Q2 2023 Qualcomm Inc/DE Earnings Call
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Speaker 2: Please, in gentlemen, thank you for standing by.
Speaker 2: Welcome to Qualcomm's second quarter fiscal year 2023 earnings conference call.
Speaker 2: At this time, all participants are in a listen-only mode.
Speaker 2: Later, we'll get back to question and answer session.
Speaker 2: If you'd like to ask a question during this time, press star at the number one on your telephone keypad.
Speaker 2: To withdraw your question, press star then in number two.
Speaker 2: If using a speaker phone, please pick up your handset before pressing the numbers.
Speaker 2: Please let me your questions to one question and one follow up. As a reminder, this conference is being recorded today, May 3rd, 2023.
Speaker 2: Playback number for today's call is 877-660-6853.
Speaker 2: International Collars, please dial 201-612-741-5.
Speaker 2: The playback reservation number is 137-37571.
Speaker 2: I would now like to turn the call over to Mr. Mauricio Lopez-Hadain, Vice President of Invest Relations. Mr. Lopez-Hadain, please go ahead.
Speaker 3: Thank you and good afternoon everyone. Today's call will include preparing remarks by Cristiano Mone and the cost of paulco olla. In addition, Alex Rogers will join the question and answer session.
Speaker 3: You can access our earnings release and a slide presentation that accompanied this call on an investor relations website. In addition, this call has been webcast on Qualcomm.com and a replay will be available on a website later today. During the call today, we will use non-GAAP financial measures as defining regulation G.
Speaker 3: and you can find the related reconciliations to GAAP on our website. We will also make forward-looking statements, including projections, and estimates of future events, business or industry trends, or business or financial results.
Speaker 3: Actual events or results could differ materially from those projected in our forward-looking statements.
Speaker 3: Please refer to our SEC funds, including our most recent 10K, which contain important factors that could cause actual results to differ materially from the forward-looking statements.
Speaker 3: And now to comments from Qualcomm's president and chief executive officer, Cristiano Mord.
Speaker 3: Thank you Mauricio and good afternoon everyone. Thanks for joining us today.
Speaker 3: In a challenging macroeconomic environment and brought downturn across the semiconductor sector, we're pleased to deliver fiscal Q2 results consistent with our prior guidance.
Speaker 3: With the delivered fiscal Q2 revenues of $9.3 billion, non-gap earnings of $2.15 per share were at the midpoint of our guidance.
Speaker 3: Our chipset business delivered revenues of $7.9 billion near the high end of our guidance range. Our licensing business delivered revenues of $1.3 billion at the low end of the guidance range on weaker demand for handsets.
Speaker 3: The evolving macroeconomic backdrop has resulted in further demand deterioration, particularly in hindsight, at a magnitude greater than we previously forecasted.
Speaker 3: As a result, we're operating under the assumption that inventory drawdown dynamics remain a significant factor for at least the next couple quarters. Additionally, while expectations are for rebound in China demand in the second half of the calendar year,
Speaker 3: We have not seen evidence of meaningful recovery and are not incorporating improvements into our planning assumptions.
Speaker 3: While the challenges we are facing are impacting the semiconductor industry.
Speaker 3: We remain focused on managing what is within our control and will continue to execute on our diversification strategy and leading technology and product roadmap.
Speaker 3: remain focused on managing what is within our control and will continue to execute on our diversification strategy and leading technology and product roadmap. As market visibility remains limited.
Speaker 3: We're actively managing operating expenses and will continue to evaluate additional opportunities to drive greater operating efficiencies without losing sight of the automotive and IoT growth opportunities ahead.
Speaker 3: Let me now provide key highlights from across our business.
Speaker 3: In Hantsons, we extended our 5G technology and product leadership with the Snapdragon X75 5G Modem RF system.
