Qualcomm is counting down the days to when it loses Apple as a modem customer, guiding weak for Q3 as orders slow.
The second quarter results for Qualcomm were within expected guidance ranges, but forward-looking statements show uncertainty for the company. The global economy continues to have an adverse effect on premium smartphone sales, which is one of many problems Qualcomm cites.
In Qualcomm's quarterly earnings results and associated 10Q form, the company references its move beyond mobile handsets multiple times. One segment directly references Apple and its move to in-house modem production as a significant factor affecting future business.
Apple purchases Qualcomm's "thin" modems — meaning that it does not include application processing technology like the Snapdragon line. These have lower revenue and margin, yet Apple is a significant customer that buys these in bulk.
Qualcomm is highly aware of Apple's plans to move its modem to an in-house solution. The company stated as much in its 10Q form.
"In December 2019, Apple acquired Intel's modem assets and is developing its own modem products using those assets. Accordingly, we expect Apple to use its own modem products, rather than our products, in some or all of its future devices."
As Qualcomm looks forward, the loss of Apple as a customer is an obvious concern. It hopes to expand further into vehicle chipsets and modems to diversify its portfolio.
However, smartphones aren't the only market impacted by the economic downturn. Vehicle shipments have slowed, thus making Qualcomm's bet in vehicle parts less impactful.
The weak guidance for Q3 with Apple in mind is interesting, as Apple seemingly won't be ready to ship its modem until 2025. This could indicate Apple's supply chain back stock inventory is being filled early to minimize orders throughout the year.
Apple's eventual exit from Qualcomm isn't the only concern, as US and China relations continue to heat up. A 2025 "Made in China" campaign threatens to alienate its US customers while the US seeks to distance itself from China.
Qualcomm expects around $8 billion in revenue for Q3. That's a slight dip from the $9.3 billion earned for Q2.