5G to usher in brighter future, Qualcomm tells Wall Street

Qualcomm Inc said sales are poised for a comeback as the chip maker supplies some key ingredients of the global shift toward the next generation of wireless technology. But some investors were skeptical.
“We have the best products and the best technology road map that I think we’ve ever had in the company history,” Qualcomm chief executive officer Steven Mollenkopf said on Tuesday at the company’s analyst day in New York.
The event was the first of its kind in three years, a period that included sluggish smartphone sales, a wide-ranging legal dispute with Apple Incand a thwarted takeover by Broadcom Inc. With most those issues behind them, Qualcomm executives took the stage to outline some of the growth possibilities ahead.
That rosy message from the day’s presentations failed to sway the market as Qualcomm shares fell 3.2% to $87.62 at 3:40pm in New York. Among the top investor questions was when and how Qualcomm will be able to capitalise on 5G, the new wireless technology. Investors have been waiting to see whether the San Diego-based company, after five consecutive annual revenue declines, can parlay its claim of leadership in wireless technology into a return to sales growth.
Qualcomm’s chips are the main component in most of the world’s smartphones. The company has suffered shrinking revenue as consumers hang on to their handsets longer. That tide has turned, said chief financial officer Akash Palkhiwala, with chip industry sales projected to increase more than 10% by the end of 2022.
Qualcomm has signed 75 licensing agreements for 5G in the past two years, a pace far quicker than the seven agreements for 4G in its early days, Alex Rogers, Qualcomm’s head of licensing, told analysts. This builds on the technology licensing revenue growth in the most recent quarter, which was up 4% from a year earlier to $1.16bn.
The company gets the bulk of its revenue from selling chips that run phones and connect them to cellular networks, while most of its profit comes from licensing patents.
Qualcomm remains under a cloud as it awaits an appeal of a Federal Trade Commission ruling that alleged unfair business practices and ordered the company to renegotiate its patent licenses. The chipmaker is appealing the decision and expects a ruling that could take anywhere from seven months to a year and a half, Qualcomm attorney Donald Rosenberg said during the analyst conference. One potential bright spot is overseas, where business in China is improving, Mollenkopf said on Bloomberg TV.
“Our China business is actually quite strong,” thanks to the accelerated rollout of 5G, Mollenkopf said. “In some ways it’s insulated from some of the trade discussions.”
China is not ahead on 5G “from the technology perspective,” he said. “But if you look at the deployment… China is going quite fast. That doesn’t mean the US is not going quickly as well, but it means you’re seeing for first time China and US launching for first time in the same calendar year. It used to be a two-year trial.”