Qualcomm, Inc. (NASDAQ:QCOM) is shifting its mobile processor manufacturing business to Samsung Electronics. The company wants Samsung to produce the next-gen Snapdragon 820 mobile chip. Samsung boasts 14nm chip production technology, which is superior to what its rivals have to offer and that explains why the company’s semiconductor division is quickly gaining ground.
Qualcomm, Inc. (NASDAQ:QCOM) supplies chips to prominent mobile manufacturers such as Apple Inc. (NASDAQ:AAPL). The company’s chips also feature in some Samsung devices. However, Samsung skirted Qualcomm in its latest set of Galaxy smartphones, using its own Exynos processors instead of Snapdragon 810 in Galaxy S6 and S6 Edge devices. Qualcomm had to narrow its financial expectations for 2015 following the move by Samsung.
It is currently unclear whether Qualcomm is in the lookout for more manufacturing partners for its Snapdragon 820 processor besides Samsung. Both companies have preferred not to comment on the speculations about chip manufacturing.
Qualcomm, Inc. (NASDAQ:QCOM) is the largest mobile chip supplier, trending ahead of Intel Corporation (NASDAQ:INTC) that is just trying to break ground in the lucrative mobile and connected device market.
Impact on TSM
If Qualcomm gives 820 processor manufacturing contract to Samsung, the move would be adverse for Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM), which has been responsible for the bulk of Qualcomm’s chip production.
Superior chip technology
Samsung’s semiconductor business is expected to be profitable this year. The company also recently boated about its SSD memory manufacturing technology known as 3D V-NAND. The technology allows for manufacturing of more energy-efficient memory chips that also occupy a smaller space. Samsung boasts what is known as 14nm manufacturing technology, which gives it a lead of rivals in contract chip production because of its ability to make smaller, powerful and more efficient chips.
Profitability in semiconductor unit
As Samsung wins more outside contracts for its semiconductor business, its overall revenue and earnings figures are expected to improve. The company is battling intense competition in mobile division, but hopes semiconductor assets can offset the impact.
There are speculations that Apple has tapped Samsung to make its A9 processors to feature in new iPhones coming out later this year. Samsung’s other contract client is Nvidia Corporation (NASDAQ:NVDA).