Qualcomm feels uneasy about Samsung

By Kim Yoo-chul

Paul Jacobs Qualcomm CEO

GIHEUNG, Gyeonggi Province ― Competition is vital for the economy as it keeps prices low and drives companies to improve and innovate.

Industry kingpins are always uneasy about new threats to their market share, the way chip giant Qualcomm is now about Samsung Electronics as it turns from friend to foe.

Samsung has been one of Qualcomm’s major customers and the U.S. firm’s wealth of intellectual property has contributed greatly in the advancement of mobile communications technology in recent years.

The tight relationship between the two companies is becoming complicated as Samsung accelerates efforts to carve its own niche in so-called logic chips, which are the brains inside today's fast-selling mobile Internet devices.

The Korean company boasts dual strength in parts and finished products and has been paying huge sums to Qualcomm to use its products but company officials say more mobile technology will be developed in-house over the next few years.

Predictably, Qualcomm has been trying to downplay the move.

``Our idea is to use Samsung solutions for Samsung products. That will be the base of our profitability for the future,’’ said a company official.

``Yes, we are trying to cut our dependence on Qualcomm for logic chips, although we are producing some of its logic chips on a foundry basis.’’

``The logic chip business has the greatest potential to become another Samsung growth engine,’’ wrote Credit Suisse in a letter to clients.

Data from Strategy Analytics (SA) shows Samsung was the undisputable leader in the single mobile application processor market with a 73.7 percent market share as of the end of last year, while Qualcomm leads the chipset arena with 61.2 percent.

In a recent trip to China, Qualcomm CEO Paul Jacobs showed his true feelings for the release of Samsung’s new eight-core Exynos 5 Octa processor for mobile devices.

``Mobile chipsets are the truly next big thing in the industry and that’s why chip majors are jumping into the market. Now, Samsung is seen as a competitor in that industry along with NVIDIA. Although Samsung’s Exynos chipsets are only being used in our products, the fact is that we have the capability to manufacture fine-tuned logic chips with better pricing,’’ said another Samsung official.

Samsung Electronics upped the ante with the announcement of the Exynos, according to market observers, as eight-core chipsets are more powerful and have better energy efficiency that the conventional quad-core ones.

In a counterattack, Qualcomm announced two new additions to its Snapdragon processor series, the 800 and 600, which the firm believes perform 75 percent and 40 percent better than its latest S4 Pro, now powering devices like the Google Nexus4 and the LG Optimus G.

``Because Samsung is the world’s top mobile phone maker and consumers want to buy speedier smartphones with better pricing, there’s no reason that Qualcomm should have nice things to say about the Samsung Exynos,’’ said Kim Ji-woong, an analyst at local brokerage E-Trade Investment.

``Since the next logic chip making facilities will be built this year to begin production next year and given the current tightness of Samsung’s application products, should the foundry business prove to be highly successful and we don’t rule out another conversion of memory chip manufacturing plants into ones for logic chips in the interim period,’’ said Credit Suisse.