The chipmaker's chip sets have been extensively used by ZTE therefore any restrictions on the telecomm company's trade will negatively effect the semiconductor manufacturer too.
One of the senior officials at the Department of Commerce has reported that the US government has finally decided to briefly pick up the export ban put on ZTE Corporation. The ban in subject was imposed by the US government after the country’s Department of Commerce explored sufficient and appropriate evidences of the Chinese smartphone vendor’s merchandising of US-manufactured high-tech commodities in Iran. Through this move, the Chinese vendor violated the restrictions put by the country on the trade to the Middle Eastern country.
The implications of ban imposed earlier this month would have come hard on the ZTE as under the customary prohibition, the vendor’s suppliers ought to apply for an export license in order to dispatch merchandises to ZTE for sale. The official representing the Shenzhen based organization told Reuters that the Chinese telecomm giant had talks with the US Department of Commerce in an attempt to secure its interest put into jeopardy by the current restrictions.
He also said, “As part of the effort to resolve the matter, and based upon binding commitments that ZTE has made to the U.S. government, Commerce expects this week to be able to provide temporary relief from some licensing requirements.”
In North America, ZTE stood at the fourth position among the largest vendors of smartphones which include LG Electronics Inc., Apple Inc., and Samsung Electronics Co. Therefore, it has its own importance for the Department of Commerce. The glad tidings of the temporarily lift of the ban is likely to bring a sigh of relief for ZTE and other companies with it.
Among such manufacturers is the America’s top chipmaker Qualcomm Inc. After the news of the ban hit the surface earlier last month many investors raised doubt over the impact the ban might have on the semiconductor manufacturer. Qualcomm’s flagship Snapdragon chipsets, including but not limited to premium Snapdragon 800 and 810 are used throughout ZTE’s wide range of smartphones.
Merrill Lynch analysts had earlier reported that around 65 million ZTE devices have Qualcomm’s chipsets installed in them. Hence, at an Average Selling Price (ASP) of $18, the proposed limitation would have mirrored a 5.8% fall in the company’s shipments of Mobile Station Modem (MSM).
Moreover, the MSM shipments ought to have additional negative impact on the San Diego, Calif. firm. The possible result which the ban could have on the chipmaker’s revenue is the substantial 7% decrease in growth from MSM shipment. Therefore, the cumulative impact would be a loss of 5.5% in earnings per share for the Californian chipmaker.
However, after the future probable ban lift, the analysts project chipmaker’s QTL business as more promising as the Qualcomm’s QTL business had potentially transitioned over the year. The $78 billion organization currently enjoys patent licensing agreements with around top 5 Chinese smartphone manufacturers. The patent licensing business is one of the pivotal revenue sources for the semiconductor manufacturer.
Almost 50% of the company’s profits are accumulated from the royalty payments by smartphones manufacturers who use the company’s highly popular 4G and 3G technologies. In the past month, Qualcomm shares went up by 5% and it is more likely that when the ban is lifted the company will go further. Moreover, two weeks consequent to the ban, the shares of ZTE have not been traded in the Hong Kong stock exchange.
At the market which closed on Monday, Qualcomm Inc. stock stood at a price of $52.21. The 52 week range of the stock is $42 to $72.
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