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Let's focus in on Qualcom shares right now down about eight percent, on track for their biggest drop since last summer. At one point in the session, we were down eleven percent, on track for the biggest drop since March of twenty twenty. 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 turn would weigh on the
handset demand. Joining us to discuss is Christiano Ammon qual Co. Christiano A good morning, thank you for coming morning.
Bow Tech.
That I give you that what's happening in memory is completely outside of your control, right but the forecast with the current period of sales up to eleven billion dollars, 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 that supply deficit puts in place.
Yeah, look, it's a very interesting situation. You know, in one hand, I'm incredibly happy with the business, like everything is going well. Demand, the strong macroeconomic indicators are good. Demand for Hans it is strong. We have seen we had like a record quarter in Q one. We saw all of our customers reporting sell true data better than expectations.
But then the industry is now defined by the availability the memory that is is going to be available for consumer electronics, and it creates, you know, a sudden change in how OEMs look at 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 one makes it like this unique period there's go ahead, let me drop it.
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 your 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?
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. OEM is 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 adjustament in prices on hences, 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 premim teer continue to expand regardless regardless over the several years, the premium teer is expanding, and we're more concentrated on the premium and the high tier. So your theory is
one hundred percent correct. All that happened is OEM's had thinking about as particular size of the year that got resized by the memory availability. They're just in their build plans and we're going to see how this is going to play out in the next few quarters. That's really the story. The good thing is demand as high.
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 it's one thing that I carefully worded. I think during our earnings call, I said the memory availability in pricing will be the defining factor for the size of the handsome market. And we talk about this as a hands to market because we have visibility whole market because of our licensing business. 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 Q three and Q four,
But the pandemic was a good proxy. When we have something like that and we have a semiconductor shortage, we saw the PREMI teer has been more resilient, and you know, we're going to be working with our customers as they move the roadmap to kind of those type of devices.
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 or we connected devices, whether it be the future of robotics, whether of course a BAI Christiana. How much can you accelerate there to make up for the handset issues.
Look, we.
You know it's not hopefully it's not lost on people that we had another record in automotive. We had actually a record in the company in Q one, 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 happen in the.
Quarter that are very very important.
One is we announce a broad partnership of Volkswagen Group across all the brands to build the Snapdragon digital chasis for Volkswagen. We saw the launch of the Rat four or one of the tough selling cars in the world.
For digital cockpit, and IoT is growing.
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.
Christiano, second consecutive quarter where automotive is above a billion dollars. And I remember over years us discussing what was a backlog in automotive. Right, apply that story and that experience to your hopes in data center. 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.
Yes, we.
Restated the data center will start showing up in fiscal twenty seven. 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 what's popular, that a different architecture will be required. I think the post GPU architecture interesting that the Grock development is kind of validating that, and 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 memory situation, and it's we have been very encouraged by you know, detraction we're getting. So it's going to be material in twenty seven, and you know, we're going to provide a lot of details in ourcoming investor event.
Just broadly, how are you thinking about the actual consumer right now as well, Christiana?
Just briefly, Yes, so phone is a great proxy for consumer microeconomic indicators are strong, consumer demand very strong, and one of the things I said in the earnings called 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 it's just a memory supply issue.
We'll come see Christiano a'mon. We so appreciate you joining on this day after the earnings