Chip Maker Qualcomm Sees Smartphone Slump Worsening

The San Diego-based company reduced its projection for 5G handset sales this year to as many as 650 million from an earlier forecast of up to 700 million. Earlier in the year it forecast shipments of more than 750 million units.

The company also said Wednesday that it would supply the vast majority of

Apple Inc.’s

new 5G iPhones next year with so-called modem chips that coordinate communications between phones and cell towers. Qualcomm had earlier assumed it would only supply about 20% of those chips, suggesting Apple’s efforts to develop its own modem chips and replace Qualcomm’s haven’t moved as quickly as expected.

While phones have been a drag on Qualcomm’s business, the company’s sales are still rising because it is gaining market share in chips for

Samsung Electronics Co.

’s flagship smartphones and because it is diversifying into other markets, including the automotive sector, which have been more resilient.

Qualcomm said sales in the most recent quarter rose by 22% to $11.4 billion, above what analysts in a FactSet survey expected. Net profit rose 3% to $2.87 billion, below estimates.

The company’s shares fell about 5% in aftermarket trading.

Many chip makers are going through a rough patch after profiting handsomely from soaring demand for electronics during the shift toward working and learning from home. Slowed hiring, reduced capital spending and cuts to production at factories have become the norm around the industry.

Intel Corp.

is aggressively cutting costs and starting targeted layoffs to deal with a sharp decline in the PC market.

Advanced Micro Devices Inc.,

an Intel competitor, on Tuesday gave a gloomy outlook for PCs, predicting a further drop in sales in the fourth quarter after a rocky third quarter. The overall PC market could be down by close to 20% this year, Chief Executive

Lisa Su

said on a call with analysts.

The broader technology sector has been challenged by a deteriorating macroeconomic environment, including higher interest rates and rising inflation.

Amazon.com Inc.,

Microsoft Corp.

and Google parent

Alphabet Inc.

have all put forth gloomier-than-expected forecasts for sales.

Qualcomm said its revenue from handsets in its latest quarter was $6.57 billion, up by 40% from last year. Its internet-of-things business grew 24% to $1.9 billion of sales. Sales to the automotive industry climbed by 58%, although that business remains a relatively small chunk of the company’s overall revenue.

While chip makers whose fortunes are tied to consumer electronics have fared poorly in the recent period of turbulence, those who focus on automotive customers have done better. Auto makers are still struggling with a shortage of chips that has led to production cuts, including at

Toyota Motor Corp.

, which said Tuesday that it was lowering production targets for its current fiscal year.

The Dutch chip maker

NXP Semiconductors

NV, which derives most of its sales from the automotive industry, this week reported a 20% rise in sales for its most recent quarter, citing continued resilience in its key markets despite growing economic strains.

Kurt Sievers,

NXP’s chief executive, said in an interview that the chip industry has moved from a broad-based surge in demand to a more-fractured one in which pockets of demand persist, but consumer-tied businesses are slowing.

“The world is now very split,” he said. “You see this across the whole chip industry.”

Write to Asa Fitch at [email protected]