Should You Invest in Qualcomm?
Qualcomm Incorporated designs, manufactures, and sells semiconductor ships around the world. Their chips can be found on several devices like phones, tablets, and many others. They sell their semiconductor chips to small and large companies all over the world. The company also licenses all of its patents to companies around the world. The company was founded in 1985 and is based in the United States.
Why You Should?
- Qualcomm might be considered an old chip company as it was founded in 1985 but is still at the forefront of innovation today. A good example of this is their 5G chipsets that will be used by some of the largest mobile-device companies in the world to bring unparalleled efficiency and speed to the devices of consumers.
- Qualcomm has benefited from the increasing digitization. The COVID-19 Pandemic has sped this process up but Qualcomm was seeing rising sales numbers even before as consumers were buying more mobile devices with a Qualcomm chip in it. This will benefit the company’s long term sales and growth expectations.
- Qualcomm chipsets can be found in many large companies' products. Companies like Samsung, Google, Huawei, OnePlus, Vivo, and many more. These companies will continue to use Qualcomm CPUs, GPUs, and other chipsets in the years to come. This gives Qualcomm a stable flow of revenue and profits which will benefit the company in the long term.
- Investors have poured money into the semiconductor industry over the past couple of months which as seen the rise in the stock price of companies like Nvidia, AMD, and Qualcomm. This strong investor confidence in the space will benefit the company in the future.
- Qualcomm has seen rising revenues and profits over the past couple of financial years due to the reasons mentioned above. In the financial year of 2018, the company reported a loss due to licensing issues with some companies. However, the company has quickly solved these issues out and has returned to turning profits and revenues for investors. This will benefit the company’s future growth. In the financial year of 2019, the company reported revenues of around 24.3 billion and profits of around 4.4 billion. Both of these metrics are higher than what the company reported in 2018 when it had revenues of around 22.6 billion and a loss in profit of around 5 billion.
Why You Should Not?
- Qualcomm faces tough competition from several large semiconductor companies like Nvidia, AMD, Taiwan Semiconductors, and Intel along with hardware and software companies like Apple who make their own chips. Other companies like Samsung might go on to make their own chipsets for their phones. This might hurt the company in the future.
- Geopolitical and trade tensions from the current administration might cause uncertainty and hurt Qualcomm’s sales in China. A good example is the banning of Huawei, a Qualcomm customer, in the United States. The government does not want companies like Huawei to get U.S. Semiconductor Tech and this will hurt Qualcomm’s sales in the region.
In my opinion, I think that Qualcomm is a great long term investment as it has a steady flow of revenue and profits due to a large customer base who has benefited from increased digitization trends. I also believe that current tensions will cool off in the future, allowing Qualcomm to continue selling chip technology wherever they want. However, some competition might hurt Qualcomm’s future growth.