Speaker 3: The world's first 5G advance ready modem RF platform that will drive the next phase of new 5G capabilities globally is starting in 2024 across segments, device types and networks. The X75 modem is now the benchmark for 5G
Speaker 3: Johnson, Xiaomi, vivo, OPPO 1 Plus Honor Motorola, ASUS, and ZTE.
Speaker 3: Additionally, our Snapdragon 7 series is redefining the heightier. Our recently launched Snapdragon 7 Plus Gen 2 mobile platform outperforms its competitors premium tier solutions, winning multiple accolades for its superior power and performance. Worseing excellent adoption across Chinese OEMs,
Speaker 3: resulting in share gains. OEMs are also reporting strong initial sales for products powered by the 7 Plus Gen 2.
Speaker 3: In automotive, we see continued traction across global automakers and Tier 1 customers driven by the increased adoption of our Snapdragon digital chassis.
Speaker 3: We are very pleased to be partnering with Mercedes-Benz on our next generation Snapdragon Digital Cod Pit platforms. This is a result of our long and close collaboration with the Ambition Mercedes-Benz software factory and engineering teams and various partners to create an industry leading MBS
Speaker 3: premium cockpit experience. The new platforms will be featured in Mercedes vehicles beginning in 2023. Additionally, our OEM partners recently launched vehicles with our 3rd generation Snapdragon cockpit platform including the XPeng P7i and Lotus P7i.
Speaker 3: new Electra SUV. Notably, during the quarter, we won 12 new designs across a Snapdragon cockpit and Snapdragon connectivity 5G platforms without a makers across the globe.
Speaker 3: We remain on track to execute on the milestones outlined during automotive investor day.
Speaker 3: In consumer IoT, we continue to be encouraged by the positive momentum of Windows on Snapdragon.
Speaker 3: Dell recently launched the Inspiron 14-inch laptop powered by the Snapdragon 8CX Gen2 Compute Platform.
Speaker 3: In addition to OEMs, we're expanding our ecosystem across BIOS, Hardware, Software, ODM, and Channel Partners.
Speaker 3: We're also launching the Windows on Snapdragon Developer Portal to enable consumer and enterprise ISVs to test, port, and optimize their applications directly on Qualcomm Silicon.
Speaker 3: Our next-generation Snapdragon Compute Platform with custom Orion CPUs and industry-leading AI acceleration is on schedule to enable commercial device launches in 2024. As a reminder, we remain the platform of choice for all significant ecosystem players for XR. Notably meta.
Speaker 3: the Joint Partnership with Samsung and Google, and broadly in China.
Speaker 3: While still in its early phases, we believe the merger of physical and digital spaces will become a significant opportunity for Qualcomm.
Speaker 3: We also continue to win designs for home robotics, smart appliances and smart camera applications with household names such as Bosch, LG electronics, Panasonic, Samsung and Sony.
Speaker 3: In Edge Networking IoT, we're very pleased to share that we're now collaborating with Reliance Geo on rolling out 5GFWA across India servicing millions of residents. We also recently announced the Qualcomm 5G Fix Wireless Access Platform Gen 3 offering operators the ability to expand their service coverage to new areas.
Speaker 3: while lowering cost and enabling faster deployment.
Speaker 3: Additionally, we continue to lead the transition to Wi-Fi 7 with more than 175 cumulative designs across all product categories.
Speaker 3: Access points account for 89 of these designs with 16 louches in the quarter.
Speaker 3: In Industrial IoT, we announced a Qualca-Aware platform to empower developers and enterprises to easily build real-time intelligence and visibility solutions.
Speaker 3: The platform combines simple, secure and scalable cloud-based services with power optimized and precise location tracking and an extensive hardware ecosystem to deliver tailor-edge solutions across many industries.
Speaker 3: Additionally, we led the Bluetooth SIG working group to help establish a new standard for electronic shelf labels that are scalable, ultra low power and highly secure.
Speaker 3: This will help enable large retailers to accelerate the digital transformation of the store with electronic labels that can interact with both store and consumer devices.
