QCOM - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Qualcomm Third Quarter Fiscal 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session. [Operator instructions] As a reminder, this conference is being recorded, July 29, 2020. today’s XXX-XXX-XXXX. for number playback call is The International dial XXX-XXX-XXXX. callers, please number The is reservation XXXXXXXX. playback now the I Mauricio to like would turn President Investor Lopez-Hodoyan, call of Relations. Vice to over Mr. ahead. Lopez-Hodoyan, please go

Mauricio Lopez-Hodoyan

call and will Mollenkopf afternoon, Akash Palkhiwala. you, Thank everyone. and include remarks by good prepared Steve Today’s

Cristiano session. addition, the Rogers Amon, Don Alex Rosenberg In join will and question-and-answer

on earnings website. Relations our access slide can Investor and a presentation our that You release accompany this call

today. on qualcomm.com this and webcast a our call website be will addition, later In on available is replay being

today, use reconciliations can will measures on defined call financial the you During website. and in we find as non-GAAP our Regulation to G, related the GAAP

materially Qualcomm’s, our cause the to that statements. make also those forward-looking to our Please business factors will recent future financial filings, materially projected events, most refer Mollenkopf. projections from industry differ statements. forward-looking from We differ our Executive and SEC contain or now estimates forward-looking or of XX-K, from statements, including important which events results. including in Chief or trends actual Actual And Officer, business, to Steve could results results could comments

Steve Mollenkopf

Thank you, afternoon, Mauricio, and good everyone.

strong We Our back revenue in long-term of to quarter non-GAAP by share solid rights granting agreement a per above and global patents. high recently certain with division. signed third license end a guidance, our license patent driven $X.XX chipset the performance of of including cross fiscal was earnings licensing new Huawei’s Huawei,

the amounts settling under agreement prior agreement. an into due entered also license We

with We to are reached pleased successfully Huawei. have resolution

Alex and QTL program have tribute job begins a included building covering our and agreements of not outstanding extensive explain the will and driving in the in fundamental track record in from is later, to a innovation. executing important team results. This most mobile. over by fiscal wide QX Akash royalty in QX margin, our an XXX Huawei As revenue done fiscal is XG licensing and

have multi-year a now major every license the handset we in agreement, agreements we OEM. period of which signing the are with Huawei entering With

while Our safety despite our has as well employees COVID-XX, the maintaining executed of priority. impact entire of company highest very the ongoing our

advance the to meet customers the of continue XG has disclosures last And set a supply requirements. current technology over the support our our We innovation. up roadmaps, impeded disclosures of with environment invention months product invention XX%, R&D very chain pace four not even of up In and our and related more. complex are and work-from-home,

Turning of and to midway In mobile the domestic the last more COVID-XX, handset of total majority shared impact phone quarter. the in smartphone the expectations just shipments. double represented of shipments market, the shipments, Research, China Academy March. with despite now than China, domestic XG the XG Telecommunication represents better year than calendar penetration XX% to month the QX of According of June you fiscal smartphone the was we through

Given XG calendar the in launches data the China of second the strength flagship in device of June handset year. XG along half with

to end bias Our XXXX, remains range. XXX the calendar upper of our handsets XG with unchanged, that million XXX now of year million forecast towards

inflection point next us our for continued positioned strong year XXXX. start in well fiscal with fiscal earnings explain As in in and QX, the leaving Akash growth growth share, ramp we shortly, revenue will per XG anticipating in are to year-over-year

billion XG which headed our Series, make of into smartphone using design We Series are who Series potential X more Snapdragon tier, year. than win accessible world. based development In QCT, Turning strong XG or our pipeline X XG X the There designs XXX over on we to has Snapdragon XXX platform, using mobile over to have XXX to the X modem, premium in our platform. recently XG momentum designs announced announced or in two with now and Snapdragon solutions from next Series strong. development announced are users mobile portfolio now around the remained a XXX our broad platforms,

front-end executing has our to And to RF wave in whether well they millimeter continue front-end our a XG emerge opportunities solutions, received. as strategy, Virtually largest significant in today by remain handset design in approach systems we been RF support space. of Our revenue. all extremely RF RF of XG XG powered of global or sub-X, fiscal one focused growth expect be front-end in our both. consequence wins XXXX front-end place have we that to as the We by vendors the the on on

is beyond market success the we would at with similar architecture We positioning computing of working high-performance can occurring expect, industries. we you and technical global innovation next directly significant Qualcomm’s ecosystem XG an we adoption XG see of internet. as This the in indicator growth, for to XG the where drive have plays smartphones. with position moves are smartphones. low-power, a the new the opportunities of edge and for the converges AI, new as to Qualcomm Qualcomm’s XG as bodies leadership in transition our wireless As connectivity, are to evolution new also to early XG leadership mobile to working high meet drive as in how requirements strengths enabled parallel standards in cloud

