SAN FRANCISCO: Qualcomm forecast has beaten estimates as artificial intelligence (AI) drives chip sales in ChinaQualcomm forecast quarterly sales and adjusted profit above Wall Street expectations, driven by selling more and pricier chips into Android smartphones with AI features.

After a smartphone slump last year, Qualcomm said that China’s Android market - which has become critical to the company - has started to pick up, with consumers there shifting toward purchasing higher-priced devices that can accommodate AI chatbots.

Qualcomm shares were up 4% in after-hours trading.

The company said its sales to Chinese smartphone makers have grown 40% in the first half of its fiscal year, a sign of recovery in that market.

“AI is driving a lot of silicon content in those devices because of the expected computational capability to run those models,” chief executive Cristiano Amon told analysts on a conference call.

“Users want to buy a more capable phone that can run AI.”

Qualcomm has faced competition from Huawei Technologies Co, which last year introduced a flagship 5G smartphone that uses its own chip made by subsidiary HiSilicon. But IDC analyst Phil Solis said that for the moment, it appears that a general trend toward more capable devices is helping Qualcomm more than Huawei’s competition is hurting the San Diego, California, company.

“The Chinese smartphone market is recovering and shifting more to premium phones, so while HiSilicon takes share with flagship Huawei phones, the total market is growing, especially where Qualcomm gets most of its revenue from,” Solis said.

Qualcomm forecast third-quarter sales and adjusted profit with midpoints of US$9.2bil and US$2.25 per share, beating analyst estimates of US$9.05bil and US$2.17 per share, according to LSEG data.

Qualcomm is the world’s biggest supplier of chips for smartphones and counts both Apple and Samsung as customers.

Qualcomm’s forecast for the recovery in China’s smartphone market recovery may not extend to Apple’s iPhone.

Apple reports results soon, and analysts expect its deepest quarterly revenue decline in over a year as it wrestles with competition in China from Huawei and other companies selling cheaper smartphones. For Qualcomm’s fiscal second quarter ended March 24, sales and adjusted profit were US$9.39bil and US$2.44 per share, respectively.

 - Reuters