Speaker 3: Our OEM partner, SCS Imago Tag, recently announced an agreement with Wal-Mart to deploy electronic shell-flavos across 500 stores over the next 12 to 18 months.
Speaker 3: I would now like to provide a perspective on the disruptive trends in the artificial intelligence space and the significant opportunity for Qualcomm.
Speaker 3: The man for generative artificial intelligence models is growing at an exponential rate.
Speaker 3: Generative AI models such as chat to BT, stable diffusion and Dali have already scaled to millions of users in a short period of time.
Speaker 3: We believe that this model will evolve quickly, continue to grow in popularity, and change user experiences across mobile, personal computing, and automotive.
Speaker 3: Beyond changing internet search, this model who have an impact on content creation, such as text, images, audio and video, for both entertainment and productivity.
Speaker 3: Beyond changing internet search, this model who have an impact on content creation, such as text, images, audio and video, for both entertainment and productivity. It will also transform many industries.
Speaker 3: For these models to realize their full potential in scale, they will need to run locally on devices at the edge. A mobile word congress, we demonstrated the world's first on-device stable diffusion, a greater than 1 billion-parameter foundational model for text-to-image applications .
Speaker 3: running completely on a Snapdragon power Android smartphone. In the coming months, we will significantly improve performance and be able to run models in excess of 10 billion power meters locally on the device.
Speaker 3: and we will increase the scalpability substantially for products in 2024. Qualcomm is uniquely positioned to enable the proliferation of AI use cases on edge devices.
Speaker 3: We're advancing AI to make core on-device capabilities ubiquitous, such as perception, reasoning, action, and now content creation.
Speaker 3: With millions of AI-enable platform shipments per year, unparalleled AI processing performance per watt in the broadest range of device categories from smartphones to PCs, automotives, and IoT, Qualcomm is firmly at the forefront of this upcoming transformation.
Speaker 3: Further, very large AI models are placing significant incremental demands on energy intensive and expensive cloud computing infrastructure. As such, a hybrid AI architecture leveraging a accelerating computing at the edge can offer a support cloud processing by running AI-infrainting directly on the device.
Speaker 3: Beyond cost optimization, additional benefits of running generative AI on device include improved latency, security, privacy, and the ability to meet data compliance requirements.
Speaker 3: This is a new and exciting opportunity for Qualcomm and one of our priority investment areas.
Speaker 3: As I close my prepared remarks, I would like to reiterate that the secular technology trends driving the long-term growth opportunities for Qualcomm remain unchanged. Despite the disappointing macroeconomic environment, our investments in technology leadership.
Speaker 3: Our best product roadmap in history and strategic customer relationships across multiple industries position us well to execute on our strategy and expand across new and diverse end markets.
Speaker 3: I would now like to turn the call over to Akash.
Speaker 3: I would now like to turn the call over to Akash. Thank you, Koshano, and good afternoon, everyone.
Speaker 4: I'll start with our second fiscal quarter results. Despite a difficult operating environment, we delivered revenues of $9.3 billion, which was above the midpoint of our guidance, and non-GAPIPS of $2.15.
Speaker 4: QTL recorded revenues of $1.3 billion, an EBT margin of 68%, reflecting lower than expected global handset units. On a year-over-year basis, we estimate global handset cell-in units declined by approximately 14%.??!
Speaker 4: QCT revenues of $7.9 billion, an EBT margin of 27%, who are both near the high end of our guidance.
Speaker 4: Hands-up revenues increase 6% sequentially to $6.1 billion.
Speaker 4: Benefiting from device launches with Snapdragon 8 Gen 2, our latest premium tier chipset platform. IoT revenues of $1.4 billion reflected in larger than expected impact of macroeconomic environment on demand and channel inventory drawdown. Automotive revenues of $447 million grew 20% year over year.