Release advanced delivers the deployments. Radio industrial applications Just new by services Qualcomm expand It spearheaded completed and for positioning technologies IoT. reliable enhanced industry, month, will needed of key this the power XGPP mission-critical to latency, that saving reach for XG low like transforming such high-precision ultra second XX, greatly standard XG as and spectrum New XG

is potential latest XX Release technology continues. work our While realize the this driving XG fully release complete, now evolution of to

advanced we Release on projects XX the addition, researching Release ecosystem technologies are XX are and for In beyond. mobile and working with already

excited commercialize Akash. like over the XG future the call and ability over to breakthrough drive that would differentiation turn very to our to technologies will about now many are our We I Qualcomm years. for

Akash Palkhiwala

afternoon, Thank you, good everyone. Steve, and

environment. XG earnings share challenging delivered $X.XX, revenues We’re high pleased end which billion non-GAAP year-over-year an guidance relative the stronger a of XG, assumption in planning our reduction we demonstrating in quarter reduction. third of results our due results, to COVID-XX prior above XX% of strong report total driven a range, business primarily was economic extremely the We In to our of by of handset of per $X.X resilience XG, to in XX% fiscal third the QTL. the shipments impact approximately quarter, and saw

units, a and revenues platforms EBT work-from-home of of regions and COVID-XX a which low XG on fewer, result margin mix revenues on benefited of In weakness performance of revenues increased tier respectively shipments QCT in in the In due addition, impact Huawei our a QTL, billion, to MSM environment. gross offset year-over-year we higher from both QCT, range margin not of emerging the and emerging adjacent saw billion we and global front-end China of with QTL XX%, strength by license note the results end reflects stronger at that end regional regions. developed high This EBT mix. favorable in design Please basis. XX% units, above high growth higher XX%, and The RF quarter improved range. offset mix. agreement. million In was certain or resulted delivered of guidance delivered as X% regions of of third our by and XXX $X patent include MSM guidance EBT $X.X do and units shipments we revenues our from settlement traction, stronger margin any in

SG&A guidance. R&D $X.XX were combined expenses of non-GAAP and slightly Our billion below our

Huawei. the with million a refinanced and of billion debt, resolution suspended dividends, overview the I paid will $X quarter, provide we During stock third $XXX financial in in buybacks. temporarily now

Please that settlement the to the from expect framework quarter for the the approximately under received Huawei prior this the record We amount of license be fiscal $X.X non-GAAP our in revenue our the calendar agreement interim our billion relating payments first will of the period prior license and amount of agreement program with fourth to amounts is half new and in due for XXXX. note from partial under incremental results. This excluded licensing years. to consistent agreement

revenue guidance quarter our in non-GAAP Huawei financial the September sales includes fourth estimated QTL from addition, In quarter.

OEMs worldwide. we all completion the have licensed now of this significant With agreement, handset

XG forecast. global the XG, XG, to Turning device

a the a quarter. of quarter XXXX shipments. This recovery ongoing quarters the year, we gradual the reflects total approximately reduction economic in in our fiscal on year-over-year trends around is uncertainty regional three for XX% of forecast Given XX% calendar our assumption a reduction saw June with prior Consistent year-over-year September expectations, the based approximately implies based of first assumption our planning device handset the planning the to forecast. recovery, fourth in on timing quarter of forecast

total units recovery. economic the quarter in However, will speed on of depend the the fourth

the of XXXX are for forecast we XG Lastly, our units million that to sell-in greater increased million quarter, XG XXX devices. for to data towards confidence we devices a This the XXX of range. of in our calendar In year the of the units. bias and point June handset XG million maintaining estimate than XX high indicator this leading forecast strong end our is the

to GAAP fiscal financial billion revenue which of $X.XX, $X.X to billion with guidance. of in We to $X.XX estimate our GAAP quarter includes Turning and $X.X revenues fourth related to Huawei. quarter fourth the settlement range be the to EPS the

