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With the Apple business likely to experience strain in the coming years, analysts are curious about the exact impact on Qualcomm’s revenue.
The shares of the American semiconductor company, Qualcomm Inc (NASDAQ: QCOM) climbed to its All-Time High (ATH) on Tuesday after the firm’s executives detailed plans to grow beyond its primary customer, Apple Inc (NASDAQ: AAPL). At an investor’s conference in New York, Qualcomm’s leaders pointed out that its future growth is not dependent on Apple’s sustained patronage as it is building its relationship with other customers in other areas.
Qualcomm is currently the primary supplier of the wireless modem chips that connect Apple’s devices to mobile networks. However, the tech giant has unveiled plans to start developing its own modem chips, placing a cloud of uncertainty on Qualcomm’s business. In the company’s projections, it will likely supply just 20% of the modem chips needed for the 2023 iPhone model.
QCOM allayed all forms of concerns its businesses will be impacted by the Apple strain, reaffirming that its chips business unit, QCT is on track to grow by at least 12% in 2024.
“As we continue to invest in leading RF front end technology, there’s opportunity to supply to Apple. But as it relates to Apple, we don’t make any assumptions other than the assumptions we have in the plan,” said Qualcomm’s Chief Executive Officer Cristiano Amon. “So everything on Apple, we should think about upside.”
With the Apple business likely to experience strain in the coming years, analysts are curious about the exact impact on Qualcomm’s revenue, however, the firm’s executives declined to give such indications.
“The potential for Apple to eventually internalize their own chipsets remains an overhang on the stock’s multiple, and we believe many investors are looking for some sort of clarity on the level of earnings power they might underwrite without Apple chips in the model,” Bernstein analyst Stacy Rasgon wrote in a note on Monday.
QCOM Shares ATH Fueled by the Promise of Extension to Other Markets
Despite the fact that Apple may source its modem chip in-house, Qualcomm is confident it will compete to supply the chips for most other phone brands it currently has partnerships with.
The positivity with which it projects its growth pushed the QCOM shares to close Tuesday’s session up 7.89% to $181.81, the stock’s ATH. At this level, the stock is now up 32,366.07% from its listing price.
Beyond Apple, QCOM said it has inked a partnership with German automaker, Bayerische Motoren Werke AG (ETR: BMW) to supply the chips for its self-driving cars. The company hopes to increase its automobile-focused revenue from $1 billion in the 2021 fiscal year to $3.5 billion in five years and $8 billion in 10 years.
The projection for revenues for the supply of Internet of Things (IoT) is expected to reach $9 billion by 2021, an 80% increase from the $5 billion for the unit in fiscal 2021. Beyond Apple, the company considers chip supplies to Virtual Reality (VR) headsets such as Meta Platform Inc’s (NASDAQ: FB) Oculus Quest 2 as some of its diversification plans.
“We’re no longer defined by a single end market and a single customer relationship,” Amon said during the event.