Compounding the doom and gloom in the global smartphone market, Qualcomm this week issued a particularly pessimistic outlook for the rest of the year.

The US-based mobile chip maker on Wednesday lowered its outlook for its fiscal Q1 2023, which ends, somewhat confusingly, in late December. The smartphone sector typically ends the year on a high, what with Christmas and everything, but that doesn’t appear to be the case this time around.

“The rapid deterioration in demand and easing of supply constraints across the semiconductor industry have resulted in elevated channel inventory,” said Qualcomm, in its earnings release. “Due to these elevated levels, our largest customers are now drawing down on their inventory, negatively impacting the mid-point of our EPS guidance for the first quarter of fiscal 2023 by approximately $0.80.”

Qualcomm expects diluted earnings per share for Q1 2023 to come in at $1.72-$1.92. In the same period a year earlier, diluted EPS was $2.98, up from $2.12 in the year before that.

Revenue-wise, the forecast is gloomy too. Qualcomm expects the semiconductor division to generate revenue of $7.7-$8.3 billion in Q1 2023, down from $8.85 billion a year ago. Revenue at the patent-licensing business is expected to fall to $1.45-$1.65 billion from $1.82 billion. For the company as a whole, Qualcomm expects revenue to fall within the range of $9.2-$10.0 billion, which would represent a fall from the $10.71 billion it turned over in Q1 2022.

The downbeat outlook comes off the back off a miserable third quarter for the smartphone market. Analyst consensus appears to be that the three months to 30 September saw shipments slump to historic lows. China is having a particularly hard time, as its ongoing ‘zero Covid’ policy hammers the economy.

Qualcomm is not expecting the smartphone market to stage a miraculous recovery in the next couple of months. On Wednesday, it lowered its forecast for global smartphone shipments for calendar 2022. It now expects a low double-digit decline in volumes this year, whereas previously it expected a mid single-digit decline. Unsurprisingly, it attributed the pessimism to “uncertainty caused by the macroeconomic environment”.

And yet, despite all this, Qualcomm’s revised forecast actually accompanied some solid fiscal Q4 results.

Revenue was up an impressive 22 percent year-on-year to $11.4 billion, driven by a 28 percent increase at the semiconductor business, which itself is being fuelled by strong demand for handset, IoT and automotive chips. Pre-tax profit grew 6 percent to $3.47 billion, while diluted EPS came in at $2.54, up from $2.45.

“We are pleased to report another strong year, despite the macroeconomic challenges, as we continue to execute our strategy of transforming Qualcomm from a wireless communications company for the mobile industry to a connected processor company for the intelligent edge,” said Qualcomm CEO Cristiano Amon, in a statement. “While our financial outlook is being temporarily impacted by elevated channel inventory, our diversification strategy and long-term opportunities remain unchanged.”

In addition, Qualcomm CFO Akash Palkhiwala revealed on the company’s earnings call that it expects to have a bigger role to play in Apple’s 2023 iPhone than it previously thought.

Reports last year claimed Apple was working on an in-house 5G modem in partnership with Taiwan Semiconductor Manufacturing Company (TSMC). It seems that plan might have been put on the back burner, because on Wednesday, Palkhiwala said Qualcomm expects to have “the vast majority of share of 5G modems” for the 2023 iPhone, whereas previously it had assumed a share of around 20 percent.

Whether anyone will be have the money to afford an iPhone in 2023 is, unfortunately, an open question.

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