Qualcomm CEO explains why the chipmaker's automotive push is thriving

Published Thu, Apr 28 20224:40 PM EDT

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

Qualcomm (QCOM) is focused on so much more than smartphones. Exhibit A: Autos, where the chipmaker is gaining some real traction. That's the message CEO Cristiano Amon drove home Thursday when he joined the CNBC Investing Club to break down the company's impressive second-quarter results from a day earlier. "We can't be seen as just a communication company for the mobile industry," Amon told Jim Cramer and Jeff Marks at the New York Stock Exchange. The Club shares this view, and it's one of the reasons why Qualcomm has become our largest semiconductor position. As of Thursday's close, it holds a 3.19% weighting in the Charitable Trust portfolio. Automotive numbers Automotive is key to Qualcomm's diversification strategy. It's only a small piece of the company's revenue right now, but it's growing. In the second-quarter, automotive accounted for 3.5% of Qualcomm's revenue in its core business segment known as QCT. Auto sales checked in at $339 million, up 41% year over year and 32.4% quarter over quarter. However, Qualcomm's automotive design win pipeline is now more than $16 billion, up by about $3 billion since Q1. "Design win pipeline" is industry jargon, but basically it represents deals Qualcomm has with auto companies that will translate into revenue in the future. It offers investors important visibility, even if some of that revenue may not materialize until years down the road. Understanding the auto push Cars are getting more technologically advanced, and that means there's a greater need for them to include computer parts such as processors and sensors. Qualcomm makes both of those things for products like smartphones, which is helpful in making sense of its automotive push. Qualcomm calls its flagship automotive product the Snapdragon Digital Chassis. Traditionally, a vehicle's chassis is its main physical support frame. Qualcomm is trying to offer, essentially, a digital support frame — built out of chips and software — that undergirds advanced in-car technologies like driver assistance, telematics and general cloud connectivity. Qualcomm is partnering with automakers to give them access to that platform, and those companies can then build on top of it for their various vehicles. Amon told the Club it's been well-received by the industry. "Our automotive business, it's incredible. In a record period of time, we're working now with the 26 global brands. The 26 global brands are designing their cars on the Qualcomm digital chassis platforms," Amon said. "It's about connecting the car to the cloud, every single electronics of the digital cockpit on the car from the dashboard to the infotainment to the rear-seat entertainment," the CEO said. Amon explains why customers like it Notable automotive customers of Qualcomm include BMW Group and Stellantis N.V., the Netherlands-based parent company of Jeep, Dodge and Maserati. In January, General Motors said it would use chips from Qualcomm's Snapdragon Ride platform to power its advanced driver assistance system called Ultra Cruise. That is supposed to be available next year. Qualcomm's acquisition of Arriver, which closed earlier this month , is integral to expanding its offerings around advanced driver assistance systems. Amon said he thinks Qualcomm's approach to automotive stands out among tech firms. His comments can get a little technical, but they paint a broad picture that helps investors understand Qualcomm's growing business line. Here they are at length: "What is unique about Qualcomm — and this is what I think was not well very understood by the analysts but it's showing in the results in how fast we became a preferred platform provider — we have capabilities across all domains," he said. He continued: "The digital chassis platform, we provide all of the capabilities for you to connect the car to the cloud -- all different frequency bands, all the [radio frequency], all the modem. We provide the digital cockpit. It doesn't matter if it's going to do smart mirrors, heads up display, dashboard, infotainment. We provide scalable [advanced driver-assistance systems] and we provide a service platform. Unlike companies that provide a specialized component, we provide an entire platform." (Jim Cramer's Charitable Trust is long QCOM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Cristiano Amon, president and CEO of Qualcomm Incorporated, speaks during an interview with CNBC on the floor of the New York Stock Exchange (NYSE) in New York, April 28, 2022.

Brendan McDermid | Reuters

Qualcomm (QCOM) is focused on so much more than smartphones. Exhibit A: Autos, where the chipmaker is gaining some real traction.

That's the message CEO Cristiano Amon drove home Thursday when he joined the CNBC Investing Club to break down the company's impressive second-quarter results from a day earlier.