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EU is 'moving faster' than U.S. on chip shortage, Qualcomm CEO says

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Qualcomm CEO & President Cristiano Amon speaks with Yahoo Finance’s Brian Sozzi in Davos, Switzerland, to discuss digital innovation, inflation, recessionary risks, supply chain challenges, global chip shortage concerns, and the outlook for growth.

Video Transcript

BRIAN CHEUNG: Well, the World Economic Forum in Davos, Switzerland is wrapping up. And amid the meetings, the parties, all the other happenings, our team has been there catching the pulse on the latest mood among the world's elite and powerful. Joining us now live from Davos Brian Sozzi. Brian, you know, I think it's 5:00 PM somewhere, and I think it's actually 5:00 PM there right now. Things are wrapping up, I understand you're getting a little loose right now, getting ready to come back home. What's the takeaway there? How are you feeling? How are you feeling?

BRIAN SOZZI: Well, that's why you're in that powerful seat, Brian, because you could connect the dots like that in real time. But what you're seeing, a little bit chilly day here in Davos, Switzerland. I have my bro vest on right now. Really the whole crowd has left. A lot of the billionaire influencers are out of here probably on their private jets going to some beach. And again, you probably start to see the sunset just a little bit here over those majestic mountains behind me.

But all in all, lots to just decompress and think about over the past really week of Yahoo Finance's coverage here at the World Economic Forum. A lot of doom and gloom, a lot of folks talking about a recession. I would say this to the cryptocurrency faithful out there, not much cryptocurrency focus here. Bank of America CEO Brian Moynihan told me, don't expect a big push into cryptocurrency anytime soon from his bank.

But also a lot of focus on what is happening in China, the supply chain challenges, and also the ongoing chip shortage. Intel CEO Pat Gelsinger told me he doesn't see the chip shortage ending until 2024. I put this question to Qualcomm CEO Cristiano Amon and also just try to get a sense of the overall chip industry. Take a listen.

CHRISTIANO AMON: You know, If you just look at the market right now, there's a lot of negativity concerns. But I'm more optimistic than that. I think what we see in the part of many discussions, huge opportunity of digital transformation across every industrial sector in Europe. There is this broad understanding that the economic growth is going to be digital.

How do we execute and making all of those devices across all those industries connected, smarter, cloud-connected. And I think in one way, I think you have those concerns about inflation and when are we going to get to a recession. I'm more optimistic than that. But then there's also this broad discussion about incredible opportunities for technology as we look out in the future.

BRIAN SOZZI: What are you hearing from Europe different than the US? Lots of focus on a US recession that is not here yet. We still are having growth. But in Europe, from the folks I've talked to, things have really fallen off and the companies have pulled back on their investments.

CHRISTIANO AMON: What we're seeing it's a little bit different set of discussions, and may be because the semiconductor sector is still very hot. A lot of interest in semiconductors, so a lot of discussions, especially with government officials, about the EU Chips Act. The EU Chips Act is actually moving faster than the US Chips Act, but I think they're both very important.

I think it's building a more resilient supply chain. I think everybody realized and all the European industry that chips are important. But also a good discussion about the importance of actually growing digital even in face of recession, how do you actually keep the engines growing, increasing efficiency, and all of that, with all the goals to address high energy costs.

BRIAN SOZZI: You talk to a lot of government officials. Where is the US Chips Act? Why can't this thing get passed? It makes so much sense.

CHRISTIANO AMON: Well, we're somewhat encouraged. I think now there's a conference between Congress and Senate. And I think there is bipartisan alignment. It's important to have manufacturing of semiconductors in America. I am very encouraged by they're actually doing that in coordination with the EU. It's not an issue that one continent can solve alone. And I'm just hoping it's going to get approved too within in the next few months.

BRIAN SOZZI: Great. That is good to hear. I talked to Intel CEO Pat Gelsinger about the ongoing chip shortage. And his comments surprised me. He said that shortage may not end until 2024. It's 2022 now. Where do you see things?

