Qualcomm, Samsung Slump on Mixed Earnings, but ARM Rises Above
April 25, 2014 7:53 AM
comment(s) - last by
(Source: BBC News)
Chip licenser was the clearest winner in the mobile sector with an impressive performance, as usual
Apple, Inc. (
) delivered mixed news in its earnings report this week. While its profit was up (from
$9.5B USD in fiscal Q2 2013
to $10.2B USD in fiscal Q2 2014), sales of growth of the iPhone was only modest (~17 percent) and
iPad sales action shrank
as the tablet market grew.
I. Samsung Echoes Apple, But Rests Hopes on GS5, Budget Offerings
Things were somewhat similar
-- or perhaps even worse -- for Apple's archrival Samsung Electronics Comp., Ltd. (
), according to its just announced unaudited earnings results. Samsung fell short of analyst hopes of W54T ($52B USD), announcing quarterly earnings of W53T ($51B USD) for Q1 2014.
Samsung saw an operating profit of 8.40T won (~$8.09B USD) in Q1 2014, down a little over 4 percent from Q1 2013 (when it earned W8.7T -- $8.38B USD). Assuming that net profit is also destined to dip and given that Samsung Electronics also saw a dip in net profit in Q4 2013 (with a profit of W7.24T -- $6.97B USD), it looks poised to have seen its first two successive quarterly declines in profit since 2011.
Q1 2014 was the current call for the Samsung Galaxy S4, which launched last March.
[Image Source: AP]
Another mixed sign for Samsung Electronics is that the Galaxy S and Note lines now only constitute 59 percent of the profits of its mobile unit -- its most lucrative smartphone unit. That could be viewed in a positive light (as in Samsung's revenue is more diversified and less dependent on premium sales) or negatively (profits are decreasing, premium sales decline is driving decrease).
Q1 2014 sales for Samsung Electronics were led by
the aging Galaxy S4
. That points to the key source of hope that the fall in premium sales could reverse with the just launched
. The Galaxy S5 is expected to carry lower margins that the Galaxy S4, but at least it's selling well; it has thus far been
beating the Galaxy S4's sales pace
from last year.
The Samsung Galaxy S5
Two key factors to its success are making buyers aware of its major upgrade to the Galaxy series' camera module (with Samsung's new ISOCELL technology) and on using incentives to drive sales.
The former improvement went unnoticed by many analysts, who focused primarily on the Galaxy S5's body design, which they felt wasn't enough of a step up from last year's Galaxy S4. Analysts did appreciate that Samsung some trimmed 10 percent off the price of the Galaxy S5 versus its predecessor. They also reacted positively to its plan to offer GS5 buyers an average of W600k ($578 USD) in incentives (apps, music, etc.).
But to some extent the GS5's success is less critical to Samsung as it's slowly shifting towards a mobile base more heavily driven by budget and mid-range smartphone sales.
Japanese investment house Nomura Holdings, Inc. (
) and U.S. market research firm Strategy Analytics, Samsung Electronics sold 90 million smartphones in Q1 2014, up slightly from 86 million in Q4 2013. That's weaker growth (~4.7 percent) than Apple even, although to its credit Samsung still outsells Apple more than 2-to-1 at present volume.
Both Samsung and Apple, the world's number one and two smartphone producers, manufacture their own system-on-a-chip (SoC) brains to go in their smartphones. Qualcomm, Inc. (
) vends the SoCs for most of the other smartphone manufacturers, and also provides modems and/or integrated circuits for Samsung and Apple devices.
Qualcomm's fiscal Q2 2014 (calendar Q1 2014) earnings were up in both revenue and profit, but gains on a year-to-year quarterly basis were so small, that analysts have grown convinced that the top chipmaker is in defense mode.
Qualcomm grew its fiscal Q2 2014 revenue by 4 percent. That took it to revenue of $6.37B USD for the quarter, versus
the Thomson Reuters I/B/E/S average
analyst hope of $6.48B USD. Net income (profit) was $1.96B USD, up only 5 percent. That was modestly better than the analyst average of ~$1.83B USD.
China saw a delayed rollout of LTE, which in turn drove lower demand in emerging markets for Qualcomm's modem chips, which provide international compatibility across numerous cellular bands and 2G, 3G, 3.5G, 4G, and advanced 4G standards. But Qualcomm told investors that H2 2014 should more than make up for that.
LTE rollout in emerging markets like China is expected to drive modem growth for
Qualcomm in H2 2013.
China Mobile will be leading the LTE push in China. China had initially plotted its own form of LTE, but switched over to a more traditional LTE scheme, like the kinds used in Europe and the U.S. Once China Mobile's network goes live, Qualcomm expects to see a spike in demand of its most lucrative modems -- 4G LTE compatible models, such as
the Gobi 9x35 modem
Qualcomm's new CEO Steve Mullenkopf
, who replaced the departing Paul Jacobs, Ph.D, commented:
We delivered another solid quarter, driven by demand for our leading multimode 3G/LTE chipset solutions and record licensing revenues. Looking forward, we are pleased to be raising our earnings per share guidance for the fiscal year. We continue to see increasing demand for our industry-leading chipsets and strong growth in calendar year 2014 of 3G/4G smartphones around the world.
