Under $100 Threat... Qualcomm Falls Like Autumn Leaves Amid 'Zhong Shock'

Qualcomm, a representative of the mobile chip market, has not been able to escape the slump in its stock price. The stock price, which had been sluggish due to worsening industry conditions, plunged further following China's 'iPhone ban,' falling back to the level seen at the end of last year. As the US-China trade war intensifies in the race to dominate the global semiconductor market, Qualcomm's stock price decline is expected to continue for the time being.

Qualcomm's stock, listed on the US Nasdaq stock exchange, closed at $106.40 on the 7th (local time), down 7.22% from the previous session. The news of the Chinese government's ban on Apple iPhone usage dealt a direct blow to the stock price that day. The Wall Street Journal (WSJ) reported that the Chinese government recently prohibited central government departments and agency officials from bringing or using iPhones and other US and foreign brand devices in their offices or for work.

Qualcomm's stock price has plunged 44% from its peak of $188.69 in January last year. The stock price, which had fluctuated due to deteriorating earnings and negative news from China, has fallen nearly 4% so far this year (as of the closing price on the 8th). The stock price decline over the past month and a half reached 20%. Bloomberg reported, "Due to adverse conditions in its largest market, China, Qualcomm has experienced its worst stock price decline in the past month."

With China's Huawei unveiling the 'Mate 60 Pro' smartphone equipped with 7nm chips despite US export controls, US regulatory pressure on China is expected to increase further. Qualcomm, one of the largest suppliers for Apple iPhones, generates about two-thirds of its total sales from China (including Hong Kong).

Image source=Reuters Yonhap News

With global smartphone demand sluggish and negative factors from China added, Qualcomm's earnings are also deteriorating. Qualcomm's net profit for Q2 (its fiscal Q3 2023) was $1.83 billion (approximately 2.34 trillion KRW), a 52% plunge compared to $3.73 billion in the same period last year. Earnings per share were $1.60.

During the same period, revenue was $8.451 billion, down 23% from $10.936 billion in the same period last year. Both earnings per share and revenue fell short of market expectations. Market estimates compiled by financial information firm FactSet were earnings per share of $1.81 and revenue of $8.51 billion.

Qualcomm expects that it will take longer than anticipated to exhaust the excess supply in the smartphone market caused by the COVID-19 pandemic, and forecasts that Q3 revenue and profits will also fall short of Wall Street estimates. Qualcomm's Q3 revenue guidance is $8.1 billion to $8.9 billion, with the midpoint ($8.5 billion) below the market estimate ($8.7 billion).

In response to the worsening industry conditions, Qualcomm recently began workforce restructuring. Cristiano Amon, Qualcomm's CEO, stated, "We plan additional cost reductions, and most of that will be achieved through workforce reductions."