Annual report pursuant to Section 13 and 15(d)

Segment Information

v3.20.2
Segment Information
 12 Months Ended
Sep. 27, 2020
Segment Reporting [Abstract]  
Segment Information Segment Information
We are organized on the basis of products and services and have three reportable segments. Our operating segments reflect the way our businesses and management/reporting structure are organized internally and the way our Chief Operating Decision Maker (CODM), who is our CEO, reviews financial information, makes operating decisions and assesses business performance. We also consider, among other items, the way budgets and forecasts are prepared and reviewed and the basis on which executive compensation is determined, as well as the similarity of business activities within our operating segments, such as the nature of products, the level of shared products, technology and other resources, production processes and customer base. We conduct business primarily through our QCT (Qualcomm CDMA Technologies) semiconductor business and our QTL (Qualcomm Technology Licensing) licensing business. QCT develops and supplies integrated circuits and system software based on 3G/4G/5G and other technologies for use in mobile devices, wireless networks, devices used in the internet of things (IoT), broadband gateway equipment, consumer electronic devices and automotive systems for telematics and infotainment. QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture, sale or use of certain wireless products. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments and includes revenues and related costs associated with development contracts with an investee. We also have nonreportable segments, including QGOV (Qualcomm Government Technologies), our cloud AI inference processing initiative and other technology and service initiatives.
Our CODM allocates resources to and evaluates the performance of our segments based on revenues and earnings (loss) before income taxes (EBT). Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to unallocated corporate assets. Certain income and charges are not allocated to segments in our management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain interest expense, certain net investment income, certain share-based compensation, gains and losses on our deferred compensation plan liabilities and related assets and certain research and development expenses, selling, general and administrative expenses and other expenses or income that were deemed to be not directly related to the businesses of the segments. Additionally, unallocated charges include recognition of the step-up of inventories and property, plant and equipment to fair value, amortization of certain intangible assets and certain other acquisition-related charges, third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, goodwill and long-lived asset impairment charges and awards, settlements and/or damages arising from legal or regulatory matters.
In fiscal 2018, all of the costs ($474 million) related to pre-commercial research and development of 5G technologies were included in unallocated corporate research and development expenses, whereas similar costs related to the research and development of other technologies, including 3G and 4G technologies, were recorded in the QCT and QTL segments. Beginning in fiscal 2019, all research and development costs associated with 5G technologies were included in segment results. Additionally, beginning in fiscal 2019, certain research and development costs associated with early research and development that were historically included in our QCT segment were allocated to our QTL segment. The net effect of these changes negatively impacted QTL’s EBT by $489 million in fiscal 2019 and positively impacted QCT’s EBT by $160 million in fiscal 2019.
The table below presents revenues, EBT and total assets for reportable segments (in millions):
2020 2019 2018
Revenues
QCT $ 16,493  $ 14,639  $ 17,282 
QTL 5,028  4,591  5,042 
QSI 36  152  100 
Reconciling items 1,974  4,891  187 
Total $ 23,531  $ 24,273  $ 22,611 
EBT
QCT $ 2,763  $ 2,143  $ 2,966 
QTL 3,442  2,954  3,404 
QSI (11) 344  24 
Reconciling items (475) 2,040  (6,002)
Total $ 5,719  $ 7,481  $ 392 
Assets
QCT $ 3,990  $ 2,307  $ 3,041 
QTL 1,601  1,541  1,472 
QSI 1,371  1,708  1,279 
Reconciling items 28,632  27,401  26,926 
Total $ 35,594  $ 32,957  $ 32,718 
Segment assets are comprised of accounts receivable and inventories for QCT and QTL. QSI segment assets include certain non-marketable equity instruments, receivables and other investments. QSI assets at September 27, 2020, September 29, 2019 and September 30, 2018 included $110 million, $230 million and $283 million, respectively, related to investments in equity method investees. Total segment assets differ from total assets on a consolidated basis as a result of unallocated corporate assets primarily comprised of certain cash, cash equivalents, marketable and non-marketable securities, accounts receivable from Huawei related to the remaining amounts due under the settlement agreement (Note 2), property, plant and equipment, deferred tax assets, goodwill, intangible assets, operating lease assets, noncurrent income taxes receivables, deferred compensation plan assets and assets of nonreportable segments. The net book value of long-lived tangible assets located outside of the United States was $2.3 billion, $1.4 billion and $1.4 billion at September 27, 2020, September 29, 2019 and September 30, 2018, respectively. The net book value of long-lived tangible assets located in the United States was $1.9 billion, $1.7 billion and $1.6 billion at September 27, 2020, September 29, 2019 and September 30, 2018, respectively.
We report revenues from external customers by country based on the location to which our products or services are delivered, which for QCT is generally the country in which our customers manufacture their products, and for licensing revenues, the invoiced addresses of our licensees. As a result, the revenues by country presented herein are not necessarily indicative of either the country in which the devices containing our products and/or intellectual property are ultimately sold to consumers or the country in which the companies that sell the devices are headquartered. For example, China revenues could include revenues related to shipments of integrated circuits for a company that is headquartered in South Korea but that manufactures devices in China, which devices are then sold to consumers in Europe and/or the United States. Revenues by country were as follows (in millions):
2020 2019 2018
China (including Hong Kong) $ 14,001  $ 11,610  $ 15,149 
South Korea 2,964  2,400  3,175 
United States 1,129  2,774  603 
Ireland 867  2,957  1 
Other foreign 4,570  4,532  3,683 
$ 23,531  $ 24,273  $ 22,611 
Reconciling items for revenues and EBT in a previous table were as follows (in millions):
2020 2019 2018
Revenues
Nonreportable segments $ 133  $ 168  $ 287 
Unallocated revenues 1,841  4,723  (100)
$ 1,974  $ 4,891  $ 187 
EBT
Unallocated revenues $ 1,841  $ 4,723  $ (100)
Unallocated cost of revenues (340) (430) (486)
Unallocated research and development expenses (1,046) (989) (1,154)
Unallocated selling, general and administrative expenses (401) (413) (576)
Unallocated other income (expenses) (Note 2) 28  (414) (3,135)
Unallocated interest expense (599) (619) (761)
Unallocated investment and other income, net 105  243  566 
Nonreportable segments (63) (61) (356)
$ (475) $ 2,040  $ (6,002)
Certain revenues (and reduction to revenues) were not allocated to our segments in our management reports because they were not considered in evaluating segment results. Unallocated revenues in fiscal 2020 were comprised of licensing revenues from Huawei resulting from the settlement agreement and royalties for sales made in the March 2020 and June 2020 quarters under the new global patent license agreement (Note 2). Unallocated revenues in fiscal 2019 were comprised of licensing revenues resulting from the settlement with Apple and its contract manufacturers in April 2019. Unallocated revenues in fiscal 2018 were comprised of reductions to licensing revenues related to the portions of business arrangements that resolved legal disputes and were not allocated to our QTL segment.