Speaker 4: to stockholders, including 903 million in stock reportages and 834 million in dividends.
Speaker 4: Additionally, we are pleased to have announced a 7% increase in our quarterly dividend, consistent with our commitment to dividend growth.
Speaker 4: Before turning to our third fiscal quarter guidance, I'll give you an update on cyclical challenges impacting the semiconductor industry. Financial headwinds have increased meaningfully relative to our initial expectations going into the fiscal year, with a combination of an uncertain macroeconomic outlook, persistent inflation and a slower recovery in China which continue to impact demand globally.
Speaker 4: We now expect global 3D4G5G hands-set units in calendar 23 to be down at least a high single-ditted percentage relative to calendar 22, which is lower than our prior expectation.
Speaker 4: Given the weaker hands-up forecast, until demand normalizes and visibility improves, we anticipate that customers will remain cautious with purchases and reduce channel inventory risk further.
Speaker 4: As the environment continues to evolve, we will evaluate and execute additional cost reduction opportunities to help exceed our operating expense target. Turning to guidance for third fiscal quarter, we are forecasting revenues of 8.1 to 8.9 billion dollars and non-GAPEPS of $1.70 to $1.90. Our guidance reflects the impact of macroeconomic headwinds, weaker global handset units, and channel inventory drawdown. In QTL, we estimate revenues of 1.15 to $1.35 billion and EBT margins of 64 to 68%. In QCT, we expect revenues of 6.9 to $7.5 billion and EBT margin of 23 to 25%.
Speaker 4: In closing, while we are not immune to near-term headwinds, we are well positioned to benefit from an eventual recovery in the macroenvironment. Despite a reduction in global hands-at units and a continued drawdown of elevated channel inventory, QCT hands-at revenues has benefited from increased content per device, expanded traction with OEMs, and improved mix across tiers. We've remained focused on executing our diversification strategy and positioned ourselves for success in our largest growth opportunities, including automotive, industrial and networking IoT, personal computers, and XR. We're confident in our ability to navigate the current operating environment, give us...
Speaker 4: smartphone and one on auto. So if I can start on the smartphone one, I think I know you're sort of taking down your guidance for the overall market outlook today of 2023. But if I look at your QTL guide, it does sort of imply that you're looking at more of stabilization in the cell through on an absolute level.
Speaker 4: So when I look at your QCity guide, that it does suggest that most of the headwinds you're seeing or expecting there are inventory and timing of the purchases, maybe this is sort of confirmed if that's the way, sort of if I'm interpreting that right, and what's the maybe magnitude of the timing and the inventory headwinds to the QCity revenue guide for a fiscal third quarter. And I have a...
Speaker 4: Our view of inventory drawdown is really, you know, the macro headwinds have increased meaningful since the beginning of the fiscal year. And so what we've seen is the impact on market is driving a scenario where it takes longer to run through the existing inventory. We don't have a fundamental change in how much inventory we think the channel had going into the year that was access.
Speaker 4: It's just how long it takes to run through it as a result of the market forecast.
Speaker 4: Okay, and on the autoside at the questioner you talked about the 12 design wins but you mentioned them being in cockpit and connectivity. So if I wanted to check if you have an update on E-DAS and the engagement from your customers on that front and your product roadmap.
Speaker 4: And really, to auto, I think there's been some concern about exposure to China volumes in terms of your pipeline. Maybe give us some wallpuck estimate about how much of your pipeline is reliant on China, electric vehicle volumes and how you're thinking about the risk around those production numbers. Thank you. Very good. Thank you for your question. The 12 designers.
Speaker 3: time at this time.
Speaker 3: The second comment is on China market. We have seen, I think consistent with the overall theme of China, some weakness in China also, I think consistent with the rest of the market, but our design and presence with the China EV with the local OEMs is very, very high.
