Rosenblatt Says Qualcomm RF efforts Could Become Headwind For Skyworks, Qorvo

QUALCOMM, Inc. QCOM announced Wednesday the signing of four MOUs with Chinese mobile communications companies that supply Qualcomm's RF front end components valued at more than $2 billion in aggregate over three years.

The Chinese companies include Lenovo Group Limited (ADR) LNVGY, Oppo, Vivo and Xiaomi.

The Analyst

Rosenblatt analyst Jun Zhang has a Neutral rating on Qualcomm with a $56 price target.

The Thesis

Qualcomm's RF supply deal with the Chinese OEMs could prove a headwind for Qorvo Inc QRVO and Skyworks Solutions Inc SWKS, Zhang said in a Thursday note. (See the analyst's track record here.) 

"Overall, with slow RF module content dollar growth and a lack of smartphone market growth, we believe the competitive landscape for RF could become more challenging for Skyworks and Qorvo." 

The efforts from OEMs to reduce RF BOM cost in 2018 could also increase the headwinds for the two companies in the first half of 2018, Zhang said.

The analyst expects Huawei to adopt Qualcomm's internal PAM in 2018.

The deal Qualcomm signed with the four Chinese OEMs is not meaningful in the near term, as Qualcomm has been aggressively selling its RF front-end module with bundled sales and subsidies to Chinese OEMs, Zhang said. 

The analyst sees the possibility of Qualcomm securing design wins with second-tier OEMs such as ZTE and Lenovo in the first half of 2018.

"Qualcomm could also become more competitive in the 5G RF market with its filter products," he said. 

The Price Action

Qualcomm shares are up close to 24 percent over the past year. This compares to Qorvo's 6-percent-plus advance and Skyworks' more than 4-percent gain.

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