Why QUALCOMM, Inc. (QCOM) Should Watch Out For SAMSUNG ELECT LTD(F) (ADR) (SSNLF) As Far As Chips Are Concerned?
QUALCOMM, Inc. (NASDAQ:QCOM) has been supplying higher-end mobile app processors to smartphone manufacturers. That included SAMSUNG ELECT LTD(F) (ADR) (OTCMKTS:SSNLF), BlackBerry Ltd (NASDAQ:BBRY), and Apple Inc. (NASDAQ:AAPL). The company was successful in delivering high-end chips to the Korean firm’s several regions including North America. However, some of the smartphone makers are now making their own app processors in different variants including China-based Xiaomi. That meant that the American company faces a threat from some of smartphone makers. Though the chipmaker can cater to the rest of the smartphone makers, the high-end segment is dominated by Samsung or Apple’s iPhone.
Out Of the Current Year’s Scheme of Things
QUALCOMM, Inc. (NASDAQ:QCOM) is in a piquant situation as it suddenly lost the favor of SAMSUNG ELECT LTD(F) (ADR) (OTCMKTS:SSNLF). That was because it selected to use its own processor linked with Exynos modem in several regions. The Korean firm is pairing Exynos Chip with the American firm’s modems only in carriers or regions that needed the support for CDMA EV-DO.
Despite losing the client, there is still optimism among the company’s supporters of winning back some of its lost business at not only Samsung but also others. That is primarily on the hopes of the next generation Snapdragon 820 processor. It looked quite positive from the way the company has revealed the details. However, there will be doubts as to how long QUALCOMM, Inc. (NASDAQ:QCOM) can hold on to clients like Samsung in the long term even if it managed to win back to provide chip to Galaxy S7.
That was mainly because SAMSUNG ELECT LTD(F) (ADR) (OTCMKTS:SSNLF) has been investing aggressively in its own mobile chips. That will reduce the cost of its smartphone handset to some extent. For quite some time, the Korean firm has been selling its mobile processors under the brand name ‘Exynos’. There was no doubt that these chips were competent enough and like the recent Exynos 7420, it will have the advantage of first use in its leading-edge manufacturing technology. However, from an architectural perspective, they have lacked something special.
On the other hand, QUALCOMM, Inc. (NASDAQ:QCOM)’s chip has both intellectual property, as well as, capability perspective. That should place it above the Samsung chips. This does not mean that the future chips would also command a similar kind of interesting design or efficiency. That was partly because SAMSUNG ELECT LTD(F) (ADR) (OTCMKTS:SSNLF) is involved in creating its own mobile-focused chip designs. For instance, the Korean company has included customized design in CPU cores in its next generation processor for mobile, which was known as Exynos M1. But one thing is very clear. That is the Korean company is working on a mobile graphic processing unit designs. Apart from being successful in deploying its chips, Samsung has also convinced third parties to buy its chips. For instance, Meizu Pro 5 smartphone used Exynos 7420 chip.
Will It Affect Qualcomm?
Though there have been some hopes that the Korean firm might place orders again with QUALCOMM, Inc. (NASDAQ:QCOM), there is a threat looming large on the American firm. That is to reduce the relevance of Qualcomm completely in the scheme of things of Samsung. However, there can be an agreement between the two enabling the American firm to move its manufacturing volume to SAMSUNG ELECT LTD(F) (ADR) (OTCMKTS:SSNLF) in exchange for chips. That might be hypothetical, but nothing can be ruled out to stay in business. However, that might be a win-win situation for both of them.
None-the-less, the American firm should protect itself by staying ahead. More than Samsung, the company faces increasing competition from MediaTek. On the other hand, the portfolio of chips from the Korean company was not really encouraging, but with its investment, it can develop. Therefore, QUALCOMM, Inc. (NASDAQ:QCOM) should always be a step ahead of others to stave off any threat.
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