How Apple and Samsung just caused this $104 billion company to cut 15% of its workforce
The restructuring plan is largely due to Qualcomm's dwindling revenue and profit, which dropped 14% and 40%, respectively, year-over-year. Qualcomm reported $5.8 billion in revenue and $1.2 billion in operating profit this quarter.
There are a lot of reasons for Qualcomm's struggles, but a big part of it has to do with two of the largest smartphone makers: Apple and Samsung.
The majority of Qualcomm's revenue comes from selling chips that go in to mobile phones. And since Apple and Samsung produce some of the most expensive phones in the world - accounting for 85% of all shipments - any deal with those two vendors could drive huge sales for the chip maker.
"The current industry environment has seen OEM share shift in the highly profitable premium tier, where the top player continues to take share and where, according to IDC, the top two manufacturers together now have more than 85% share of premium tier shipments," Qualcomm CEO Steven Mollenkopf said during earnings call.
The problem is Apple designs its own main processor for the iPhones, and only buys the less profitable baseband modems from Qualcomm. And with Apple's iPhones continuing to ramp up sales and take larger market share, Qualcomm is left with a smaller market to go after.
Samsung, on the other hand, had been a loyal customer of Qualcomm's main processor since 2011, but decided to ditch it this year for its new Galaxy S6, opting to use its own in-house manufactured chips instead.
"Most of the shortfall was due to demand concentration at the high end, including the iPhone that only utilizes Qualcomm's baseband and Samsung's GS6/Note 5, which increasingly uses home-grown chipsets," wrote FBR Capital analyst Christopher Rolland in a research report.