EBT, the shipments. addition of to we to of billion units, MSM by XXX assumption implies strong delay $X.XX to shipments $X.X of our of to economic due and quarter growth to of guidance launch. QCT, $X.X estimate from impact and revenue includes including of QTL, shipments environment. we to of than expect XX%. in billion the fourth handset revenues strategy of This guidance reduction a the challenging our $X.X to greater an EBT Huawei, year-over-year These partially our revenues EPS impact the billion of margins of revenues of imply of the XX% handset year-over-year royalty in by driven phone non-GAAP billion due billion $X.X million XX% expect of quarter and XX% XX% and XXX from revenue reflecting midpoints XX% XX% XX%. revenues in partial to planning growth $X.X reduction million to a flagship $X.XX. COVID-XX, EBT In in this We a offset midpoint, of in billion, XG execution $X.XX At margins $X.X fourth In guidance

As drivers growth. outlined, front-end one RF key is we previously have of our of the revenue

to commitment non-GAAP of and suppliers employees, our reflecting content. circumstances. be X% during I expenses sub-X quarter for millimeter and forecast We R&D want normal million fourth closing, XG, up and $XXX sequentially, these XG XG In revenues their approximately seasonality XG approximately customers partnership to quarter investments. for includes Our and SG&A anticipate fourth combined in thank wave extraordinary

of Looking businesses. are to Thank forward, across product you. growth strong Mauricio. call foundation I’ll the our now And excited have we back turn a and to licensing

Mauricio Lopez-Hodoyan

questions. Thank you, Akash. Operator, we are ready for

Operator

Thank Thank Instructions] you. you. [Operator

the comes of from with your Mike with proceed Walkley question Please first Genuity. Our line Canaccord question.

Mike Walkley

results strong a and the is the thanks for us helping just tough forward. going on in taking question, your Great, My my trends question revenue and congrats understand Huawei settlement. environment MSM per

obviously, You time. greater be phones highlighted XXXX, leader have up RF, MSM in per a of revenue over revenue you to the take the could that and much then expect you should XG in mix

as should how about on look in we a per quarters, and we MSM pluses calculation? much. future minuses you the think revenue So, very out the Thank

Akash Palkhiwala

this Yes, hi Akash. is Mike,

said consistent in with The still revenue expect by in transition as of at then $XX in you similar MSM If a grow we from over over fiscal to just which we’re MSM number and perspective, quarter upcoming $XX the our what the And before, we growth per a XG behind second premise opportunity we guiding couple to XG, a the quarter. quarters, on revenue September over $XX look the trend were we over in had is times. our June the quarter. we per reported revenue X.X the is little last

quarters we about long-term. we so a think And of kind delivered higher as I the look the where kind numbers trend have revenue that’s behind of results way And per with the bear out these think we thinking math of on it. still forward, reasonable MSM

Mike Walkley

trend lines? smartphones numbers on about maybe should kind And just any modeling that based mix think of seasonality to type premier of those follow-up, a Right. in we quick is those there

Akash Palkhiwala

bit Yes, quarter. on and is launches a the tier March on premium of volume will a be chipset when our There seasonality sure. little we go on based typically tier premium the which heavy in

way So thinking a suggest seasonality, some I there overall quarters reasonable the it. always that the few but think will last is be of about trend

Cristiano Amon

think penetrates XG. over look think XG the lot our the just to we Mike, thing to time good that the a into there. about X.X understand this I have more at of want base, about the is seen I given increasing feel trends, to maybe revenue units We about Cristiano. more transition helps you MSM. out you period of add where Hey, of pandemic, think And the help we units. still it. when thinking that we XG short one XG per market may the But is metric, the the like have handset I accelerated We as trend

Operator

Thank you.

with next from Please Chatterjee Samik JPMorgan. comes Our proceed question your with question.

Samik Chatterjee

my guidance It roughly the that the if what of for improvement and at mentioned taking terms improvement. of of you here recovery in maybe at guess then I the I assuming bit market off a of end. end know me terms that And in kind unit could thanks XX are the question. for Hi, kind product launch sequential if help the of of sequential in – just try it high improvement MSM and you’re would unpack understand you low of thinking you you the terms the the first can and what’s million what’s I normal kind that launch, of? in have delay but XX the product million in

of how is So that much a product how much recovery is of and market the launch? that

Akash Palkhiwala

Samik, is this Sure, Akash.