Qualcomm's new CEO Steve Mollenkopf is focused on global LTE and the 64-bit transition.
[Image Source: Jason Mick/DailyTech LLC]
Qualcomm is in the midst of
shifting its production globally
towards 64-bit CPUs
Aside from the revenue miss and wariness regarding Qualcomm's predictions of LTE modem growth, Qualcomm also is suffering from a Chinese antitrust investigation into ugly allegations that it engaged in bribery to outsell domestic rivals like
Chinese SoC-maker MediaTek
, Inc. (
Chinese telecom equipment and handset provider Huawei
Technology Comp., Ltd. (
). Qualcomm reportedly used these abuses to overcharge and exclude rivals, with its large portfolio of international wireless patents.
Qualcomm's lawyers are reportedly negotiating with Chinese bureaucrats, trying to avoid the worse case scenario, a fine which
reports could be as hefty as $1B USD -- or roughly half a quarter's worth of profit for the chipmaker.
MediaTek reports its earnings on April 30. NVIDIA Corp. (
) -- another smaller SoC producing rival to Qualcomm --
saw a rise
in revenue and profit in its fiscal Q4 2014 (calendar Q4 2013), but a slight erosion in gross margin. It reports its fiscal Q1 2015 (calendar Q1 2014) earnings on May 15.
An estimate on 4-Traders.com
predicts a 16 percent growth in net profit, although part of that is likely
due to NVIDIA's new
The Tegra 3 and Tegra 4 failed to attract many OEM design wins as they waged war with the Snapdragon S4 and 200/400/600/800 series chips from Qualcomm. NVIDIA is hoping for better luck against the Snapdragon 210/410/610/810 (64-bit) with its
brand new Tegra K1 SoC
Early benchmarks suggest
that the Tegra K1 in quad-core configuration should be able to best anything other than perhaps the unreleased Qualcomm Snapdragon 810.
III. ARM -- The King is Back, Baby
ARM Holdings is the silent force behind the smartphone and tablet industries, posting strong double-digit growth most quarters, as the mobile market continues to grow. Mobile CPU makers virtually universally adopt its instruction sets. And it also offers pre-designed CPU and GPU cores for chipmaker partners to customize. Given that it has no direct production presence and operates purely as a licenser, ARM maintains superb margins. But, much like Apple and Samsung, it's influence and strong financials have earned it high analyst expectations.
One might expect that ARM Holdings plc (
) would suffer given the weak profits from Qualcomm and Samsung.
Last quarter ARM saw modest licensing revenue gains
, but fell short of analysts' high hopes.
But despite the trouble spots from Samsung and others, it appears that the modest iPhone sales and gains of new licensees such as MediaTek helped
surge the chip designer
[PDF] to a 16 percent revenue growth from $263.9M USD in Q1 2013 to $305.2M USD in Q1 2014. Both overall normalized net profit and revenue fell roughly in line with
average analyst expectations
ARM Holdings is back to meeting or beating analyst expectations, thanks to strong processor licensing growth in Q1 2014.
One soft spot was royalty payments growth, which rose 8 percent on a year-to-year basis, versus the ~32 percent growth in mustered from 2012 to 2013. This was probably the biggest place where the soft sales of the premium smartphone industry impacted ARM's earnings.
Smartphone makers pay ARM royalties a month in advance. Given the slow sales, partner chipmakers simply used up their existing inventories, leaving ARM with the shortfall in growth.
On the other hand ARM made up for that with an impressive showing in its licensed core designs. With partners like Samsung finally warming up to its 64-bit core designs, processor licensing revenue rose 38 percent to $111.6M USD for the quarter.
ARM Chief Financial Officer Tim Score offered optimistic commentary about Q2 2014 and H2 2014. In Q2 2014, he pointed to a likely boost from the Galaxy S5, which -- as mentioned -- is seeing strong sales. In H2 2014, he expects that sales driver will be complemented by Apple's rival offering, which is
expected to be called the iPhone 6
ARM CFO Tim Score [Image Source: Andy Lo Po]
Mr. Score also expects growth to continue in budget smartphones, as customers move away from premium feature phones towards budget entry-level smartphones, which typically carrier more power processors and bigger licensing payments to ARM.
There were other positive signs as well. Intel Corp. (
) -- ARM's only real rival in the mobile instruction set business -- saw a painful
61 percent drop
in mobile chip revenue to $156M USD (that segment also includes communications applications). The message is clear. Intel's chips aren't gaining any ground to the chips of ARM's partners like Qualcomm, Apple, and Samsung.
