'Samsunggeddon' saved by Qualcomm

Samsung loses Apple business, but Qualcomm helps

By Kim Yoo-chul

iPhone designer Apple will likely no longer rely upon its chief smartphone rival Samsung for chips to be used in its next iPhone.

Samsung and Apple are the world’s largest purveyors of smartphones, but the latter is also one of the former’s biggest semiconductor clients.

Apple has been paying billions of dollars to Samsung Electronics annually, for the purchase of mobile DRAMs, NAND flash memory chips and application processors manufactured by Samsung’s fabrication plants in Korea and the U.S.

Officials said TSMC of Taiwan was recently named as the sole vendor for equipping the iPhone 7 series with key A10 processors, which will likely boost TSMC’s bottom line.

Theoretically, Apple’s decision to make Samsung as a second-tier vendor does not bode well for Samsung’s chip business. But U.S.-based telecom chip giant Qualcomm is filling in the void made by TSMC.

“TSMC won over Samsung Electronics in the battle for the first batches of A10 chips,” an official who is familiar with the issue told The Korea Times by telephone. “TSMC will entirely handle the new Apple project, though Samsung will take a secondary role. But Samsung doesn’t have to worry about that as Qualcomm is ditching TSMC.”

He said Samsung’s logic chip fabrication lines both in Korea and the United States will be fully operational without suffering a lack of business thanks to the increased orders from Qualcomm.

This view is in sync with J.P. Morgan, as the U.S.-based major investment bank said Qualcomm is dropping TSMC and going to its largest competitor Samsung for its finer 14-nanometer technology this year and 10-nanometer next year.

“As a result, while Qualcomm contributed to over 20 percent of TSMC’s revenue in 2014, it is expected to be only 9 percent this year and 4 percent next year,” J.P. Morgan said. “Building a semiconductor plant is expensive _ estimated to be over $10 billion in capital expenditure _ that even large foundry makers like TSMC and Samsung tend to skip a generation.”

Qualcomm is selling its popular Snapdragon 820 chipsets using Samsung’s 14-nanometer processing tech after the San Diego-based outfit addressed a problem with overheating.

Samsung is the planet’s sole chip producer handling the 14-nanometer processor technology. The 820 chipsets are being used in new smartphone models by top handset manufacturers including Samsung Electronics, LG Electronics, Sony and Xiaomi.

“The growing popularity of Qualcomm’s redefined 820 chipsets keeps Samsung fabrication lines busy,” said another official. “Samsung’s logic chip business is expected to generate about 1 trillion won in profits throughout this year.”

A company spokesman declined to comment on the issue. Qualcomm representatives in Seoul also said they can’t comment on client-related issues.