IC Design Industry Shock, Semiconductor Giants Face Impact

International chip giant Qualcomm's global layoff wave has finally hit China. Recently, Qualcomm is located in Shanghai research and development center of large-scale layoffs rumors gradually landed, according to insiders, the layoffs from October officially implemented, the proportion of layoffs is likely to reach 20%, "whether Wi-Fi department, chip research and development, software verification, or marketing, procurement, almost every department will be affected."

However, Qualcomm's compensation is also a conscience: the compensation standard for ordinary employees is N (years of service) +4, and the compensation standard for senior employees with non-fixed term contracts is N+7, and there is no limit on compensation for monthly income exceeding three times the social wage.

Before this, Qualcomm layoffs plan has in fact with the release of the financial results have a prototype. In August, Qualcomm released its third fiscal quarter of 2023, which ended on June 25. In view of the accelerating decline in both revenue and profit, Qualcomm Chief Financial Officer Akash Palkhiwala said that it would reduce the number of employees in the next quarter to "implement further cost reduction measures and ensure that the enterprise continues to invest in key areas." Clearly, the key areas that Qualcomm is bullish on are not phone chips, but cars and the Internet of things.

Although the size of the layoffs was not disclosed, considering that this adjustment will continue to the first half of the 2024 fiscal year (the end of March 2024), Qualcomm's more than 50,000 employees worldwide are sure to be hit.

Qualcomm's conservative approach to spending is inseparable from the handset market downturn and the burden of blind expansion in the previous two years.

高通公司的主要业务包括of two parts: semiconductor business (QCT) based on chip products and technology licensing business (QTL) based on intellectual property rights authorization. Qualcomm's revenue fell 23% year over year to $8.442 billion in its latest fiscal third quarter results. Net income fell to $2.105 billion, down 37 per cent from a year earlier.

Among them, the revenue of QCT business, which accounted for more than 80% of the total revenue, was $7.174 billion, down 24% year-on-year, and the pre-tax profit was $1.744 billion, down 42% year-on-year. QCT business, accounted for the majority of mobile phone chip business revenue of $5.255 billion, a year-on-year decline of 25%; The only positive segment, "automotive electronics," posted revenue of $434 million, up 13% from a year earlier and its 11th consecutive quarter of double-digit year-over-year growth. Although the proportion is small, it still indicates the trend.

The downturn in the smartphone market, which has lasted for at least eight quarters, is nothing new. According to market research firm Canalys, the global smartphone market shipped 258 million units in the second quarter of 2023, down 10% year on year. IDC, another market research firm, expects global smartphone shipments to fall by 4.7% year on year in 2023 to 1.15 billion units, the lowest level in a decade.

The slower-than-expected recovery of the Chinese market and the lack of a license to supply 5G chips to Huawei have also made Qualcomm, which once focused on the high-end market, uneasy.

在2022财年第二季度(12月27日,2021 to March 27, 2022), Qualcomm's leadership also believes that there is still strong demand for high-end products in markets other than China, which accounts for approximately 20% of the global smartphone market. "Although the overall smartphone market is slightly weaker, the weakness is mainly in low-end products," Qualcomm said. Qualcomm, which is focused on flagship and high-end markets, is less affected."

But this year, Qualcomm's goal has become "to gain more share in the low-end market." In June, Qualcomm unveiled its second-generation Snapdragon 4 chip for "entry-line devices" and said it would push more low-priced phones to migrate to 5G through its recovered capacity.

Another reason for the layoffs is the wave of expansion of head chip and Internet companies since 2020. Qualcomm, NVIDIA and AMD all added more than 7,000 people in the period from 2020 to 2022, with Qualcomm adding more than 10,000 people and AMD adding more than 13,000 people, significantly higher than other chip design companies. When the tide goes out, it's time to clean up the coast.