The word "chip crisis" has frequently made it into the headlines in recent months. It stands for a semiconductor shortage that also and especially affects the automotive industry. The bottleneck shows how important the small components are for the economy in general and mobility in particular. For almost four decades, Qualcomm has been involved in the successive rise in importance of the chip industry. Founded in 1985 in San Diego, California, the company specializes in wireless technology. Whether it's the new mobile communications standard 5G, the Internet of Things (IoT) or autonomous driving - countless wireless applications come to life with the help of chips developed by Qualcomm. The increased emergence of these and other megatrends has given the Qualcomm stock a strong boost in recent years (see chart).
Recently, however, the Nasdaq 100 stock had to lose ground with the broad technology sector. Even a strong interim report could not stop the short-term downward trend. In the second quarter of fiscal year 2022 (as of the end of September), Qualcomm posted revenue growth of 41% to USD 11.2 billion. At USD 3.21, earnings per share were 69% higher than in the same period last year. Qualcomm exceeded expectations on both metrics. The same applies to the outlook. Among other things, CEO Cristiano Amon expects sales for the current quarter to be between USD 10.5 billion and USD 11.3 billion. Until the earnings release, Wall Street had expected less than USD 10 billion. Despite the Ukraine war and lockdowns in China, Qualcomm's core business has performed strongly. The company reported 56% growth for its handsets division. The CEO attributes the relative strength to the company's focus on the premium segment in the smartphone market.
However, the industry giant is in danger of losing a prominent customer right here. Apple is now developing its own chips and could sooner or later do without Qualcomm's modem semiconductors. On the other hand, the company can apparently rely on Samsung. According to Cristiano Amon, around three quarters of the high-end chips installed in the new Galaxy S22 smartphone are Qualcomm components. According to the CEO, this ratio was only around 40% for the predecessor model. Regardless of this, the top manager is working on reducing the dependence on the core business. He has high hopes for the currently smallest segment, "Automotive". Qualcomm has developed chips for autonomous driving under the "Snapdragon Digital Chassis" label.
This innovative platform is catching on: The Group has now received orders from carmakers and their suppliers, resulting in a sales volume of more than USD 16 billion. The latest coup in the pipeline is a deal with Volkswagen. The German carmaker is fully committed to Qualcomm technology in the development of autonomous driving. From the middle of the decade, so-called system-on-chips (SoCs) from the U.S. company are to be installed in all vehicle brands of the VW Group. BMW had already announced its alliance with Qualcomm in March. The automotive group concluded a long-term cooperation agreement with the chip developer and the software company Arriver for the development of solutions for automated driving. The partnership will see the further development of a software toolkit that was already introduced in the all-electric BMW iX model last year.
The combination of BMW, Qualcomm and Volkswagen also makes for an attractive underlying for a new softcallable barrier reverse convertible (BRC). In the product currency CHF, this trio leads to a guaranteed coupon of 17.00% p.a. for a term of 15 months. This opportunity is partially protected by the risk buffer of 41%. A barrier of 59% of the initial fixing is also provided by two new softcallable BRCs based exclusively on Qualcomm. Here, investors have the choice between the trading currencies CHF and USD. In the domestic currency, the coupon amounts to 10.00% p.a., while the USD variant pays out 250 basis points p.a. more. Each of the three new BRCs is equipped with a softcallable feature. Leonteq therefore has the right - for the first time after half a year and then every three months - to call the respective issue and redeem it early.
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