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Speaker 1: From Bloomberg television and radio audience worldwide more earnings, and

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Speaker 1: this time Qualcom delivering a solid earnings forecast for the

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Speaker 1: current period, helped by a recovering market for smartphone chips,

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Speaker 1: but some analysts also noting high inventory levels in other

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Speaker 1: business lines. Solighted to bring in Qualcom CEO Cristiano am

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Speaker 1: On and let's get right to the inventory narrative. Cristiano,

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Speaker 1: so smartphone, you said the inventories have improved. The lingering

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Speaker 1: concern is Internet of things, which for our global audience

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Speaker 1: is basically anything with a network connection, right from industry

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Speaker 1: manufacturing through to connected devices in the home. And you're

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Speaker 1: saying that they're still working through inventories there. But because

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Speaker 1: that business line is so broad, what can you tell

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Speaker 1: me about where the inventoryes linger, specifically geographically heavy industry, retail.

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Speaker 2: Very good, ed, good talking to you.

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Speaker 3: First of all, I don't understand where this inventory commentary

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Speaker 3: is really coming from. We saw this, I think in

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Speaker 3: the press yesterday. Maybe I'll use this opportunity to explain

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Speaker 3: the majority of our business hentsts. We're working very hard

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Speaker 3: to diversify the business. We're making good progress, but still

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Speaker 3: the majority of the business hand sets, and hence as

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Speaker 3: we have seen that inventory had actually stabilized since last quarter.

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Speaker 3: I think what we've seen in the results, especially with

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Speaker 3: the beat and raise in EPs, is that hinses are

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Speaker 3: getting back to normal. We're happy with the health of

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Speaker 3: the Android Ecosystem premium tier. It's strong with H and three,

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Speaker 3: and we still say that in the numbers IoT we

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Speaker 3: talk about industrial inventory actually before every other company. Actually

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Speaker 3: we were some of the first ones to talk about it.

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Speaker 3: Still a smaller percent of our business, would like it

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Speaker 3: to be bigger, but we had said that that is

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Speaker 3: the lowest quarter and we expect to see growth in

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Speaker 3: the coming quarters. So yeah, I don't understand this comment

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Speaker 3: on inventory. We're happy with the results, and we're happy

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Speaker 3: with a number of the analysts revisions that actually came

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Speaker 3: out this morning on the stops.

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Speaker 1: I'm just reading the transcript from the Anien School, right,

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Speaker 1: and you said second half of the fiscal year as

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Speaker 1: we see the inventory kind of normalizing. In the IoT context,

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Speaker 1: a positive area was China. You promised that we would

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Speaker 1: get an uptick in China sales. We did get that.

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Speaker 1: Does it reflect customers in China having been through inventories

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Speaker 1: or is this a commitment to forward ordering signs that

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Speaker 1: those end markets have demand.

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Speaker 3: Yes, this is a great question, and I want to

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Speaker 3: start by saying we have two vectors that are very encouraging.

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Speaker 3: One vector is the premium teer has proven to be

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Speaker 3: resilient even within the micro uncertainty. It it shows that

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Speaker 3: users when they go by their next phone, they want

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Speaker 3: a better phone. The second thing is we're starting to

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Speaker 3: see the first evenings of Jenai. Some of the use

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Speaker 3: cages are starting to come in and that has brought excitement.

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Speaker 3: Some of our customers had record pre sales of their

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Speaker 3: new devices with Agent three.

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Speaker 2: And what we see in China right now.

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Speaker 3: I think there was a lot of concern in the

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Speaker 3: past about Huawei come back to the phone business, but

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Speaker 3: what exactly happening is Huawei is increasing the size of

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Speaker 3: the tem and our customers are holding share and seeing

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Speaker 3: opportunities in the premon Teer, and that's reflected in the quarter.

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Speaker 3: We have a lot of orders of Agent three, especially

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Speaker 3: for phones that launch or lounching in the market. We're happy,

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Speaker 3: We're just cautiously optimistic since we don't know how the

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Speaker 3: second half of the year in phones in China is

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Speaker 3: going to unfold.

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Speaker 4: Christiana, how do you navigate geopolitics when it comes to China,

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Speaker 4: not just macroeconomy.

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Speaker 2: We just do business. I think we focus on what

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Speaker 2: we can control.

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Speaker 3: I think we're happy that we have a strong relationship

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Speaker 3: with China. Our technology is differentiated and is helping I

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Speaker 3: think on both sides. Its business is export of semis

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Speaker 3: for the US. For China, it has been growth for technology.

