Statements made on a recent Qualcomm earnings call suggest that Apple may be switching some orders from Qualcomm to Intel for the LTE modem in the new iPhone 7.
Qualcomm CEO Steven M. Mollenkopf said that the company is assuming that a large customer may begin 'second-sourcing'.
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Question (Timothy Patrick Long - BMO):
Steve, you mentioned chip margins with regard to thoughts about second-sourcing at large customers. Could you talk to us, just expand a little bit about that on timing, when you think you might see second-source at most of your major customers? And on the cost side of it, do there need to be OpEx cuts if there is a second sourcing going on, or can you handle it without that?
Answer (Steven M. Mollenkopf - Chief Executive Officer & Director):
So on the second-sourcing, I think the main point is that we have been assuming that in our plans really since the beginning of when we did our restructuring. Difficult for me to talk about timing related to that, but I think the point we wanted to communicate was that we are assuming for planning purposes that that is the case. And even with that, we are comfortable with our margin targets and our improving financials in the chip business in the second half.
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Analysts believe that the large customer in question is Apple. Qualcomm's two largest customers are Samsung and Apple. Since Samsung already uses multiple suppliers, that leaves Apple as the company most likely referred to.
This falls in line with a report by CLSA Securities in March which said Intel had secured orders for a 'significant portion' of the cellular LTE modems for Apple's next-generation iPhone 7. Intel is said to be supplying about 30 to 40 percent of total orders.
Apple isn't expected to unveil the iPhone 7 until this fall. Please follow iClarified on Twitter, Facebook, or RSS for updates.
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Qualcomm CEO Steven M. Mollenkopf said that the company is assuming that a large customer may begin 'second-sourcing'.
---
Question (Timothy Patrick Long - BMO):
Steve, you mentioned chip margins with regard to thoughts about second-sourcing at large customers. Could you talk to us, just expand a little bit about that on timing, when you think you might see second-source at most of your major customers? And on the cost side of it, do there need to be OpEx cuts if there is a second sourcing going on, or can you handle it without that?
Answer (Steven M. Mollenkopf - Chief Executive Officer & Director):
So on the second-sourcing, I think the main point is that we have been assuming that in our plans really since the beginning of when we did our restructuring. Difficult for me to talk about timing related to that, but I think the point we wanted to communicate was that we are assuming for planning purposes that that is the case. And even with that, we are comfortable with our margin targets and our improving financials in the chip business in the second half.
---
Analysts believe that the large customer in question is Apple. Qualcomm's two largest customers are Samsung and Apple. Since Samsung already uses multiple suppliers, that leaves Apple as the company most likely referred to.
This falls in line with a report by CLSA Securities in March which said Intel had secured orders for a 'significant portion' of the cellular LTE modems for Apple's next-generation iPhone 7. Intel is said to be supplying about 30 to 40 percent of total orders.
Apple isn't expected to unveil the iPhone 7 until this fall. Please follow iClarified on Twitter, Facebook, or RSS for updates.
Read More