Qualcomm Looks Beyond Phones as Memory Crisis Hits Revenue

The cause is the surge in memory prices. IDC said in August that global smartphone shipments would fall almost 17% this year, with DRAM and NAND prices up more than 300% year on year and the average phone price up as much as 28%. RAM has replaced the processor as the most expensive component in a phone, and Qualcomm's margins are suffering. The operating margin of its chip division fell from 29% to 24%, and the company expects 20% to 22% this quarter.

Three bets

Qualcomm is pointing in three directions. Cars are expected to be a strong pillar in fiscal 2027. In data centers, it forecasts more than $650 million this quarter and a target of $5 billion for the full fiscal year, helped by deals such as one with Amazon for AI inference chips.

The third is Starlink. On November 4, Qualcomm said it will supply radio equipment, baseband units and software for the planned terrestrial 5G network of Starlink Mobile in the United States, with thousands of towers deployed from 2027. The company calls it its largest 5G deal to date and a base for future 6G infrastructure for AI.

Risks ahead

Cars and phone chips are secure markets for Qualcomm, but the SpaceX and data center revenue is less certain. It depends on those data centers being built, on the AI bubble holding, on SpaceX's plans staying on schedule and on Big Tech customers like Amazon sticking with Qualcomm rather than a rival with a more attractive design.

The shift shows how AI has upended company strategies, sometimes for the worse, as with Qualcomm and phones, and sometimes for the better, as with Nvidia moving away from gaming toward AI GPUs or Micron leaving the consumer segment.