Speaker 5: at the same time to make this quicker. The first one, Christiano, in China, you were pretty clear in your script, and I think you guys were earlier than most bellwether companies in flagging this, but the recovery in China in the second half of the year might be a bit more muted. But I think that, after the installation ofRh 1, the a
Speaker 5: During the peak, obviously things were being overshipped into China during the peak. I think we were 500 million units give or take on an annualized basis in China. And I think we're running closer to 300 million now on a sell-through basis. Maybe you could update us. Are those numbers roughly right? And what are you guys seeing in terms of a recovery? And maybe how much are you undershipping that today that could still help your numbers in the back half of the year? But when we closer, helped our books be more stable as you Communism Right, next time. Thank you for that question again, please rocket the new
Speaker 4: if that's what you're quoting. I don't have the exact numbers in front of me, but that's what you're quoting. It'd be consistent. The way we are thinking about the inventory drawdown is, of course, it's a near-term phenomenon. We're gonna get past it. The strength of our design win pipeline is very strong. So if you do, if...
Speaker 4: One way to measure it in our minds is we look at our share of cell through and we've seen that share grow from 22 to 23. So that should give you a sense of our position going into the next year.
Speaker 3: I think just met this Krishna I just want to add one thing. You know common sense and I think the overall expectation is following the reopening the China market was going to bounce back. It has been very suppressed I think during.
Speaker 3: the lockdown and during the pandemic. I think what we're basically saying is we have not seen those signs yet. So therefore we thought that prudent not to put in our planning assumptions was still gonna be monitoring the situation. But the dynamic we see right now is exactly what Akash outlined. It's an inventory drawdown.
Speaker 3: And that's why I think the difference between the QCT and the QTL business.
Speaker 5: Thank you guys. As my follow up, a mid single digit top by thinking the guidance you mentioned for IoT, there's sort of three different segments of the business there. If you could, there's been an inventory correction across the IoT business and I think many of us have less visibility on your granular basis there than in your hands at business. So you could just talk through the dynamics of
Speaker 4: that business recovering a bit in June , that'd be helpful. Thank you. Sure, so it's Akash. When the initial weakness that we saw in IoT was in consumer, and then we've kind of seen that expanded into industrial and edge networking, and specifically China playing a significant role in that weakness.
Speaker 4: So it's a combination of all three areas. Now as we look forward, a lot of the growth that we're expecting within the quarter is actually going to be a cross recovery across all three. So there isn't one that stands out that I would point to. And then maybe the last point on IoT is really when you step back and think about the broader.
Speaker 4: very optimistic about how things look longer term and will kind of work through everything in the short term.
Speaker 2: Our next questions from one of Michael Walkley with Han Court Genuity. Please receive a few questions.
Speaker 6: how well the Snapdragon 7 is performing relative to a premium tier from your competitor. Can you talk about design win traction and share gains you're seeing maybe further downstream from the premium tier? And once inventory clears, do you think that you'll start to see some...
Speaker 6: Sharper share games coming back maybe you know into Chinese New York and counter Q4 that tour lid of colony and tour site
Speaker 3: Hey Mike, thanks for your question. I will say we are no longer in, and that's probably an understatement, right? We're no longer into a supply constraint environment. So as the supply constraint environment got resolved, we have the ability. We're, we're looking for a new application. Let me introduce the palavra qualcosa. Sogende, let's see which substance we are not going to enter into the printer.
Speaker 3: to gain share. And I think as a cash outline, if you look at our share of activations and sell true compared to 22, you see a very positive picture for us in China. We've been gaining share on what we call the height here. The new seven series we made a lot of investment, including leveraging the Snapdragon brand in the position of the seven. Very well received in the market, our seven plus.
Speaker 3: outperform, I think, the competition prematteer. And we like because it sets the floor and then you have Snapdragon very uniquely positioned in the eight series. And I think as outlined from a share perspective, we're gaining share. The whole market still going to the dynamic.
Speaker 3: that we just outline an inventory, but we like our position in the marketplace.
