SAN JOSE, Calif. – Smartphone growth will continue to slow next year, China’s OEMs will command a growing share of the market and the prices of chips going into handsets will continue to fall though less steeply than this year. That was the view from Qualcomm Inc. as it reported declining revenues and profits for its latest quarter and fiscal year.
The market dynamics hit Qualcomm especially hard for two reasons. It is still reeling from the loss of a design win in top-tier smartphones from Samsung, the market’s second largest vendor. And it is still re-negotiating licensing deals with individual OEMs in China at lower rates agreed on with the China government.
Global sales of 3G and 4G phones will expand 7-13% next year, down from 11-17% last year, Qualcomm forecasted as part of its fiscal fourth quarter report. Growth will be higher at about 15-16% among China’s OEMs, it said. However it expects revenue growth at low single-digit percentages due to declining prices.
“We expect further declines [in average selling prices (ASPs) in 2016] but probably at half the rate we saw in 2015 for a lot of reasons including further concentration [of the market] in China OEMs and more evidence China’s ASPs are increasing to come in line with non-China suppliers and that will continue,” said Derek Aberle, Qualcomm’s president in a telephone conference with financial analysts.
Qualcomm reported revenues of $5.5 billion for the quarter, down 18% from last year and 6% from the prior quarter. Profits of $1.1 billion were down 44% from a year ago and 10% from the last quarter. For its fiscal year, Qualcomm reported $25.3 billion in sales, down 5% from the prior year and $5.3 billion in profits down 34%.
Despite the declines, the numbers were slightly ahead of the company’s guidance to Wall Street. Seeing the storm ahead, the company announced in July a major restructuring, laying off 15% of its workforce. It foresees its fiscal 2016 as a transitional year with return to revenue and profit growth starting next fall.
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