Automotive sector

Qualcomm Takes ‘First Step’ Into Automotive With Arriver Acquisition, Says CFO

Qualcomm Chief Financial Officer Akash Palkhiwala joins Yahoo Finance Live to discuss Qualcomm’s move to be a major player in driverless cars as the auto industry seeks to transform, bringing a complete self-driving solution. driving to automakers, and its acquisition of Arrive.

Video transcript

BRIAN SOZZI: Welcome to Yahoo Finance Live. We have seen a fairly noticeable reversal in the markets. And traders are really pointing the finger at some of those comments we received moments ago from Federal Reserve Governor Lael Brainard. Now we have a story on the Yahoo Finance homepage from our very own Brian Cheung.

But Brainard noting, quotes, “Currently, inflation is far too high and is subject to upside risks. The committee stands ready to take stronger action if inflation indicators and inflation expectations indicate that ‘Such action is justified.’ And traders clearly see this as potential for faster-than-expected rate hikes from the Federal Reserve. We see all three major stock indices now in the red on this news

Alright, let’s switch gears here– Qualcomm is looking to be a major player in driverless cars. The chip giant has completed its acquisition of standalone tech player Arrive. Qualcomm’s goal here is to eventually bring a complete self-driving technology solution to automakers. Let’s talk more about the transaction with Qualcomm Chief Financial Officer Akash Palkhiwala. Akash, nice to see you here this morning. Congratulations on this case. So what are your ultimate plans with this?

AKASH PALKHIWALA: Thank you very much and great to be here. We are very excited about what is happening in the automotive industry. The industry is obviously going through an incredible transformation. And it’s not just the electrification of cars, but you know, you see cars becoming smartphones on wheels. And what that gives us an opportunity is to really take all the handset technologies that we have and bring them to the automotive – connectivity, low-power computing and AI at the edge.

So we’re very excited about what this acquisition means for us in terms of this great diversification strategy that we’ve put in place. If you look at what this acquisition can do for us, because we will combine our chipset technology with Arriver’s computer vision and driving policy technology. And together we will deliver an open, scalable, and scalable platform that will work across all levels of cars. And so we’re very excited to be part of this ADAS wave that’s happening in the automotive industry.

JULIE HYMAN: Akash, this is Julie here. And as we talked about, they are not chips. This is software. And I’m curious if you’re going to go further into software, or in other words, beyond chips as you get more into automotive and more into other industries.

AKASH PALKHIWALA: Yes, absolutely, Julie. That’s an excellent question. As we think about the issues that need to be addressed for ADAS, which is autonomous driving and driver assistance, to happen on a large scale in the automobile, we thought that the best way to approach this market was to have a combined chip and software solution.

And we really believe that as we move forward, we have the ability to bring in additional software assets and expand the offering. And this is something that OEMs are very interested in. And so we’re delighted. We believe this is the first step. And the interest we see from all the OEMs is what validates our strategy.

JULIE HYMAN: Yes, there does seem to be a demand from OEMs. And we’ve also seen your other competitors in semiconductors grow in automobiles, like the others. It’s still a relatively small part of the business now. I’m thinking a little over 10%, if I’m not mistaken, of last year’s sales.

What is the size of your company ? As we see growth there, what kind of piece of Qualcomm is this going to be going forward?

AKASH PALKHIWALA: Yeah, absolutely. Our strategy here is therefore to become the preferred partner of OEMs for what we call the digital chassis solution. And in our mind, the digital chassis includes connectivity, it includes the digital cockpit and it includes ADAS. And it’s just a tremendous opportunity for us to bring all of these technologies to large-scale OEMs at all levels.

When you look at the winning design pipeline that we talked about, we have over $13 billion worth of winning designs in those areas. And so that will materialize into revenue over the next few years. And we think that’s just the beginning. We’ve given very specific five-year and 10-year revenue forecasts, and we’re very pleased with the traction we’re getting and how well we’re on track to meet and exceed those targets.

BRIAN SOZZI: Akash, what are the biggest challenges in scaling technology like this?

AKASH PALKHIWALA: Well, I mean, that’s an area where the whole industry is learning at once, isn’t it? The bottom line, then, is being able to deploy both computer vision and policy management technology at scale across different OEMs. And each OEM has its own set of plans.

We must therefore be able to work closely with them. And that’s why the fact that our solution is open, scalable and scalable is very important. Maybe the other thing I will say is how we define the software, it’s going to be modular. So that allows us to work with OEMs and leverage their software and combine theirs and ours, which I think is very important.

This is an industry that is still being defined. And the ability to be flexible is going to be a competitive advantage for us.

JULIE HYMAN: And to expand it a bit, I want to ask more general questions about the semiconductor industry. I was also looking at some of the analyst commentary – the latest price data from the Semiconductor Industry Association. And it looks like prices are continuing to rise. And I’m just curious what you see from your vantage point and what kind of visibility you have over the rest of the year on that front.

AKASH PALKHIWALA: Yeah. I mean, it’s obviously an industry that’s been going through its own supply-side challenges over the past couple of years. And as we’ve said in the past, it’s an image that continues to evolve. We have made considerable efforts to improve the supply that we can guarantee to our customers. So we are very pleased with the progress we have made.

This obviously also lends itself to a stronger price environment. And you see some of that showing up both in the price that we charge our customers, but also in the price that the foundries charge us. And so the net impact for us is what is reflected in our financial statements.

BRIAN SOZZI: I think, Akash, a lot of people coming in this year were expecting the chip supply chain to improve to some degree. But we still see reports of automakers shipping cars without certain chips, halting manufacturing production. Are chip shortages just the new norm and should companies expect this to go ahead?

AKASH PALKHIWALA: Yeah. I mean, we definitely had a scenario where multiple chip companies struggled to maintain the right balance between demand and supply. As we’ve said in the past, for us the demand has definitely outstripped the supply. But thanks to the measures we have taken, we have been able to reduce this gap significantly.

And as we’ve said in the past, we think it will get better as the year progresses. More specifically on the automobile, it is certainly an area that we have prioritized. And I think we’ve been a great supplier to automotive OEMs trying to meet their needs as much as possible.

BRIAN SOZZI: All right, we’ll leave it at that. Akash Palkhiwala, CFO of Qualcomm, always nice to see you. We’ll talk to you soon.