of is guiding quarter we’re million relative June actuals that units million. XXX XXX midpoint the So to

increase. around address I’ll the drivers two midpoint. it really are to the There So, try for

of first weakness The one June the quarter the of emerging in we low-tier COVID the in impact is, saw markets. because some on units

basis. forward impact look so seeing then about delay from come partial a a phone of are we seeing from flagship talked launch. in So, that at that we drives second, customers, as we’re XG growth back on we quarter-over-quarter the that our our demand And

flagship the of launch. perspective, our chipsets couple phone buying you typically think large end customers facilitate months the about a launch, a in If for QCT up that the before launch

and really So get to in portion guidance would are of we’re quarter because into our purchases and they’re quarter. portion the of seeing pushed September those factored what here happening the the is December another delay, out a

things. So it’s a those combination of

low-tier question, going XXX launch. really the is answering And a XXX in two direct then from especially million benefit and your to units new back million so increase drivers, the increase to at from

Samik Chatterjee

of Okay, follow-up then from now, this Huawei place to just guidance your of being in on you if if opportunity an is them chip And kind provide them the on MSM to even chipsets with impact there the high restrictions ramp their in got to required And silicon potentially kind can in licensing that? right that an here able the of it. the open now shipments up future up the for the to agreement I absence that are then handsets? XG does unit have,

Akash Palkhiwala

So, Samik, really point, Huawei. this have first any with question. business we At the the part I’ll material of address don’t

about unit that think MSM volume shipping So, be OEMs when isn’t it’s other the Huawei you there really our to. really would it, we around guidance,

Steve Mollenkopf

Yes, this is Steve.

including – second every to is, report OEM but yet. I Huawei, about way as the of to out part how question, it nothing On of to the think to the we’re second hard think figure to working sell the really

Operator

Thank you.

comes Raymond Caso Please James. question. with from your proceed next Chris with Our question

Chris Caso

Yes, you. thank

happening September if to much now And us you I quarter, once in give could this of there’s indication QTL moving global Huawei that metrics put normalize parts revenue First question Huawei Is on of those coming the In handset timing QTL some and provide maybe us QTL changes that run now, be. past, because the excuse normalized all a would exceptional quarter? go Huawei events in those the given as me, you something and into the contributes we September in? is of decline, lot rate flagship. of are what how about the the you’ve some us can for I with

Akash Palkhiwala

Hi, is Akash. Chris. This Yes.

kind rate try calendar you billion to range. billion reasonable said first run the a revenue and Historically, quarters, a $X.X your we’ve data somewhere I before December our few two factors. range number that our will think $X.X is guided me we’ve the a in That’s help quarter with points give Let for key of triangulation. for range three as then of QTL, the for

on our factor is really COVID guidance. of impact the First

June from a perspective. that over a on came with we the the in XX% was lower market QTL, year-over-year So in $X a side revenue in billion in quarter, little handset

reduction normalized you rate came weakness And over forward a a XX% $X.X what we’re $X against billion. number billion of factors, So assuming. two year-over-year. we look that midpoint market billion we’re decline a in little a in XX% $X.X is and a and really are Huawei When there bit little on run guiding right, of coming that a of and increasing based

normalized key to happens. numbers, recovery just run able I the The rate how us triangulate a insight between forward be not into is So, think going what having COVID should those for and you thing is.

So for to the guidance give now we’re run quarter, rate. we but into proceed, look the normalized we’ll as guiding September

Chris Caso

helpful. that’s Thank very Well, you.

As for guidance regard given you’ve a to follow-up with also. to that, QTL this quarter margins,

expect forward that. revenue incremental, assuming cost So what I’m should on that new the associated with all no we was that? there’s going Huawei

So for run it the year, higher stronger quarter. is margin suppose December you quarters first go I a would at as the to went this the reasonable rate least of three seasonally

Akash Palkhiwala

perspective, line really to the you’re a correct, that’s so on Huawei Chris, down accurate Yes, an the revenue bottom assumption. falling from

said the our provided than would view year, of Huawei last longer-term be a and think for sustainable with midpoint we margins of that. I higher kind where on Day at XX% slightly Analyst it we QTL,

believe is of change don’t any to view. I there So, that point

still to forward. think to model our good those we use business are think going numbers I reasonable

Chris Caso

it. Got Very helpful, you. thank

Operator

you. Thank

with with Ross question Please Bank. your Deutsche comes question. Seymore proceed Our next from

Ross Seymore

Hi, so you much. guys, thank

correlation QCT call revenue could given the little about these launches, bit go understand of that MSM in let the I you flagship moving between a congrats is, that margin well. the to line between the earlier the better. side Huawei per of the get And into revenue into and the to per quarters, gross gross on ask it what the some question QCT be like want over really dynamics the deeper given things. is there doesn’t MSM the want in place those Akash, and a seem I that you next within of and couple all relationship two in Can margin great me performing mentioned So, in settlement.

