion, which is up 2% on the year.

Separately, the company said it had extended its patent license agreement with Samsung Electronics through the end of 2030. That will help secure the revenue stability of Qualcomm for its licensing business.

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Written by Sophie Webster