qualcomm-china

US-based semiconductor company Qualcomm has had better days. The chip-making giant, which ranks the likes of HTC, Motorola, Sharp, Sanyo, LG, Nokia and Samsung among its biggest customers, is feeling the squeeze from a slew of Asian upstarts.

Taiwan’s MediaTek and China’s Spreadtrum Communications, for example, have “lately grabbed noticeable footholds” in the market, according to a pre-earnings report by the Wall Street Journal this week. A recent blow by Samsung also saw it move towards its own in-house silicon in some of its high-end 2015 units like the S6 Edge.

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Reuters added that the growing competition comes from “a handful of small Chinese companies that specialise in making chips for low-priced smartphones.” Fortunately China’s homegrown smartphone maker Xiaomi — now the world’s third largest — is still using Qualcomm’s Snapdragon processors in its handsets. And in June the company hired (read: poached) Qualcomm’s head of China.

On Wednesday, Qualcomm announced in its fiscal third-quarter earning report revenue of US$5.83 billion, just shy of analysts’ expectations of US$5.85. But the stock nonetheless slipped following the announcement on Wednesday — now down a fifth of its value on where it stood 12 months ago.

In reality, Qualcomm more or less hit revenue targets and exceeded profit expectations, but the bearishness of its stock seems to do with its weak projections going forward. Does it lack clear strategies on how to fight off growing competition from Asia? CNBC reported Wednesday that it plans to lay off 15 per cent of its workforce.

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On the whole, the problem being faced by Qualcomm is already one familiar to the tech industry at large: How to compete with increasingly competitive products coming out of China — and Asia more broadly — when quality is no longer lagging as it once was?

That problem is only exacerbated when 84 per cent of its annual sales reportedly come from this part of the world.

Image Credit: BidnessEtc