Mr. Score also relates another piece of good news,
There has been an inventory correction in smartphones [that hurt Q1 2014 revenue], [but] that looks to be unwinding. We saw TSMC showing very strong guidance for their second quarter, which will inform our Q3 royalties.
He's referring to the Taiwan Semiconductor Manufacturing Comp., Ltd. (
) (TSMC), a top third-party fab used by ARM chipmakers. TSMC said it expected to possibly set a revenue record in Q2 2014, in a conversation with Deutsche Bank AG (
) analysts. TSMC will be
bringing its 20 nm process online
, which should offer a key boost to ARM, helping it keep pace with Intel, which is currently manufacturing on the 14 and 22 nm nodes.
ARM is finally moving to 20 nm production in Q2 2014.
Looking even further ahead, ARM will be targeting FinFET chips in either 2015 or 2016 on the 14 or 16 nm nodes.
TSMC's 16 nm node is expected to produce the first FinFET-based ARM 64-bit chips.
ARM is also working with Samsung, GlobalFoundries, and International Business Machines Corp. (
) on the die shrinks.
Samsung [press release]
ARM Holdings [PDF]
This article is over a month old, voting and posting comments is disabled
Too many images
4/25/2014 1:20:47 PM
There are too many images in Dailytech articles. It makes the text hard to read and the narrow width of the site doesn't help either.
RE: Too many images
4/25/2014 3:23:14 PM
We need more images for those who can't read!
Things were somewhat similar -- or perhaps even worse?
4/25/2014 2:44:59 PM
The basics of the reports aren't similar how? Apple actually posted year over year growth for the quarter and beat analysts expectations on the high end of what they projected was possible. Samsung came in under there projections and made less profit than what analysts had even hoped for. Its inherently different I'm not seeing similarities at all?
RE: Things were somewhat similar -- or perhaps even worse?
4/25/2014 2:46:00 PM
It should have read:
"The basics of the reports are* similar how?"
"The whole principle [of censorship] is wrong. It's like demanding that grown men live on skim milk because the baby can't have steak." -- Robert Heinlein
iPad Sales Shrink, Apple CEO Chides Hybrid Tablets, Android, and Microsoft
April 24, 2014, 1:38 PM
Quick Note: Samsung Galaxy S5 Launch Day Sales Surpass Predecessor
April 14, 2014, 10:30 AM
Qualcomm 808 and 810, 64-bit, 20 nm Chips Will Debut in 2015
April 7, 2014, 3:05 PM
Report: NSA Has Been Spying on Huawei Networking Equipment, Execs Since 2007
March 23, 2014, 1:23 PM
NVIDIA GeForce 800M Series Mixes it up, Bests Promised Results
March 12, 2014, 10:20 PM
New Photos Show “Assembled” iPhone 6, Protruding Camera Ring
August 20, 2014, 2:32 PM
ZTE Nubia 5S mini LTE 4.7" Smartphone Headed to U.S. for $280 Unlocked
August 20, 2014, 10:37 AM
AT&T Will Also Receive the HTC One (M8) for Windows
August 19, 2014, 9:27 PM
Sharp's "Edge-to-Edge" AQUOS Crystal Smartphone Coming to Sprint for $239 Off-Contract
August 19, 2014, 7:31 PM
After 34 Years With Microsoft, Steve Ballmer Parts Way to Focus on LA Clippers
August 19, 2014, 4:17 PM
HTC One (M8) for Windows Officially Announced for Verizon Wireless
August 19, 2014, 12:15 PM
Most Popular Articles
Lumia 830 Gets Major Upgrades Including New 20.1 Megapixel Toshiba Sensor
August 15, 2014, 6:00 PM
Windows Phone, BlackBerry Smartphone Market Share Falls to 2.5%, 0.5% Respectively
August 15, 2014, 9:44 AM
GM Concedes That the Cadillac ELR Doesn’t Really Compete with the Tesla Model S
August 15, 2014, 5:42 PM
Cell Phone Thief Calls 911 After Her Victim Chases Her and Her Male Cohort
August 14, 2014, 12:11 PM
Smarter Wired, Wireless Chargers Set to Shake Up Mobile Industry
August 14, 2014, 6:39 PM
Latest Blog Posts
Space Terrorism is a Looming Threat For the United States
Apr 23, 2014, 7:47 PM
Facebook Aims to Provide Internet to "Every Person in the World" with Drones, Satellites
Apr 1, 2014, 10:20 AM
Retail Mobile Sites Experience Outages in Light of Simplexity's Bankruptcy
Mar 14, 2014, 8:48 AM
Tesla vs. BMW: Who Has the Safer EV?
Feb 1, 2014, 2:56 PM
Justice Leaks Details of Next HTC One Two Flagship Phone
Dec 5, 2013, 4:04 PM
More Blog Posts
Copyright 2014 DailyTech LLC. -
Terms, Conditions & Privacy Information