Akash Palkhiwala

Sure, Ross.

And mid-point versus So at saw weakness some low-tier. let what for through a quickly that talk referred was quarter. fewer me in What happened the emerging saw because on markets, saw guidance higher MSM, our let of by to the of was I kind a my the in was as we the XXX result maybe it. of impact low-tier higher script – we margin June gross units million me COVID of MSM revenue and what we per units driven of

So, and in at they in same the moved time same both direction. concert

quarter, for As in our we look of terms are margin what line June the forward come consistent implying gross September a profile guidance perspective, we because we with going to expect margin margin really had into the our very we’ve lower-end it’s with forward. from guided mix for strong is pretty quarter, outlined, what we in the back more units what to and

Cristiano Amon

for Yes. And with, low of consistent as this to those Cristiano, is XG think the had think, about units improvement starts conversation per units the revenue – to we XG before MSM, it’s in see driver Ross, by I be I some good replaced a penetration, continue go accelerated and gross that’s margin going future XG QCT. quarters, we get into also to

Operator

you. Thank

Our next with Ramsay Matt from your comes with proceed Cowen. question. question Please

Matt Ramsay

Akash. guys of well. you the from myself and deal on much, very Huawei A questions, as couple Thank congrats

one on first is opEx. The

other a that opEx from is one investments And have You as you happened the us whether it COVID know on Huawei, rate quarter payment run Maybe, few coming controls back of cash. context – realistic with the years, there you have and of Thank forward top given thoughts of of you. guys I – any number mind being to a the up XG little given is bit of use the cost last give so things had sort a going September settlement been that’s talked of about QTL cash that is the second and could the as in things. in to the then payments settlement, big from one. some

Akash Palkhiwala

Matt. Hi, Yes.

increase what your really on quarter-over-quarter. first we’re is So, question, a OpEx guiding in X%

we historical variable what our an of quarter June If you seen you look compensation when last adjust increase quarters, the two an at the saw the for Apple X% we’ve between these trend, deal. example related year, to as

and historical we’re little trend. increase and will back of So, When you with look consistent we at whole timing you guiding Analyst kind what for a extra pull very of increase the of just bit told There of XG what is up $X.X year. end investments. really opEx and the with an X% Day our at is year, of the total because we forecast billion, our consistent

total us So, we grow and $X.X we us $X.X deliver as pay on of and our billion. the think six second two the a super The it’s previous of for with of $X.X of is consistent which and – it’s on historical to through agreement, is the manage to revenues. to periods billion, through as Huawei really question, XXXX really, and combined what And XXXX goes commitments things; continue to for first then operating that opEx leverage have going important it combination opEx we June. settlement months is the of add well the end it’s billion

the over that first amount the – payment And that an quarter. some that’s due to one-year with so September going a period pay in they’re

Matt Ramsay

Thank you. it. Got

Just guess Steve a for or Cristiano quick follow-up for well. I as

might be talked Was about maybe, major upper XXXX the against being view incremental with ramping of range. should the visibility? about be units markets that some in the with now units that pushed XG XG or at of end you other global upside there maybe, all in And if – we slightly. a in XG put are now you. are China thinking that You launch Thank units that confidence guys some of being that

Cristiano Amon

there confidence look, think is an is Well, in Cristiano. XG. overall Hi, Matt. I this

units low-tier markets, over have better on by units. commercial emerging countries. which than at the in If XG. XX in be quarter, XG and saw markets Traction I high. Akash developed mix weakness which continues saw expected, in is made now a of the we better the originally we XG you think offsetting a we comment XX just look networks is to is We result mostly What

We have millimeter a large of working XG. number to traction now on XXX, to and XXX operators of now XXX which our design wave are designs on jumped

has momentum it’s XG giving confidence us on down and not year. estimate the So, slowed we made the for

Operator

you. Thank

Our Please next question with with from Liani comes Tal question. proceed of your Bank America.