Speaker 6: Great. Thanks. It may be quick follow up for a cost just on QCT margins just given the inventory work. There is any mix or anything else we should think about on QCT margins as you go through this inventory clearing and less modem only shipments over the next couple quarters. Yeah. So from a gross margin perspective, there's individual reruffs
Speaker 4: that's significant enough to discuss. It's really the current environment playing through and then as we look forward, us remaining disciplined with pricing as we grow in a mature market. Our next question's from the line of Stacey Raskin with Bernstein Research.
Speaker 7: Please proceed with your questions. Hi guys, thanks for taking my question. For the first one, I was wondering if you could define what you mean by muted.
Speaker 7: seasonality for September quarter. I think you're usually up, I mean, it's not uncommon for you to be up by double digits. What are you thinking now? And I guess maybe if you could talk a little bit about the different drivers, handset, IoT, auto, and Q4.
Speaker 4: Sure, Stacey, it's Rakesh. If you look at our typical seasonality from third quarter to fourth quarter, it's really driven primarily by the launch of a new flagship device and the build that happens for that device. Outside of that, there are some other puts and takes, but that's the primary driver of the growth.
Speaker 4: What we're suggesting is, as outlined in the prepared remarks, we expect that to be muted because the lower demand from the Modemollni hands-up customer extends from June into the September quarter as well. And the reason for this is we saw them buy a little more earlier in the year and so this is just kind of balancing.
Speaker 4: purchases of chips from us. To be clear, this is not a comment on their sell-through, and it's not a comment on our share within the OEM either. This was just the timing of purchases from chips from us.
Speaker 7: Thank you. For my follow-up, I know you said you expect the inventory drawdown to last the next couple of quarters, but I guess into June , do you think the magnitude of the drawdown is better or worse or about the same as what you saw in March? I'm just trying to gauge directionally, is it getting at least better or worse, even though we know it's still there?
Speaker 4: Yeah, so honestly, they see there's a different story with every OEM. There are certain OEMs who are much further ahead in reducing the inventory profile and there are others including the ones we just discussed happening over the next couple quarters. So I haven't specifically sized it in terms of scale, but I would...
Speaker 7: I know organically what you're doing in IoT and automotive. Are there inorganic opportunities to accelerate that? Or is the diversification effort going to just simply take time because automotive and IoT are great markets, but they take a reasonable amount of time to penetrate, especially given their relatively smaller size versus your handset-oriented businesses?
Speaker 3: Thank you, Ross. Look, there are, inorganic opportunities that we continue to look into the market. We've been clear. We have been focused in identifying M&A opportunities that help us to accelerate diversification. We've been very careful just because of the current environment. We wanted to do something that is actionable and we'll continue down this process of identifying. But we are looking.
Speaker 3: at inorganic options as well to accelerate diversification. And we also very excited about what I mentioned into the prepared remarks. I think this incredible opportunity that we now have, we're very uniquely positioned to do AI at a very high performance and low power in all the devices at the...
Speaker 3: as well.
Speaker 7: Thanks for that, Cristiano. I guess one for Akash as my follow-up on the handset segment. It looks like you're guiding that down kind of low-teen sequentially. I know you said Android flat and...
Speaker 7: The modem only customer would be the headwind. How is Android flat if you still are saying macro is a problem, inventory burns, a problem, etc. Is that just evidence of the share gain or what's going on there?
Speaker 4: Yeah, I assume your question Ross was related to QCT. Just QCT that what you guys call me and that's not that we're getting. Yeah, so if you think about our historical kind of trend between these two quarters in the Android business, we're staying very consistent with that this quarter. I mean, if you look at last year, second quarter to third quarter.
