Qualcomm faces challenges amid China troubles and competition from Huawei

United States:  Qualcomm (NASDAQ:QCOM) experienced its worst stock drop in a month due to disruptions in China that threatened the company’s sales in a vital market.

The world’s biggest supplier of smartphone chips, saw a more than 7% decline in its stock value, primarily due to growing concerns related to issues in China concerning iPhones and chip technology.

One significant challenge impacting the mobile chip maker’s stock is the ongoing situation with Apple (NASDAQ:AAPL) and its iPhones in China.

Chinese authorities have raised security concerns regarding iPhones near sensitive government operations, potentially leading to restrictions at the government level in China.

Such bans could have ripple effects for Qualcomm, a major supplier of broadband modems for Apple, according to research house TipRanks.

Additionally, Qualcomm faced competition from Huawei, which introduced a 7 nanometer (nm) technology node 5G chip named the Kirin 9000.

Huawei developed this chip out of desperation as it found many of its conventional supply routes cut off. It then developed the Kirin chip, which was at least somewhat on par with the Qualcomm lineup.

The Kirin 9000 chip’s performance posed a surprise to many, as Huawei and SMIC, the largest chip foundry in China, that actually makes the chips, did not have the necessary tools to make such chips.

Qualcomm stock prospects

Despite these challenges, analysts remain relatively optimistic about Qualcomm’s prospects.

A consensus of 14 buy ratings and four holds categorizes Qualcomm stock as a strong buy.

Besides, with an average price target of US$137.63, Qualcomm’s stock presents investors with a potential upside of 29.07%.

Apple’s stock drops amid China concerns

Shares of Apple dipped yesterday as investors worry about China’s restrictions on iPhones.

However, Wedbush Securities analyst Dan Ives believes the market is overreacting. He said that even in the worst-case scenario, the impact on iPhone sales in China would be minimal.

Ives remains optimistic about Apple’s future, especially with the forthcoming iPhone 15, which he believes justifies a slight price increase for advanced models.

In addition, Citi analysts noted that this news has also affected stocks of companies supplying parts to Apple.

They caution that the market’s reaction may be too extreme, similar to past incidents involving Tesla’s suppliers.

Apple has been doing quite well in China, holding a strong position in the smartphone market, partly due to challenges faced by its main competitor, Huawei, due to US government restrictions.

However, some analysts believe recent restrictions in China could slow Apple’s growth there, adding to the difficulties the company has been facing in the Chinese market.

This situation underscores the trend of both the US and China favouring domestically produced tech products due to mounting security concerns.

Apple stock price forecast

On Wall Street, AAPL stock maintains a Moderate Buy consensus rating based on 22 Buy ratings, eight Holds, and zero Sells assigned in the past three months. The average price target of US$207.46 per share implies 17.77% upside potential.