Qualcomm's (QCOM) finance chief says chip supply is catching up with customer demand.
In an interview Wednesday ahead of Qualcomm's early-morning analyst day Thursday, CFO Bill Keitel said the chip shortage the company encountered last quarter is coming "back into balance."
While strong demand is usually good for suppliers, as evidenced by Qualcomm's third
boost to financial guidance in three months, there is a slight hitch.
Analysts point out that to compensate for a shortage of older, cheaper 5000-series chips, Qualcomm has been filling orders with newer, more expensive 6000-series chips.
The substitution showed up when the company
reported March quarter earnings last month. One of the few weaknesses in an otherwise solid tally sheet was a 5% drop in the average price of chips, both sequentially and year over year. Analysts say the dip is a function of selling 6000-series chips at 5000-series prices.
Keitel declined to say if this is having an impact on pricing. He added that "margins will vary" as the company tries to negotiate a price that reflects the features built into the new chips. Keitel says he sees it as a trade-off between lower prices now and greater growth.
With a firm claim on technology patents, Qualcomm has a dominant position in the code division multiple access, or CDMA, market. The San Diego shop collects royalties on all CDMA phone sales and additional fees from licensing of patents.
Rivals such as
have fashioned independent versions of CDMA chips and have been building them into their own phones and those of
Though the company doesn't provide market-share numbers, analysts estimate that some 85% of the CDMA chip business belongs to Qualcomm.
"Customers always want a second supply source to play off for better pricing. But you have to have a broad offering, and it takes time to build that," says Keitel, referring to Qualcomm's emerging rivals.
Keitel didn't offer a market-share position but said that he said that Qualcomm has done "better than I expected" on that front.
We'll see what other gems the company shares during its half-day analyst session, which is scheduled to start at 7:30 a.m. EDT.