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QCOM guidance positive for Taiwan
semi supply chain
Event
QCOM reported its Q2FY11 EPS of US$0.86 on revenue of US$3.87bn (up
16% QoQ or 46% YoY), surpassing street expectations of US$0.8 and
US$3.62bn, respectively. Q3FY11 revenue and EPS guidance were also
ahead of consensus and the company increased its full year revenue and
EPS target, citing continued healthy smartphone demand across all
geographical regions. QCOM stock was up over 5% after market.
Qualcomm’s positive forecast will continue benefiting the local suppliers
particularly TSMC (foundry, 10-12% of revenue contribution) and ASE
(backend, 7-9%).
Impact
Q3FY11 guidance ahead of consensus and FY11 forecast raised. QCOM
guided to 3QFY11 EPS of US$0.68-0.72 on US$3.35-3.65bn sales, ahead of
expectation of US$0.69 and US$3.40bn, respectively. The company also
upped its full year revenue and EPS forecast by 4% from US$13.6-14.2bn
and US$2.91-3.05 to US$14.1-14.7bn and US$3.05-3.13, respectively, as the
company continues to see healthy growth in smartphone across the globe.
Importantly, the company now expects higher blended ASP in FY11 for its
CDMA devices to US$199-209 from US$190-200 previously and compared to
US$183-189 in FY10. We believe this is attributable to increasing smartphone
penetration with greater hardware specs (higher frequency and from single to
dual cores), coupled with the structural decline of feature phones. QCOM
shipped 118m MSM (commonly known as Snapdragon chipset/SOC), in
Q2Fy11, higher than its 113-117m guidance and expects 115-119m shipment
this quarter.
No significant impact on its supply chain. The company stated that the
recent event in Japan does not have any significant impact on its ability to
supply product to its customers but did indicate that some customers may not
ship due to potential shortage of other components and this is already
factored in their guidance.
Inventories. While QCOM’s inventory value has gone up from US$574m in
1QFY11 to US$606m in 2QFY11, inventory days came down to 41 days from
46 days. The company also highlighted that CDMA channel inventory
would exit the fiscal year at the low end of the historical 15 to 20-week
range, in-line with its prior estimates. We believe the lower inventory days
should be positive for the overall semi industry and Taiwan semi supply chain.
Price war looming for low end smartphone? QCOM believes that the lower
cost smartphone will outgrow high-end smartphone this year. In response,
Qualcomm’s strategy is to price aggressively in order to raise entry barrier for
peers. Mediatek is catching up Qualcomm’s mainstream mass-market product
in terms of spec, and is aggressive entering this market. We believe once tier-
1 China smartphone vendors have qualified Mediatek’s solution, price war
may start in 2H11
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
QCOM guidance positive for Taiwan
semi supply chain
Event
QCOM reported its Q2FY11 EPS of US$0.86 on revenue of US$3.87bn (up
16% QoQ or 46% YoY), surpassing street expectations of US$0.8 and
US$3.62bn, respectively. Q3FY11 revenue and EPS guidance were also
ahead of consensus and the company increased its full year revenue and
EPS target, citing continued healthy smartphone demand across all
geographical regions. QCOM stock was up over 5% after market.
Qualcomm’s positive forecast will continue benefiting the local suppliers
particularly TSMC (foundry, 10-12% of revenue contribution) and ASE
(backend, 7-9%).
Impact
Q3FY11 guidance ahead of consensus and FY11 forecast raised. QCOM
guided to 3QFY11 EPS of US$0.68-0.72 on US$3.35-3.65bn sales, ahead of
expectation of US$0.69 and US$3.40bn, respectively. The company also
upped its full year revenue and EPS forecast by 4% from US$13.6-14.2bn
and US$2.91-3.05 to US$14.1-14.7bn and US$3.05-3.13, respectively, as the
company continues to see healthy growth in smartphone across the globe.
Importantly, the company now expects higher blended ASP in FY11 for its
CDMA devices to US$199-209 from US$190-200 previously and compared to
US$183-189 in FY10. We believe this is attributable to increasing smartphone
penetration with greater hardware specs (higher frequency and from single to
dual cores), coupled with the structural decline of feature phones. QCOM
shipped 118m MSM (commonly known as Snapdragon chipset/SOC), in
Q2Fy11, higher than its 113-117m guidance and expects 115-119m shipment
this quarter.
No significant impact on its supply chain. The company stated that the
recent event in Japan does not have any significant impact on its ability to
supply product to its customers but did indicate that some customers may not
ship due to potential shortage of other components and this is already
factored in their guidance.
Inventories. While QCOM’s inventory value has gone up from US$574m in
1QFY11 to US$606m in 2QFY11, inventory days came down to 41 days from
46 days. The company also highlighted that CDMA channel inventory
would exit the fiscal year at the low end of the historical 15 to 20-week
range, in-line with its prior estimates. We believe the lower inventory days
should be positive for the overall semi industry and Taiwan semi supply chain.
Price war looming for low end smartphone? QCOM believes that the lower
cost smartphone will outgrow high-end smartphone this year. In response,
Qualcomm’s strategy is to price aggressively in order to raise entry barrier for
peers. Mediatek is catching up Qualcomm’s mainstream mass-market product
in terms of spec, and is aggressive entering this market. We believe once tier-
1 China smartphone vendors have qualified Mediatek’s solution, price war
may start in 2H11
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