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Friday, February 14, 2025

Smartphone woes send Qorvo shares down 27%

Greensboro chipmaker Qorvo says it’s considering selling part of its business and is transferring a production line from its North Carolina factory, hoping to reduce its manufacturing and operating expenses.

Qorvo executives announced the moves during their quarterly earnings call this week. The company said it lost $17 million after analysts had expected a $101 million profit. The company lost  $70 million in the previous fiscal year.

That follows a reported $70.3 million loss in the fiscal year ending March 31.

The news, along with lower profit prospects in coming quarters, caused Qorvo shares to decline 27% Wednesday to $73.04. It’s the lowest shares have traded since March 2020.

Qorvo is a key supplier of components for smartphone giants Apple and Samsung. The problem, CEO Bob Bruggeworth and CFO Grant Brown said, is that while the market for flagship- and premium-tier 5G Android phones is holding up, the middle tier of the market is drying up in favor of budget entries.

Making the innards of budget smartphones isn’t as profitable, and the trend away from mid-tier offerings seems likely to hold for the next couple of years.

“As a result, we are taking appropriate actions, including reductions in manufacturing and operating expenses as we focus on opportunities that align with our long-term profitability objectives,” Brown said.

The company is mulling “strategic alternatives for our silicon carbide business,” he said. That is a product line Qorvo bolstered via the buyout of another company in 2021.

“Exiting the silicon carbide market will allow us to reduce operating expenses and avoid the capital expenditures necessary to remain engaged,” he added.

Meanwhile, the production-line move entails shifting work on gallium arsenide chips from Qorvo’s Greensboro fab to a counterpart in Hillsboro, Oregon, a Portland suburb.

The Greensboro facility also makes “SAW filter wafers,” used to improve wireless reception, and will continue doing so, Brown said.

Moving out gallium arsenide production will “make room for anticipated growth” in the remaining line there, he said.

Qorvo’s report underscores that chipmaking remains a tough business.

Rival Wolfspeed reported a three-year cumulative loss of almost $1.4 billion.

The Durham-based company is finishing a new silicon-carbide wafer factory in western Chatham County, with considerable financial help from federal, state and local-government subsidies.

Despite the recent losses, Qorvo has reported a cumulative profit of about $1.1 billion during its past three fiscal years. About 46% of revenue came from Apple and another 12% from Samsung in fiscal 2023-24.

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