Both Seem To Be Doing Equally Well, But A Closer Look At Qualcomm And Texas Instruments Since 2012, Tells A Different Story

by Trefis Team
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Qualcomm (NASDAQ: QCOM) and Texas Instruments (NASDAQ: TXN) are two of the biggest players in the semiconductor market, manufacturing and selling embedded processors and chips to be used in all sorts of technological devices.
Most of Qualcomm’s revenue comes from the sale of chipsets that are used in mobile phones, laptops, and tablets to provide voice modulation, internet access, and data storage.
Texas Instruments gets most of its revenue from the sale of analog semiconductors that are used in a variety of industries, such as computing, wireless communication, and infrastructure.

In this dashboard, Qualcomm vs Texas Instruments: How have Revenues And Key Operating Metrics For Each Changed Over Recent Years?, we take a look at how the two companies have evolved since 2012.

How have Total Revenues for both trended over the years?

  • Texas Instruments has seen a steady growth in revenue from 2012-2018, with a 3.57% average annual growth rate over this period.
  • During the same period, Qualcomm too has seen an almost 3% average annual growth in revenue.
  • This has been due to steady growth in demand for semiconductors and chipsets, and due to the strong product lines offered by both companies.

 

  • However, a closer look at Qualcomm’s per-year change in revenue tells a different story.
  • From 2014-2018, Qualcomm’s revenue dropped at an average annual rate of 3.8%.
  • This has largely been due to a growth slowdown in the smartphone market, combined with a steady drop in chipset selling prices as 4G technology gets older.
  • The licensing dispute with Apple that started in 2016, further weighed on revenues.
  • Texas Instruments, on the other hand, has seen consistent revenue growth throughout, due to internal reshuffling, to increase its focus on high-growth, high-margin industries like the automotive market.

 

What has been the trend in gross profit and gross margins for both companies?

  • While Texas Instruments has seen a steady growth in gross margins from 2012-2018, Qualcomm’s gross margins have dropped gradually over the same period.
  • Texas Instruments saw a rise in gross margins from 49.7% in 2012 to 65.1% in 2018.
  • This has been due to their increased focus on high semiconductor demand markets like industrials and automotives, and their ability to cut manufacturing costs for their analog products significantly.
  • Qualcomm’s margins have suffered mainly due to a gradual drop in selling prices for their older 4G chipsets.
  • Also, from 2016-2018, margins dropped even more due to the licensing dispute with Apple, which took away a lot of their licensing income.

 

How have Embedded Revenues trended for both companies over this period?

  • Texas Instruments sells embedded processors to be used in communications and automotive applications, while Qualcomm mainly sells embedded chipsets for use in mobile phones, laptops, and tablets.
  • Texas Instruments’ embedded revenue has had its share in the total revenue gradually increase from 2012-2018 (17.6% to 22.5%).
  • The same can be broadly observed for Qualcomm (63.5% to 76%). However, from 2014-2016, there was a net 5% drop in chipset share, as selling prices dropped and demand slowed down.
  • But there has been a 10.5% net increase in the chipset share from 2016-2018, as licensing revenues slipped heavily due to the dispute with Apple, causing Qualcomm to rely more heavily on chipset sales.

A look at which regions contribute most to the revenue of both companies

  • Asia makes up a major part of the revenues for both companies, with more than 60% of Texas Instruments’ revenue coming from Asia alone.
  • Qualcomm gets a little over 80% of its revenue from Asia (which is where smartphone and tablet manufacturing takes place), with China alone making up two-thirds of the total revenue.
  • Revenue from the USA alone, makes up just 2.7% of Total revenue from Qualcomm, whereas for Texas Instruments it’s much higher, at 14.5%.

 

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