Speaker 4: our Android business was roughly flat and we're guiding the same this year. So it's just following the same trend and the factors, the market and inventory drawdown exist in both corners. Next question's from the line of Joe Moore with Morgan Stanley . Please proceed with your questions. Great, thank you. I guess as you look at the year on year decline in handsets, how much of that would you attribute to Transfer Waywarden Goes toind St,
Speaker 6: inventory build in a year ago, inventory depletion now, or any kind of change in kind of like for like pricing. Can you just kind of separate out those three factors? Yeah, Joe, we haven't talked about it.
Speaker 4: or given specific numbers on it, but one of the frameworks to look at it would be to look at the two years combined. One year had the bill, the second year has the bleed, and if you look at that combined, it will give you a framework of what the run rate strength of the businesses. The other thing I would say is just the one thing to calibrate in that framework is also.
Speaker 6: location mode that there would be a little bit of gross margin headwind. What causes that? Is it just that are there expedite fees that we were getting before? Is it more promotional now? And has there been any change in kind of like-for-like pricing as you've kind of moved out of that tight supply environment? Thank you so much for playing, and thank you for your time to finish your course. It's been a pleasure meeting you today.
Speaker 4: Yeah, so it's a combination of them. I mean, given supply constraints, we were able to exercise some pricing leverage that gets neutralized in the current excess inventory environment. And so that's just playing out through the numbers. The other two factors to keep in mind is we had a price increase from Foundry that was
Speaker 4: ran through starting first of January as well. And some underutilization in our RF front end fabs that over time will get filled back in as demand comes back, so that should be a tailwind for us going forward.
Speaker 2: Any questions from the line of Blaine Curtis? Farclays. Please receive us your questions.
Speaker 8: Thanks for taking my questions. I do, but maybe just following up on that last one on gross margin. I mean, I guess if I'm looking at the numbers.
Speaker 8: Seems like your ASP is still going up. So is it really just the higher cost? And I guess the second part of it is I think there's a lot of concern about more competitive environment, media tech moving up to the high end. So just can you go back and just talk about that environment? Yeah, thank you.
Speaker 8: I said there's not more like for like, but I mean, I think there's a lot of concern about maybe people buying older products and not taking Gen 2 and MediaTek moving up. Just kind of touching those points.
Speaker 4: Yeah, Blaine, I'll address the first part and then Krishna will address the second part. On gross margin percentage, I think it's a reasonable way of thinking about it. Our gross margin dollars per device continues to grow and that's the strength and it kind of adds scale and profitably to the business. But we have seen gross margin percent get impacted by.
Speaker 4: the couple factors I just outlined. But again, those are to me kind of ins and outs of the business. It's better to kind of step back and look at the broader, longer term opportunity for us to continue to add content to our chips, which we have done very successfully over the last three years. And we have an opportunity to do that, especially with our new custom CPU cores coming into play into all of our products.
Speaker 3: choices of investment, we feel pretty good about the roadmap. And we took this very, very focused strategy and make sure that our seven tier outperforms the competition prem and tier. And that changes the landscape, which means we are very well positioned above that in the eight, as I outlined. Our design traction, it's very good, especially.
Speaker 3: within all of the OEMs, no exception. I remind you that we are globally with Samsung, you know, our agreement with them, we have the launch of GS23 that just happened, then we have the fold and flip, and then we have the GS24, it's gonna be a number of years of association of Samsung with Snapdragon brand.
Speaker 3: globally and you know the size of the market is not good but our position is very strong and as I outlined before we're gaining share.
Speaker 8: And then if I could just follow up with the modem only in terms of the timing, I guess you guys have been waiting if there's any decision of that customer to move away. I'm just curious if that timing you would be notified at this point or if you thought that that timing of shipments had anything to do with their transition.
Speaker 3: No, it has nothing to do with the transition. For the transition, I think we said a number of furnace calls ago that we're expecting to be in the product they launch in 23 and in 24 we have no change to our planning assumptions.
Speaker 2: Our next question is in the line of Brett Simpson, of REIT Research.
Speaker 2: Our next question is from the line of Brett Simpson, from the line of Brett Simpson.