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Speaker 3: We have not been impacted to date by any of

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Speaker 3: the restrictions. And as we diversify the company, going from

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Speaker 3: hints to automotive in industrial, I think we see our

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Speaker 3: China business expanding as well.

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Speaker 4: Let's go back to the bread and butter that is phones, though,

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Speaker 4: and I think about Apple's earnings coming after the bell,

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Speaker 4: everyone wanting to get some sort of steer on where

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Speaker 4: the consumer is at right now. And ultimately you've said, look, consumer,

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Speaker 4: we're recovering in phones. How excited are consumers to renew

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Speaker 4: do you think? And how much will this manage to

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Speaker 4: carry you on into the rest of twenty twenty four.

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Speaker 3: Look, we don't want to make a prediction. Phone cycles

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Speaker 3: is very difficult to make predictions. There are a couple

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Speaker 3: of things that we know it will happen once over

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Speaker 3: ten years, you have a generation of wireless. We've just

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Speaker 3: been to the five G transition. But the early signs

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Speaker 3: of GENAI use case are actually exciting. I think you

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Speaker 3: saw Samsung launching S twenty four with a number of

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Speaker 3: gen AI use cases running on the device.

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Speaker 2: Same thing happened in China. Just mentioned about that, So.

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Speaker 3: That could create an interesting opportunity for upgrade cycle in phones.

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Speaker 2: It's just hard to predict the timing.

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Speaker 1: Christiana, you and I've talked about on device processing of

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Speaker 1: generative AI tools and running of large language models on

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Speaker 1: device airplane mode. When does that business that you're involved

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Speaker 1: in show up in the financials.

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Speaker 2: Yeah.

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Speaker 3: The way you should think about the financial impact, especially

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Speaker 3: if you think about phones.

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Speaker 2: Is really.

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Speaker 3: A premium tier becoming a larger percentage of the market,

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Speaker 3: and we're kind of starting to see that.

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Speaker 2: And then the other one is more silicon content.

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Speaker 3: I think our asps increase on the chipset and that

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Speaker 3: has a positive contribution for the business. And the dynamic

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Speaker 3: that we see with the success of AG and three

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Speaker 3: is just the first signs of the opportunity.

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Speaker 2: Just to be cautious that we still need to see

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Speaker 2: a lot of use cases, develop.

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Speaker 1: Lots of partnerships and deals kind of talks about on

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Speaker 1: the call. When we think about names like Apple and

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Speaker 1: Samsung and the handset makers in China, look at the

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Speaker 1: history of Qualcom. Can you kind of guarantee investors that

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Speaker 1: you can continue forward on the deals and avoid the

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Speaker 1: legal entanglements you've had in prior years.

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Speaker 2: All right, so you mentioned partnerships.

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Speaker 3: I think we have two very important conversations, and I

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Speaker 3: want to make a distinctions. I think the first one

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Speaker 3: is our licensing business. And we have been saying that

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Speaker 3: the licensing business, which has been the reason we have

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Speaker 3: been in a number of disputes in the past, is

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Speaker 3: very stable. It's one of the most stable times that

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Speaker 3: we had since the beginning of the licensing business.

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Speaker 2: And in the quarter we.

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Speaker 3: Announce three very important milestones. Is we saw an extension

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Speaker 3: of the Apple license agrement. That means that Apple is

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Speaker 3: paying license for the Qualcom standard cential patents and that's

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Speaker 3: regardless of using or not using a Qualcom chip. We

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Speaker 3: also saw two Chinese significant customers renewing the license agreement,

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Speaker 3: which speaks to the value of the Qualcom intellectual property portfolio.

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Speaker 3: Even in China in the middle of the geopolitics. That's

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Speaker 3: a very positive side to investors. Now, the second part

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Speaker 3: of a questions about partnerships. What's exciting about Qualcom? And

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Speaker 3: I know we spend a lot of time talking about handsets,

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Speaker 3: but auto. There is a lot of reports on the

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Speaker 3: piers of a decline in auto. If you look at

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Speaker 3: this quarter, we actually had record auto revenues with thirty

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Speaker 3: one percent growth year over year when the whole market

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Speaker 3: is down, and that speaks to the number of ships

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Speaker 3: we've been making in auto for the future of the

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Speaker 3: automotive industry, and that's an important metric where the future

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Speaker 3: of Qualcom is going to be.

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Speaker 4: Still about that diversification. Cole Comcio, Cristiano Amon. Great to

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Speaker 4: have some time with you.