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- [00:03]
Cristiano Amon
Bloomberg Audio Studios Podcasts, Radio news.
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Bloomberg Host 1
Let's focus in on Qualcomm shares right now down about 8% on track for their biggest drop since last summer. At one point in the session we were down 11% on track for the biggest drop since March of 2020. The world's largest maker of smartphone processors issued a lackluster revenue forecast raising some concerns that memory supply constraints could push prices higher, which in would weigh on the handset demand. Joining us to discuss is Christian Cristiano Amon Qualcomm CEO Cristiano, good morning. Thank you tech. I give you that what's happening in memory is completely outside of your control. Right. But the, the forecast for the current period of sales up to $11 billion. I suppose one way of looking at it is how much better would that have been were the market not so constrained by the supply of memory right now but also the pricing pressure that supply deficit puts in place.
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Cristiano Amon
Yeah, look, it's a very interesting situation. You know, in one hand I'm incredibly happy with the business. Everything is going well. Demand is strong. Macroeconomic indicators are good. Demand for handset is strong. We have seen, we had like a record quarter in Q1. We saw all of our customers reporting sell through data better than expectations. But then the industry is now defined by the availability that memory that is is going to be available for consumer electronics. And it creates, you know, a sudden change in how OEMs look at of their build plan and they say look, I have to size the size of the market not based on demand but the memory that I can get for consumer electronics and that will make it like this unique period. There's.
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Bloomberg Host 1
Go ahead, let me jump in. But you know, within that market there are some specific interesting case studies. Right. The premium segment is good like from a demand side particularly in China. So usually like in any hardware environment where you're supply constrained but demand is high, like that's a good thing. And increasingly like think about the content in the phone that you provide. How can you kind of navigate this to your advantage?
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Cristiano Amon
Yes, and that's a great observation. That's why I think there's a lot of, I think a lot of unnecessary, I think speculation right now. Here's, here's what's going to happen. We saw this with COVID OEMs. The first thing they're going to do, they're going to prioritize premium and high tier, you know, because those are more resilient I think to price increases. They are, we are going to see probably adjustment in prices on handsets. And because, you know, demand it is strong, it is very likely that the premium and the high tier is going to be less impacted than the mass tier on phones. And we have seen that the premium tier continue to expand regardless. Regardless over the several years the premium tier is expanding and we are more concentrated on the premium, the high tier. So your, your theory is 100% correct. All that happen is OEMs had thinking about a particular size of the year that got resized by the memory availability. They're adjusting their build plans and we're going to see how this is going to play out in the next few quarters. That's, that's really the story. The good thing is demand is high.
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Bloomberg Host 2
So the second quarter chip sales guidance was what worried people. But third quarter, fourth quarter, it's going to play out over that time frame. Do you think?
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Cristiano Amon
It's one thing that I carefully worded. I think during our earnings call I said the re availability and pricing will be the defining factor for the size of the handset market. And we talk about the size of handsome market because we have visibility the whole market because of our licensing business. But, but now we're going to see how this play out. And I'm a little hesitant to make a very definitive prediction on how this is going to play out in Q3 and Q4. But the pandemic was a good proxy. When we have something like that and we have a semiconductor shortage, we saw that the premium tier has been more resilient. And you know, we're going to be working with our customers as they move the, the, the roadmap to kind of those type of devices.
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Bloomberg Host 2
And now you control the controllables. And those controllables have been diversification in many ways. This speaks to why you've been focusing in on new areas of growth, whether it be autos, we connected devices, whether it be the future of robotics, whether of course it be AI Cristiano. How much can you accelerate there to make up for the handset issues?
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Cristiano Amon
Look, we, we, you know, it's not, hopefully it's not lost on people that another record in automotive. We had actually a record in the company in Q1. And not only we continue to be satisfied with the direction the company is going on diversification, we add a new things like robotics for example. We had a record in automotive. A couple of things that happened in the quarter that are very, very important. One is we announced a broad partnership of Volkswagen Group across all the brands to build, you know, the Snapdragon digital chassis for Volkswagen we saw the launch of the RAV4, one of the top selling cars in the world for digital cockpit and IoT is growing. We, we enter robotics in a short period of time with some major customers. So we're excited about that. The fundamentals of the company are actually incredible and we're just navigating to another phone cycle.
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Bloomberg Host 1
Cristiano, second consecutive quarter where automotive is above $1 billion. And I remember over years us discussing what was a backlog in automotive. Right. Apply that story and that experience to your hopes in Datacenter. You know, you've told us when this will happen and who it will happen with first, but how do you see that translating from your order backlog to revenue growth and hitting milestones like a billion dollar quarter?
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Cristiano Amon
Yes, we, we will, we restated the data center will start showing up in fiscal 27. We have been talking for a while that the data center is going to change. It's going to go from the current focus on training into inference. We have been saying, I think before it was popular that a different architecture will be required. I think the post GPU architecture, interesting that the GROQ development is validating that we're getting a lot of good feedback. We have a new architecture including for memory. We don't need HBM which is causing all of this a memory situation. And it's, we have been very encouraged by, you know, the traction we're getting. So it's going to be material in 27 and you know, we are going to provide a lot of details in our upcoming investor event.
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Bloomberg Host 2
Just broadly, how are you thinking about the actual consumer right now as well? Christiana, just briefly.
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Cristiano Amon
Yes. So phone is a great proxy for consumer macroeconomic indicators are strong consumer demand. Very strong. And one of the things I said in the earnings call sell true data on phones and we have visibility because of our licensing business exceeded all expectations. Phones are getting off the shelf. So it's not a demand issue, it's just a, it's just a memory supply issue.
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Bloomberg Host 2
Qualcomm CEO Cristiano Amon, we so appreciate you joining on this day after the earnings.