Tal Liani

previous market thank the Great, a at us a And have other of, estimate It’s if you this initially? the capturing much the market When within U.S. global how you. of you your you millimeter be are – then you sense actually look of on give – Europe the wave, share do of to Thanks. wave? kind an you’re do the with of look when follow-up answer. at and think globe, it can planned you launches places, millimeter much and at how

Cristiano Amon

this Tal. for Cristiano. right, All the Thanks question. is

of So, I big that’s millimeter let talking question. about wave, a just me know component start the

a – expected. kind is millimeter wave we as of So, technology of moving it’s traction

for And Kong, Europe and the to occurred auctions Japan then had Thailand, year. end you, the Singapore it continue the to millimeter spectrum think United commercial wave. targeting launch I Finland and we recently within Taiwan, before commercialization scorecard give launched, in States current forecast of Hong still to XXXX. the year in Russia are launches I Korea with can ramp,

a is wave millimeter I will that still noting operators. of think is there worth China have is total There by XXXX. expectation also XXX

We operators. the the XX continued some of across and have leadership significant is but have market, into think as devices well So, expansion And do designs. flagship the the the with Verizon share, a example within disclose it’s live expand, millimeter to really – wave as I of wave showing T-Mobile and in specific States, millimeter traction. have to continue technology don’t now our we ultra wideband. remains largest now United been of specifically, for cities we all three requirement with for which gain AT&T

Tal Liani

Got it.

the wave all being in means millimeter it? to in will support devices launched have have wave, are that millimeter devices all that U.S. So will the U.S.

Cristiano Amon

No. get combination reform you you’re sub-X you think tiers is have a Millimeter and as technology well the we spectrum down to penetrate of the with time. that lower in all of to devices combination flagship wave DSS, some both. a expect and of as going have over requirement wave I for millimeter today the

Tal Liani

it. Thank Got you.

Operator

Thank you.

Our next Rasgon the Bernstein Research. question with line from Stacy proceed with Please question. comes your of

Stacy Rasgon

my Hi, guys. thanks taking for questions.

be obviously the my when talked you I about ran already. For new on see you $X.X top then if on follow-up, you’ve $X.X of was million do the that MSM? about $XXX should mix is they it Apple guess you or of $XX, the that everything revenue MSM that’s about I mean kind $XX, up. gave give revenue QX MSM you especially sort And about for, in day, how that that in that gets X.X back feeling where where play, of since billion XXXX. like that the so know didn’t look up pay to XXXX for on every think wanted that be into one, for first little and broadly kind I per some XXXX But half splits the like paid color of of I first XX%. per number us to applying we over kind of of phone could you and ones Huawei billion If thinking a add would bit per the I we period normal revenue that before

Akash Palkhiwala

Yes. it’s Stacy, Akash. Hi,

the that the $X.X that agreement And that component the months second – with that – to really on XXXX. two the entire to again, it components first six had billion and we there period So, previous since period calendar of are them. the One settlement our of there dispute amount. is is captures

total agreements So approximately of adds them. we that $X.X total shorter-term had billion. up $X.X with to the two The the agreements was It to billion. previous additive amount that those is

$X.X then these you’ll and the said see as remarks, forecast framework I quarter. million program. are we number for forward, it a $X.X terms very And our it’s million So, total of as our we’ll And really – in for going prepared – licensing the historical. my overall the in with really, September consistent additive

your would So, licensing think then the overall way it’s given And program really other terms. revenue about it’s reasonable you OEMs per XXX% it, is X.X math assumes a and one times, we it thinking using your The I about what MSM, of XG. is a what expect thing which are think to is the well. framework as calculation caveat I maybe, is you use would

So some get and obviously, be it’s into time to will to a going there there curve it. so take

Operator

Thank from next proceed line with comes your Please with you. question question. Rod Hall Goldman of the The Sachs.

Ashwin Gupta

for This behalf this is question. for maybe, is on Hi, thanks Akash you. Rod. Ashwin my of taking

your Samsung, on but just us mentioned it could you not thought impact past, help and how And on about market. phone but had delay when delayed, an XG its QTL. You on if overall understand you about backed was flagship it, the handset got impact Samsung QCT, I it’s wondering like in

could give us color So, just wondering there. some if you

was strength self-tied about units June and overall my not related, China, were where Units quarter. exactly the on and China you some if to in second were better better market? sort saw you And I that – the of talk you related in but potentially and improvement question but the QTL – outside well, is could trends wondering

Akash Palkhiwala

Yes.

question. the second markets. what developed In saw across June quarter, is China start and So, I’ll with we maybe strength your

it China. extremely weakness broad-based market across kind markets. landscape by in China, in strong emerging was sure So, aware, the obviously, it was developed as And to addition numbers. what certain you’re I’m offset of

the we scenario various XG impacts launch kind saw and markets. that – So how we that QTL, trade-off the in trade-off late between the are talking is first delay On the question of on about flagship typically quarter. your phone the that’s pretty that specific launch

in COVID. the a factor as it factor September in it’s guidance the our market much large QTL And bigger again, quantities smaller think we I for total in guidance. purchases happen a it’s than as captured within of QTL, much So, of a is chipset advance it of think for weakness because QCT launch. But for quarter typically a part

