Qualcomm Ponders Restructuring Amid Changing Smartphone Market Dynamics

Qualcomm is considering restructuring its operations and is aiming to slash up to 15 percent of its full-time employees in order to stay at the forefront of an increasingly competitive mobile chip industry.

"Our goal is straightforward: to take down costs without sacrificing our technology leadership, customer commitments or valuable IP road map," said Steven Mollenkopf, CEO and director of Qualcomm, during an earnings call Wednesday. "Through the comprehensive cost review, we have identified a number of ways to resize and realign our investments so they are directed at achieving that goal. Full-time head count in QCT will be reduced by approximately 15 percent, which is in alignment with the overall company reductions. … Our team and organization will be streamlined. We will have fewer office locations overall, and we'll shift some of our resources to lower-cost regions."

The company, which employs 31,300 full-time, part-time and temporary employees, will consider splitting its chip division from its technology licensing division, as well as cutting 15 percent of its full-time employees and cutting its temporary staff "significantly."

[Related: Smartphone Market Swells: Shipment Battle Between Samsung And Apple Continues]

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The moves, which are aimed at cutting spending by up to $1.4 billion, are part of an idea to reduce costs from activist investor Jana Partners.

The organizational changes come as the San Diego, Calif.-based chip company struggles with a barrage of changes in the industry, including changing partnerships with longtime client Samsung and constant pressure from rivals in emerging markets like MediaTek Inc.

Samsung, a loyal customer of Qualcomm's, recently substituted the company's flagship Snapdragon chips for its new Galaxy S6 smartphones, released in April, with its own in-house Exynos processors.

Samsung's snub of Qualcomm came after the mobile chip company utilized 64-bit ARM architecture to its flagship Snapdragon chipset line, sacrificing some of the custom components that its chips are known for.

Patrick Moorhead, president and principal analyst with research firm Moor Insights & Strategy, does not think the changes are indicative of Qualcomm's long-term future.

"This is more of a statement of Qualcomm losing Samsung as a customer," said Moorhead. "This all stems back to when Apple announced required 64-bit support in their chips, and as a result Qualcomm had to tear up their road map and rushed to take CPU technology from ARM and put it into their mobile SoC, where they normally have a custom processor. They lost differentiation."

Samsung was the top vendor in the global smartphone market in the second quarter, according to market research firm IDC. The high-end phone vendor with the second highest number of shipments, Apple, also uses its own chips for its smartphone devices, though Apple does use Qualcomm's cellular modems for its iPhones.

Meanwhile, Qualcomm also faces pressure at the midrange and low-end smartphone market as chip vendors like MediaTek and Intel ramp up their efforts in entry-level and emerging markets.

Can the mobile processor giant get back on track? Possibly, said Moorhead, if its newest chipset, the Snapdragon 820, sticks to the company's custom-concept roots, as opposed to utilizing ARM architecture again. "That's the chip that will give Qualcomm the ability to get back on their feet," he said.

In addition to workforce cuts, Qualcomm said in a release that it will review alternatives to the company's corporate and financial structure and further align executive compensation with performance, including returns on investment.