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Qualcomm to slash workforce following chip demand slump

by Mark Tyson on 24 July 2015, 11:08

Tags: Qualcomm (NASDAQ:QCOM), Samsung (005935.KS)

Quick Link: HEXUS.net/qacs6h

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Earlier in the week Qualcomm published its latest set of quarterly financials. The report wasn't comforting reading, as the chipmaker and designer posted "its worst sales decline since 2009," according to Bloomberg. Now it must move to appease investors and show it has a recovery plan. Thus Qualcomm has stated that it will cut its workforce by 15 per cent, cut executive pay and implement other actions to reduce costs by $1.4 billion.

During its most recently reported (third) quarter Qualcomm's sales slid by 14 per cent. This is due to the high-end smartphone business being dominated by Apple, which designs its own chips, and Samsung, which has started to migrate away from using Qualcomm SoCs to its own ARM-based designs. The loss of Samsung as a major customer has "wiped out year-over-year sales growth that had stretched back 19 quarters," reports Bloomberg. On the cheaper side of the market it has to face Taiwan's increasingly potent MediaTEK Inc.

Currently Qualcomm employs 31,300 workers and of these about 4,700 are expected to be cut by the end of 2016. The use of temporary workers and cutting exec pay will also help reduce costs. Other more drastic changes are on the table for consideration; Qualcomm might separate into its constituent chipmaking unit and patent licensing arm to go forward. The FT reports that patent income accounts for a massive two-thirds of its earnings. Previously the Qualcomm CEO had dismissed this idea as the two units are said to be complimentary, however now he will take a fresh look. Also under consideration is the moving of operations to a country with cheaper labour/tax.

Talking about the proposed changes and possible impacts, chief executive Steve Mollenkopf insisted that Qualcomm was "not sacrificing the future for the present". Qualcomm would still be putting money into the future, with a budget of $4 billion per annum for R&D. It was noted that the company is investing in 5G, in-car tech and server processors at the current time.

Qualcomm shares have fallen in value by a fifth over the past 12 months.



HEXUS Forums :: 15 Comments

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Investors…

A company still turns a massive profit but because it's less than perfect and they've had a hiccup, investors want blood and stuff the long-term potential as long as they get their quick fix.

It just seems like, if a company doesn't have a complete monopoly on a market then they're worthless and need to start taking peoples' jobs and cutting pay/investment in order to boost profits of people who do no actual work for said company.

I can't see how splitting the licensing and chip-making companies would benefit anyone except for short-term investor greed at the expense of long-term competitiveness of the company as a whole. Having separate segments complementing each other helps companies get through periods like this and allows more investment in the weaker segment to improve it. If the chip business was separate, would they be able to fund the chip-making part as well in order to compete better in the future? Plus you probably end up with higher overall spending because of duplicated costs with the separate companies, less co-operation, etc.

Snapdragon 810 was always going to be a relatively short-notice stopgap because of the MOAR BITS craze, and if the rumours are true it's a bit sad we might have missed out on their 32-bit Krait successor.

Look at Intel - until they folded the mobile business into their other segments, it was a consistent loss-maker (giving chips away for free tends to do that I guess). I wonder if investors will be wanting that split off to a separate company too as the margins aren't as rosy as their other markets in the short-term? :rolleyes:

Don't get me wrong, like any consumer I like to see good competition in markets and Qualcomm was getting worryingly close to a monopoly in Western markets but I don't think tearing up a company because of increased competition is good for, again, anyone but ‘investors’.

/rant
it does seem that the current trend with mobile cpu's is 64bit versions of existing 32bit chips rather than improving the existing ones. I've got a first gen moto g at the moment and the 3rd gen is looking like the cpu will literally be the same cpu but with 64bit added… not exactly needed when the phone only has 2GB of ram max (according to rumours)
I mean the 64bit ARM cores A53 and A57 do improve on their 32bit predecessors the A7 and A15. However rumour has it Qualcomm was working on a 32bit successor to their Krait architecture but because of the market perception of higher number=better, they canned it in favour of off-the-shelf cores - the first time they've done it for a high end part. It's entirely possible this scrapped core could have been a better fit for the Snapdragon 810 than the A57 whose primary focus wasn't really mobile phone use anyway.

32bit processors can use >4GB RAM anyway, so that's not a big reason in and of itself to switch to 64. However the ARMv8 ISA does offer advantages over ARMv7 so there are good reasons to switch eventually regardless of RAM capacity, but there was no need to rush it out.

It's like the whole octa-core thing. It's different for big.LITTLE octa-core for obvious reasons, but I'm talking about e.g. the 8 identical-core A7 CPUs we keep seeing. It's just number-chasing.
@watercooled - agreed. I wish I could switch my pension investments to a plan that wasn't short sighted.
The mobile market is the most fickle market in the world and always has been