Operator

Thank you.

with the Timothy next Arcuri proceed of UBS. Our from comes question. Please with your question line

Pradeep Ramani

IoT Ramani that? standing than around QCT first do on. quarter sort so a you have question roughly – And of in the then quarterly they Did follow-up. on billion your run color and I This last my are for Tim. approaching Can Hi. $X now some provide is better autos, guess Pradeep the I just in adjacencies, and rate. they was

Akash Palkhiwala

Yes.

COVID with the way adjacencies we’ve work-from-home are we been actually. markets the overall, it that been from that definitely environment. certain pretty So performing, in our are benefit and happy There have

all We have with XG have XG large of clearly market, mobile very in WiFi Dongles broadband player and and those the extremely WiFi, CPE market, and the a well. we’re done well. work-from-home. the as been as within for spot strong And connectivity overall, then to IoT us pretty people home strong is improved for demand continuing That see has a traction. also

obviously, new what But strength a the of the got changed within those of across the hasn’t you leaning, are on of when lot and really a markets, board. kind as connectivity just fundamentally. for impacted lot look Auto going of demand through. IoT is part which at which make up launches products all So, our is us, for focusing a forward category broader the and really industry infotainment auto,

So, impact, while lot the probably a in other well. as industry smaller than it’s are are seeing of an impact a we seeing peers

kind that’s – the adjacencies. of our landscape of those So,

Pradeep Ramani

can share Okay. the XG of the ASP? XX% just your And increase RF share sort you follow-up, your driven – think beyond by versus maybe I we you millimeter are across are opportunity, sort to speak or is share, your just about XG gain the gaining or And board. of in sort as broad especially my when of you XG gaining front, mean largely on share, wave share

Cristiano Amon

is This Amon. a Cristiano entrant. a growth on new Hi. is market especially this us for the – as Yes, as RF we front-end

get And scale and we as XG are strategy system of And the RF we be attached been traction entry to because XG, point. of to some wave and continue front-end continue seeing differentiation to getting We really have share RF as clear, XG gain our using We’ll very our at for be our we millimeter to we’re traction across modem-to-antenna sub-X, a baseband, positive level. as across content gains expect started designs within trend to in to an well. front-end. that

Akash Palkhiwala

of just points. quick to a this couple add is And Akash,

in we said my I revenue the for prepared of remarks September front-end million. are quarter, RF As $XXX expecting approximately

that really market. of front-end the about happy share And target is to to previously, very milestone. So getting our as we outlined to RF XX% grow approximately

in between that to being that And very feel data talked point we that so Cristiano traction the hit able target. comfortable really, about, forward and

Operator

Thank you.

proceed question. Our next from Research. Brett with Arete comes your Please question Simpson with

Brett Simpson

the you licensing Yes, look maybe Can then on the I how the going Huawei Cristiano, a PD if can or just licensee of with full sort a thanks before confirm billion question what think I they questions. license? you I’m is settlement. And Huawei, Maybe, the $X.X Two still much wondering very just is cover? they quarter? licensee, automotive. agreement be cashed the And with then with And about for platform at maybe talk dispute, of on SAP And in settlement, September the that. the licensing to are much. first are taking the to SAP second going

QCT think an any when the we XG? we XG backlog on you big at to is how ramp last about also a a car you per now give Qualcomm, ago how up we for haven’t license able XG with do licensing for on think there’s maybe was update specifically. backlog spoke VXX should a billion. be automakers from deals Can it about automotive; for the think your seen QTL, to going content for the us QCT going push and here year $X.X address? I opportunity to what’s is about about And clearly, And be big and

think should going Thank about how you. So, that forward? we

Alex Rogers

Alex. is This

In of extent we Akash to talked the terms financials the that has And about the Huawei deal, are obviously confidential. can. the terms already

agreed-upon and the the This license we’ve license period. to a long-term is patents. that we and the in deal amounts respect to As with to mentioned payment relate prior schedule disclosures, certain with Huawei have a back broad agreement

happy we’re so very with deal. And the

actually on a so. Your business quite space automotive XG, had XG or question licensing a longstanding in decade the for we’ve automotive,

And but some time. quite automotive in licensing essentially, so XG, into for for licensing been transitioning we’re we’ve

that’s so in revenue. also And reflected our

Cristiano Amon

Hi.

