Qualcomm predicts 30% decline in smartphone shipments in next quarter

Qualcomm, one of the world's biggest chipset companies, has painted a grim picture for the smartphone industry in the near future. The chipset giant has predicted a sharp decline, nearly 30%, in the smartphone shipments from its partners in the coming months due to the Covid-19.

"Given the uncertainty caused by the COVID-19 pandemic, including the timing and pace of economic recovery, our guidance for the third quarter of fiscal 2020 is based on a planning assumption that there will be an approximate 30% reduction in handset shipments relative to our prior expectations, resulting in an estimated impact of greater than ($0.30) to EPS in the third quarter of fiscal 2020," said Qualcomm in its Q2 Fiscal 2020 earnings report.

Qualcomm also took a big hit in the Q2 Fiscal 2020 due to the Covid-19 pandemic and economic slowdown. The company said it had shipped 129 million modem chips during the quarter, and aims to sell between 125 million and 145 million in the next quarter.

"Our second quarter fiscal 2020 GAAP and Non-GAAP results were negatively impacted by the global coronavirus (COVID-19) pandemic, which caused a reduction in demand of 3G/4G/5G handsets of approximately 21% compared to our prior expectation and on a year-over-year basis. In addition, our GAAP results were also negatively impacted by $265 million, or ($0.21) per share, in non-marketable investment impairments, resulting in part from the impacts of COVID-19," the company noted in its release.

As TheVerge notes, Qualcomm's projections for 5G smartphones haven't changed for the year. The company has predicted its partners will ship between 175 million to 225 million 5G smartphones in 2020.

Qualcomm's projections are in line with the industry experts have estimated for the smartphone industry in the coming months. Big smartphone markets such as India are also said to face a sharp contraction in the coming months. According to a Counterpoint Research estimate, smartphone production in India is set to decline by up to 40%.

"Our conclusion is that we expect to see a sharp contraction as consumers withhold making discretionary purchases during periods of maximum uncertainty. The result is an extension in the replacement cycle," Peter Richardson, Research Director, Counterpoint is quoted as saying.