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Qualcomm Takes Third Place

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According to the latest report presented by Gartner on worldwide semiconductor industry, Qualcomm Inc. (QCOM), which is the largest chipset maker of smartphones went up by three places to reach the third position in terms of revenue in 2012.

As per the industry report presented by Gartner, the semiconductor industry faced a lean period in 2012, where the global revenue fell 3% to $297.6 billion. Such a decline in revenue was mainly attributable to the fall in PC business coupled with a slowdown in smartphone penetration across developed nations.

When all the leading semiconductor vendors (total 25 vendors) reported fall in revenue, Qualcomm and Broadcom Corp. (BRCM) were the standout performers with positive revenue growth of 29.6% and 8.8%, respectively.

At the end of 2012, with 4.4% market share Qualcomm is currently behind the market leader Intel Corporation (INTC) and Samsung Electronics, both having a market share of 16.6% and 8.4%, respectively.

In the recently concluded quarter, Qualcomm reported strong financial results mainly driven by huge demand for smartphones/tablets coupled with continuous deployment of 3G/4GLTE deployments across different countries. The company’s chipset market share gained 110 basis points from last year to 4.4%.

Such robust growth in smartphone/tablet demand coupled with the easing of supply constrain for 28 nanometer Snapdragon S4 processor, widely used in high-end wireless devices have together induced Qualcomm to raise its revenue outlook by nearly 20% (compared with fiscal 2012) for full fiscal 2013. Moreover, emerging nations like India and China are continuously migrating toward 3G and 4GLTE networks, hence creating more opportunity for the company in the years ahead.

We maintain our long-term Neutral recommendation on Qualcomm Inc. Currently, it has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

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