So Brett, this Cristiano. is

automotive answer on your me question Let business.

now right I So, why will an backlog trends. for we’re design on not the some wins, the talk those providing about of update

continue I see think impacted it’s the automotive as pandemic. by industry, we to that increasing especially for us, current the

and electronics transformation of higher more within the programs digital cockpit we’re think the more to see moving more and interest starting bringing I in a car. even

continue traction, automotive gain and that get design to incremental about we’re very happy for growing continue awards we to So, business is how us.

digital So, smart entertainment, the connected now for and Telematics the infotainment, content, the seat includes within really for the that content the and our been we car, to WiFi connectivity across regards cockpit and unit dashboard have transformation the focused on mirrors Bluetooth. rear

for We’re the silicon digital of just in the beginning but ADAS, within is content most the of transformation. cockpit really ECU

Akash Palkhiwala

And Brett we’ve on on design the last pipeline, the billion than greater providing $X we’re disclosed question not this at update pipeline. is design your But an win point. number win

Operator

Thank you.

Please with from the Srini proceed Securities. question. Pajjuri with comes Our of SMBC line Nikko your question next

Srini Pajjuri

couple Akash, trying impact just a ASPs understand we last obviously, couple into I few the nice curious; And modem to I’m of questions, margins? that mix of quarters. a I’m as will Thank as then the well you. Obviously, go quarters, I your ASP. might your first on increase. follow-up. next have as improvement how just have

Akash Palkhiwala

Yes.

ASPs point, specific kind of at specific this margins mean we’re really and product. through I fund not So, guiding

think had go we I to framework broader best back and it’s probably trend. the on discussion the to So, ASP broader

true think with margin your holds trends that also – applies. the still and And then question. I I even think same

the it. accurate that’s rather about socket the specific way broader than a I broader best about So, probably, trend, – it’s it’s think at talk still and of thinking

Srini Pajjuri

Cristiano, better Cristiano. And landscape, on competitive the trying handle to for then get just maybe, Okay, fair enough. a

with obviously, with the going one forward. guessing, have you silicon, high less So situation I’m competitor

close modem if contrast at stage cycle, if you you margin the compare the it you’re running any forward. and this billion and like going about that and semi run could relates this could other what similarities you’re what MediaTek margin. expect And and then of kind and question XG you also look curious, this do that Just at differences my of $X I’m below of is business you rate. talk – seeing some of to a at others, between running aware are not competition XX% to and with company in kind scale And longer-term

the what the XG? is you. to margin shaping business potential trying landscape just for up understand how potential longer-term I’m this And competitive – So, margin is? Thank in

Cristiano Amon

it second-generation. our over XG. designs. based [indiscernible] always our All lot And ability when designs for go me the right of question. said a you indicated started thank been space our I it’s to just and about your probably of think on traction. the differentiation with XXX and we Cristiano, smartphone competitive start design We is competition, with landscape. front-end right, This in Hi. it’s showing one different kind within into product those now, competitive are opportunity XG, of let very Of this of especially, now our of segments good And on think feel use XXX we releases for the being think designs the given first-to-market industrial most technology we faster us now complexity the XXX cases semi. to given then the right move beyond generation, smartphones other We have I as third to RF mobile

attach including So, we’re the leadership our RF to with seeing front one from of propagate design end. other the

So, very happy about we’re that.

Oppo We customers our in as to that’s other I expect goes XG true many differentiation Vivo, increase will think also that demand to outside industry. global China, Xiaomi more and like companies our of as Qualcomm, grow especially like for more abilities and continue China; solution

far our compared much feel to provides margin we’re operating on as we growth better us differentiation have in are earnings And expansion for our we solution, and think XG. we long-term XG margins, as track for of approaching been that. consistent. about So, significant get to QCT and I XG the of target

Operator

Thank Mr. anything further you have do you. Mollenkopf, adjourning to add That session. before concludes the question-and-answer call? today’s

Steve Mollenkopf

hard Yes. thank the employees to unusual you their for been obviously, just and work circumstances. – the there for has

business. the everybody. great for of so on forward a we you in behind such I hard much to Thank it’s us to to very has result happening. them, that strategy to who in traction a the positive work laid look Huawei that And appreciate update worked Thank giving great and out see the been the you, all deal, an get quarter. It’s

Operator

this conference gentlemen, call. concludes today’s and Ladies

may You disconnect. now

QUALCOMM (QCOM) 29 Jul 202020 Q3 Earnings call transcript