CHRISTIANO AMON: Well, we're doing a little bit better. I think different companies have kind of different situations. We invest early in the process. That's why I remain optimistic. Even when things were going down with the pandemic, we thought that demand for chip will be high. So we invest in multi-sourcing, we invest in capacity for us.

The second half of this calendar year, not everywhere but in some of our products, we see a more balanced demand and supply. We still have more demand than supply. And I think by the beginning of 2023, we were maybe in a good spot.

BRIAN SOZZI: Well, I don't think a lot of folks appreciate about your story and what you're doing here as Qualcomm CEO. It's what you're doing in automobiles. I caught a tweet from you. You had a cool new VW bus set up in front of your installation here. What are you doing with VW, and how big is the car opportunity for a company like Qualcomm?

CHRISTIANO AMON: It's massive. Look, if you just look at what happened in the last quarter, we had $3 billion to our design win pipeline. We're winning the future of the automotive industry. We created something which is resonating well with the automotive company. We create a digital chassis. It's really a digital platform.

If you just look how the market is valuing car companies that are tech companies, if you look at the market cap compared to traditional car companies, traditional car companies know they need to have a partner that will provide them with digital assets. This is what we're doing. In a short period of time, we've been working with pretty much all companies. We're working today with 26 global brands. And some of the recent design wins off the digital chassis was Stellantis and as well the Volkswagen Group. And we keep working on that.

BRIAN SOZZI: You mentioned value. And I can't believe your stock is trading about 10 times forward earnings. It makes no sense to me, and I know a lot of other people that I talked to as well. You just came off a quarter. Your sales are up 41%, earnings per share about 69% if I'm correct. Where's the disconnect here?

CHRISTIANO AMON: Actually, I don't know. What I'll tell you is, I think it's a mistake. It's really a mistake for the market to continue to look at Qualcomm and say, this is a comms company. This is comms for the mobile market. And then they look at fluctuations in the mobile market and they say, well, that's a problem. That's an absolute mistake. That company, it's not the Qualcomm of today.

If you look what's happening to us right now, in mobile, our new strategy is really to be focused on premium and high tier. They've been proved very resilient. And in the market that is flat with a negative bias, we grew 50% because we're gaining share of Samsung. The GS 22, we went from 40% share in the 21 to about over 75%.

But that's not the story. We have a great mobile story, we're growing 50%. But automotive is growing. IoT grew 61% year-over-year, and I think we're just scratching the surface. So we're really a processor company for all of those connected processor opportunities happening at the edge, and we now have a number of end market growths that beyond mobile.

BRIAN SOZZI: So guys, you heard of Cristiano Amon talking about his stock price and the valuation on where it is. And it has continued to get cheaper amidst this tech route. But amidst all the tech executives I talked to on the record, off the record, no one came out and told me, we think we are near a bottom. That is one takeaway for me that I have to just think a little bit more on over the weekend. But still, I thought that was pretty interesting. Soz, when's your flight?

BRIAN SOZZI: My flight is-- I can happily say it is Friday. It is Friday morning. We had to take a COVID test before we come back to the United States. Of course, myself and the top A-team here at Yahoo Finance of Mike Claudio and Kevin Burke, they are COVID-free. We're coming home. You're going to see us next week on the anchor desk talking about, I don't know, maybe 47 earnings reports.

AKIKO FUJITA: Brian, don't think about chips this weekend, OK? Why don't you go get some drinks, relax.

BRIAN CHEUNG: Some fondue. Some fondue while you're at it.

AKIKO FUJITA: And have a safe flight back.

BRIAN SOZZI: I'm glad you mention it because I'm getting ready to go get myself a 60 ounce beer one of the places down the promenade cells. And I'm very excited about it. Follow me on Instagram.

BRIAN CHEUNG: Mix the water in, bro. Mix the water in, OK?

AKIKO FUJITA: With the social media shout out, follow me on Instagram. As always, Brian Sozzi, safe travels back. Thanks so much for all the coverage this week.