Seaport has lowered its rating on Qualcomm to Sell from Neutral, saying the company faces mounting headwinds as the smartphone market contracts and competitive dynamics tighten around its core business.
The brokerage pointed to a combination of softer handset demand and rising component costs that could reduce shipments of devices using Qualcomm chips. In particular, Seaport highlighted accelerating memory prices as a factor that may prompt phone makers to either increase device prices or cut specifications such as memory capacity - moves that could lengthen upgrade cycles and dampen overall demand.
Seaport forecasts global phone volumes declining by 10% - 15% this year, a drop that would erode the total addressable market for suppliers like Qualcomm. The firm warned that this pressure may weigh especially heavily on Qualcomm's customers, undermining the chip designer's position even as the market it serves shrinks. Seaport used the phrase "incredible shrinking TAM" to summarize this dynamic.
The brokerage also flagged competitive shifts among handset makers. While many Android manufacturers are reducing memory content or lowering prices, Apple has reportedly maintained memory specifications and pricing on its latest models, a stance Seaport says gives Apple an advantage as memory costs climb.
Seaport further noted Apple's ongoing efforts to remove Qualcomm components from its devices, and said Qualcomm could be substantially absent from Apple models beginning next year as the iPhone maker advances its own silicon development.
On the Android front, Seaport identified Qualcomm's recent strength as concentrated in high-end Android phones - a segment it expects will encounter the most pressure this year. The combination of rising costs and intensifying competition from Apple, the brokerage said, could lead to discounted chip sales and reduced royalty rates for Qualcomm.
Lower-tier Android devices may also shift share toward competing chipmakers such as MediaTek if Chinese handset producers prioritize cheaper models, a trend that could force Qualcomm into additional price concessions.
Beyond near-term demand and pricing risks, Seaport pointed to a longer-term threat from handset makers designing their own silicon. The five largest handset vendors already create their own application processors, and several companies - including Samsung Electronics - are working on in-house modems. Seaport said that while this transition has been gradual, it represents a growing risk to Qualcomm's core mobile market as its addressable market continues to shrink.
The downgrade reflects Seaport's view that these converging pressures - weaker phone volumes, higher memory costs, the potential loss of Apple business, shifts to lower-cost competitors, and increasing vertical integration by major handset makers - combine to meaningfully weaken Qualcomm's market position.
Bottom line - Seaport's move to Sell underscores rising downside risks for Qualcomm as smartphone makers respond to cost pressures and pursue more in-house silicon strategies, a development that could compress shipment volumes, pricing and royalty streams for the chip designer.