Chip giants take a beating

James Middleton

January 29, 2009

2 Min Read
Chip giants take a beating

US chip shop Qualcomm said Wednesday that net income for the three months to the end of December fell 56 per cent year on year and 61 per cent sequentially to $341m as mobile phone shipments plummeted.

The company reported quarterly revenues of $2.52bn, up 3 per cent year on year and down 25 per cent sequentially.

“The CDMA inventory channel has contracted as we expected, and the business environment continues to remain uncertain. Reduced visibility in the marketplace makes it difficult to forecast future inventory levels or predict when a recovery will begin. As a result, while we continue to estimate healthy growth in the CDMA-device market, we have lowered our shipment estimate for calendar year 2009,” said Paul Jacobs, chief executive officer of Qualcomm.

Rival US manufacturer, STMicroelectronics fared little better. The company reported a quarterly net loss of $366m compared to a profit of $20m in the same period last year, while net sales fell to $2.26bn from $2.7bn a year ago.

However there was a bright side. While quarterly wireless revenues decreased 17.4 per cent on a sequential basis, reflecting the painful fourth quarter for handset vendors, on a year on year basis, wireless net revenues increased 29.6 per cent reflecting additional sales from ST Micro’s joint venture with NXP Wireless as well as an improved product mix and expanded customer base.

Last year, NXP and STMicroelectronics agreed to combine their wireless operations in a joint venture better equipped to target the major handset manufacturers. Philips spin off NXP and US-based STMicroelectronics said the deal would make the new venture a “solid top-three industry player”, tailing Qualcomm and Texas Instruments.

Commenting on STM’s results, Richard Windsor, global technology specialist at Nomura Securities, said: “There is still a long way to go. 2010 is going to be a horrible year but I remain confident that STM will pull through. The difference between STM and other chipset vendors in that it already has the customers on board. This is in stark contrast to many of the others who are still struggling to find customers to take their 3G basebands. In 2010 STM should begin to see meaningful revenues from Nokia which combined with benefits from the restructuring program will make a big difference to earnings. I think that 2009 could see a number of competitors exit the market leaving STM as the only credible alternative to Qualcomm for 3G chipsets. This is likely to trigger a big upswing in interest in STM’s products and underpin the earnings recovery.”

Earlier this week US chip manufacturer Texas Instruments announced 3,400 job cuts, as fourth quarter profits dropped 86 per cent.

During 2008, mobile handset shipments decreased worldwide, resulting in shrinking wireless chipset revenues for the likes of TI. The firm recorded fourth quarter income of $107m, while revenues dropped 30 per cent year on year to $2.5bn.

About the Author(s)

James Middleton

James Middleton is managing editor of | Follow him @telecomsjames

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