What Does SAMSUNG ELECT LTD (F) (SSNLF)’s Chip Choice Mean For QUALCOMM, Inc. (QCOM)?

QUALCOMM, Inc. (NASDAQ:QCOM) has been dealt a blow in the Chips business, after SAMSUNG ELECT LTD (F) (OTCMKTS:SSNLF) opted to use an internally developed wireless modem on some models of its next flagship smartphone, Galaxy S6. Qualcomm was expected to supply the modem even after Samsung gave the clearest of indications early in the year that it was going to use its own manufactured processors.

Reduced Earnings

However, there is also indications that QUALCOMM, Inc. (NASDAQ:QCOM) may end up powering models of the phone designed for some networks according to people familiar with the matter. No further details are available on what networks those are at this time. Qualcomm has already warned that a change of sentiments in the chip business could hurt its financial results this year as the company continues to lose big customers.

Handset makers are usually given the option of choosing chips that handle both calculating and communication or separately. QUALCOMM, Inc. (NASDAQ:QCOM) has always preferred to offer the same, separately, as it always tends to be more lucrative in terms of returns. Apple Inc. (NASDAQ:QCOM) on its part has always preferred separate chips while using its own processors and turning to QUALCOMM for wireless modem chips.

Apple-Samsung Deal

Samsung was once a big consumer of the Snapdragon model but has since switched allegiance to its own Exynos processor, which it manufactures using an advanced production process that it says brings about power and savings benefits. Apple also dealt Samsung a major blow last year opting for chips from Taiwan Semiconductor Manufacturing Co to power iPhone 6, ending a long run relationship in the chips business. However, there has been reports that Apple may switch back to Samsung to supply chips for its upcoming line of iPhone 6.

Samsung may also switch back to QUALCOMM, Inc. (NASDAQ:QCOM) should the chip maker come back with a new version of its current Snapdragon line that incorporates more original circuitry.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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