Speaker 7: Yeah, thanks very much. Christiana, I wanted to ask about the state of the Android market. There seems to be a sort of consistent structural share loss here. And I guess even going back pre-COVID, Apple has been growing their business since COVID and Android just seems to keep losing share. So,
Speaker 7: What do you think is going on and how much of the structure decline in Android do you think is the second-hand iPhone market? And then I don't know whether you can size this, you know how big do you think the second-hand market is and how it's affecting Android and what do you think the Android value chain is going to do to reboot their business? Thank you. Yeah, no, this is a great question and there are a number of questions.
Speaker 3: We did as well. I think so, as our competition, I think everyone had grew as the expense of the market. And I think that is resulting to a much larger, you look at that Huawei Android as a net loss of Android. And that's...
Speaker 3: for the areas that Apple gained share. The market, the market, it's smaller and even the component of hand-me-down phones, it's accounted in our planning of a smaller market. That's where we are until we go to the next upgraded cycle, cycle-co-business.
Speaker 3: But our position in Android has improved. And I think if you look at our trajectory, actually on the smaller Android market, we've been gaining share and focus on the value share of the market with concentration in the high and the middle tier.
Speaker 7: Do you think the second and markets growing structurally, I mean, just to understand the dynamics because some of the data we've seen, it would suggest that this is starting to have an impact on Android volumes.
Speaker 4: Yeah, Brett, it's Akash. So I divide this into two parts. I think there's a second-hand market that has been around for a long period of time in emerging markets as a hand-me-down device. And so that obviously still exists. There has been a little bit of a change at the top with the refurbished phone market. And so that's something that we're definitely closely watching and contemplated in our numbers at this point.
Speaker 1: Thank you.
Speaker 2: Our last question is from the line of Tal Vianney with Bank of America. Please receive your questions. Hey, thanks.
Speaker 2: of Tal Vianni with Bank of America. Please receive your questions. Hey, thanks.
Speaker 2: I've got to sometimes you give us more indications of future quarters and I wanted to ask about QTL, QCT for the September quarter. Can you provide us some comments on your expectations?
Speaker 4: There is a slight change in the market and our revenue is relatively flat as well. So you should think of that as a proxy based on historical trend. There isn't something specific going on this year that I'd say is different than last year, pending a recovery in the market. From a QCT perspective on the fourth quarter,
Speaker 4: We typically have seasonality, seasonal growth, and what I said in my prepared remarks is that we expect muted seasonality this year because of all the factors that we've been discussing on this call and have been outlined in the prepared remarks as well.
Speaker 4: So that would be a framework to come up with a number for September and then obviously as we go from there, you go into the holiday season. That's typically a strong quarter for us and we would realize benefits as we go there. Got it. And what's normal seasonality for Q4 for QCT? When you say muted, what's your benchmark? Well, I would say if you look at last year, you would...
Speaker 3: Yes, thank you so much for listening to our call. Here is the summary. From our perspective, while the marking conditions remain challenging, we are very confident to reach our Q3 estimates at this point.
Speaker 3: We're taking action where we can control as we navigate the near-term headwinds, but it's most important we'll continue to execute on our strategy. We like our strategy. I think we invest in the right technologies for growth and diversification, especially in IoT and Auto.
Speaker 3: I feel we have a very competitive roadmap, so we're well positioned to benefit when the market returns to growth. And I think the last comment is, we are going to become very relevant in AI. As you look up the speed of new models appearing, new companies investing in new...
Speaker 3: larger opportunity for us in automotive as well the entering of next-generation personal computing so excited about that will continue to invest in this area
Speaker 3: In summary, we're very focused on our long-term success and we steadfast our commitment to derive maximum value for stakeholders. I want to thank all the employees for the dedication and contributions to Qualcomm's roles, our many partners and suppliers. Thank you. Please, in general, let's say conference conference. You may now disconnect.