Samsung Snaps Up Snapdragon 820 Chip Manufacturing Deal

Samsung Electronics on Thursday announced that it had struck a deal that will make it the sole manufacturer of Qualcomm’s flagship mobile processor. Samsung last spring began mass production of a logic chip utilizing its 14-nanometer LPP (Low-Power Plus) process in its own Exynos 8 Octa processor. That process will be used for the Qualcomm Snapdragon 820 chip.

Devices using the Qualcomm processors likely will become available in the first half of this year, Samsung said.

Samsung’s 14nm FinFET process technology “delivers the highest level of performance and power efficiency,” claimed Charlie Bae, EVP of sales and marketing for the system LSI business at Samsung Electronics.

“Qualcomm has always used a variety of fab suppliers and will continue to do so,” a Qualcomm spokesperson said in a statement provided to the E-Commerce Times by company rep Hayley Johnston.

“Our decision to choose a specific process technology is based on its ability to meet our design goals for performance, power efficiency and yield,” the spokesperson said. “We are confident the Snapdragon 820 will set the bar for the premium tier smartphone in 2016.”

Performance Boost

Developed for Samsung’s Exynos 8 Octa chip, the 4nm LPP process is able to deliver up to 15 percent higher speed and consumes 15 percent less power than its previous 14nm LPE process, due to improvements in transistor structure and process optimization, the company pointed out.

Its three-dimensional FinFet structure allows for the boosts in performance and power efficiency, Samsung said. Further, the use of fully depleted FinFET transistors could help overcome scaling limitations.

Samsung could see a boost to its bottom line as well — up to US$1 billion in revenue from orders of the Snapdragon 820 processors, according to reports. Samsung’s gain could be Taiwan Semiconductor Manufacturing Company’s loss. Up to now, Qualcomm was TSMC’s biggest customer.

TSMC “will suddenly have a lot of empty capacity,” noted Roger Entner, principal analyst at Recon Analytics.

“In the fabrication world of chip producers, it is a continuous cycle of feast or famine,” he told the E-Commerce Times. “One year there isn’t enough capacity, and then [the chip producers] expand until there is too much production, so prices crash until there is demand that drives it back up again. TSMC will be back in the downward cycle this year.”

TSMC actually has larger foundry capabilities to produce chipsets, so Samsung’s win could amount to a major blow.

“Unless it sizably invests in more effectively competing with Samsung, GlobalFoundries and Intel, TSMC could find itself left out of other deals,” said Charles King, principal analyst at Pund-IT.

Why Samsung

Samsung’s ability to offer reliable support for the 14nm manufacturing process likely played a major role in its securing this deal.

“GlobalFoundries, which has a strategic partnership with Samsung, and Intel have similar capabilities,” King told the E-Commerce Times.

“Samsung is also reportedly manufacturing chips faster and more power-efficiently than it did last year, which could also benefit Qualcomm,” he added. “All in all, the deal seems like a no-brainer.”

Qualcomm long has outsourced manufacturing of its processors to external makers.

“Samsung has already been one of the leading conductor manufacturers in the world, and they are really on the cutting edge in terms of advanced technology — as well as one of the largest and most experienced manufacturers of chipsets,” said Recon Analytics’ Entner.

Although this is “an external validation for Samsung” he added, “let’s not forget that they make many A Series chips for Apple, so it would be natural that they’d be in the mix and win business from Qualcomm.”

Closer Ties

With Samsung producing the chipset for Qualcomm’s processor, it wouldn’t be too much of a stretch to imagine the Snapdragon 820 showing up in Galaxy devices in the near future. That would be a reverse course, given that Samsung wasn’t all too pleased with the previous generation — the Snapdragon 810 — considering it plagued with issues.

“Samsung is likely happy to be captain of its own fate as regards component oversight — especially if rumors of overheating in TSMC-produced Snapdragon 810 chips are true,” said King.

“It’s also possible that the two companies included product discounts or other incentives as part of the agreement,” he added.

For Qualcomm, the deal means gaining access to some of the industry’s best and most advanced chip fabs, which could help it continue to pursue cutting-edge processor designs. However, that could come at a cost.

“As the semiconductor industry continues to consolidate, fabless chip companies like Qualcomm will have fewer and fewer manufacturing partners to choose from,” King observed. “Over time, that could impact the company’s bottom line — but for now, things look good for Qualcomm and the Snapdragon 820.”

Peter Suciu is a freelance writer who has covered consumer electronics, technology, electronic entertainment and fitness-related trends for more than a decade. His work has appeared in more than three dozen publications, and he is the co-author of Careers in the Computer Game Industry (Career in the New Economy series), a career guide aimed at high school students from Rosen Publishing. You can connect with Peter on Google+.

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