Qualcomm Incorporated (QCOM Quick QuoteQCOM - Free Report) shares have witnessed a rollercoaster ride in September, with the ebb and flow attributable to various macroeconomic developments and corporate achievements. While such ups and downs are part of a stock’s progression, the sudden turn of events often tests the stock's inherent strength to withstand the storm and its ability to come up trumps. We believe that Qualcomm has the requisite wherewithal to emerge victorious from the apparent upheaval and strike the right chords in the near future.  

Early this month, Qualcomm and BMW Group extended their technology partnership to redefine the automotive landscape. The collaboration is set to power BMW's new vehicles with Qualcomm’s Snapdragon Digital Chassis Solution. It aims to provide drivers and passengers with safer, smarter and more sophisticated in-vehicle experiences. BMW has chosen Qualcomm as its systems solution provider, incorporating the latest Snapdragon Cockpit Platform and Snapdragon Auto Connectivity Platforms for 5G connectivity.

One key aspect of this partnership is the integration of Snapdragon Cockpit Platforms into new BMW vehicles and MINI's New Family vehicles. These platforms enhance the user experience by offering high-definition graphics, premium audio, crystal-clear voice communication and AI-driven features. As Qualcomm continues to innovate and collaborate, it is poised to reap the rewards of a dynamic and evolving automotive landscape.

During the month, Qualcomm inked an agreement with Manchester United plc (MANU Quick QuoteMANU - Free Report) to be the official shirt sponsor from next season. Per the deal, effective from the start of the 2024-25 season, the Snapdragon brand of Qualcomm will be put in front of the iconic jerseys of the English Premier League (“EPL”) club. Snapdragon will feature on all the home, away and third kits of the men’s and women’s teams of Manchester United, replacing Germany-based software firm TeamViewer. Although no official deal value is currently available, people familiar with the proceedings have billed it to be one of the largest jersey deals in soccer.

The three-year agreement with one of the premier EPL soccer clubs with a dedicated fanbase is likely to prove beneficial for Qualcomm and augment its global exposure. Manchester United historically sells around 2 million shirts each year on average, with the club maintaining a rich legacy and huge fan-following base across the globe. This, in turn, is likely to provide additional mileage for upcoming Snapdragon models with top-of-the-mind recall and boost its brand presence.

The deal gains further significance as Qualcomm chips will be featured in the upcoming iPhone models with a renewed deal inked with Apple Inc. (AAPL Quick QuoteAAPL - Free Report) . The chipmaker entered into a multi-year agreement with Apple to supply Snapdragon 5G Modem-RF systems for forthcoming iPhones.

In addition to incremental revenues, the deal augments QCOM's leadership position across 5G technologies and products. It also gains weightage as the chipmaker is expected to record softer revenues from China owing to strict restrictions on iPhone usage. Per various media reports, Beijing is mulling to impose a ban on the use of iPhones in government offices and state-backed entities as part of its concerted effort toward self-reliance. The restrictions on Apple are likely to have a profound effect on Qualcomm, which is one of the leading suppliers to the iPhone manufacturing firm.

Over the years, China has been one of the primary markets for Apple. As the news of the purported ban spread like wildfire, Apple’s shares slumped and wiped nearly $200 billion in market capitalization. This further affected its suppliers like Qualcomm, among others. Qualcomm modems have been a key feature in iPhone models, connecting the device to cellular networks for fast web browsing and instant app access. Built on indigenous technology that requires specialized engineering expertise and broad industry know-how, these modems have been the hallmark of impeccable performance standards.

Moreover, as China accounts for the lion’s share of Qualcomm’s revenues, any disruption in local operation is bound to have a ripple effect across the company. The chip-making firm has a significant presence in more than 12 cities in China, aiming to drive advancements in semiconductors and mobile telecommunications for the larger benefit. The company has been a key supplier of chips and other related components to local smartphone manufacturers like Xiaomi, Huawei and its spin-off brand Honor. However, it appears that Qualcomm is increasingly finding it difficult to maintain its operations in China.

Much of these hardships can be attributed to the continued Sino-U.S. trade spat. The U.S. Commerce Department has long imposed various trade restrictions against China that banned the sale of high-tech equipment, chips, components and related technology to develop high-end smartphones and AI-enabled chips. Despite adding China-based Huawei to the ‘Entity List,’ the newly developed Huawei Mate 60 smartphone is believed to have violated the U.S. trade sanctions. This has forced the U.S. watchdog to enforce stricter trade restrictions while conducting the authenticity of the trade violations.

Qualcomm is reportedly undertaking job cuts and retrenchments to sustain its business in China. Local media reports claim that the company has laid off dozens of people from its research and development facility in Shanghai, raising questions about its long-term viability plans.

In the backdrop of these events, we believe that the company will strive to maintain an optimum balance between its China operations and conforming to the national interests of both countries. Although shares did have a knee-jerk reaction triggered by the sudden developments, we expect the company to retrace its growth trajectory in the near future.