Qualcomm Inc
Chatterjee sees "the likelihood of displacement of revenue from Apple's in-sourcing of the modem increasing," as Apple continues its efforts to develop an in-house modem. Initially, this could affect the iPhone SE, which Chatterjee estimates "contributes only 1% of revenue for Qualcomm's QCT business."
While the immediate impact is small, Apple's potential to use its modems across its entire iPhone lineup looms large. If Apple moves to fully in-house modems for the iPhone 17, Chatterjee warns this could result in "14% of revenue and 12% of EPS headwinds in Year 1."
Despite the challenges posed by Apple, Chatterjee sees a significant opportunity for Qualcomm to regain market share with Samsung. He notes that Samsung's flagship smartphones could provide a new source of growth for the company, stating that "winning back share with Samsung flagships could be a revenue/EPS tailwind of ~5% each in FY25."
This potential to increase business with Samsung is key to offsetting losses from Apple, particularly in light of Qualcomm's focus on expanding in other areas like automotive, IoT, and PCs.
These sectors, according to Chatterjee, are "positioned to eclipse the decline in revenue attributable to one of Qualcomm's largest customers."
Automotive, IoT Lend Optimism To Qualcomm's Future
Chatterjee is optimistic about Qualcomm's long-term outlook, emphasizing the company's "technology leadership in mobile SOC (and modem) technology." He projects a "healthy, although modest relative to expectations, revenue CAGR of 6%" from FY24 to FY27, bolstered by growth in non-smartphone segments like automotive and IoT.
Even with the expectation that Apple-related revenue could decline by 87% by FY27, Chatterjee believes Qualcomm's diversification efforts will more than compensate for this. The analyst concludes that, while near-term risks from Apple are real, the opportunity to regain share with Samsung and expand in other sectors positions Qualcomm for long-term success.
