Samsung’s Chip Choice Is a Mixed Verdict for Qualcomm

Samsung Electronics 005930.SE +2.51% delivered a blow to Qualcomm QCOM -0.13% in one key choice of chips in its new Galaxy S6 smartphone. But the South Korean giant seems to be hedging its bets on another Qualcomm technology choice.
Chipworks, a consulting firm that disassembles and analyzes features in mobile devices, reported late Thursday that Samsung used an internally developed wireless modem in the Galaxy S6. Qualcomm had been expected to supply the modem–one of two critical chips in the handset–though Samsung had said earlier this year it would use its own processor chip over Qualcomm’s Snapdragon.
But Chipworks analyzed a Galaxy S6 that was designed for a particular carrier’s network, a person familiar with the situation said Friday. Models built for some other networks, this person said, would use Qualcomm modems, leaving the chip maker with a meaningful share of modems in Galaxy S6 units.
Qualcomm warned in early January that its financial results this year would be hurt as a major customer, which was not identified, had decided not to use the Snapdragon 810 chip in a flagship smartphone. Qualcomm didn’t use Samsung’s name but never disputed that it was referring to the South Korean company.
Handset makers can either buy one chip that handles both calculating and communications–like the Snapdragon–or separate chips for those functions. Qualcomm prefers the first approach, since it tends to get more money for multi-function products.
Apple has tended to  favor separate chips, using its own processors but typically turning to Qualcomm for the wireless modem. Samsung has used prior Snapdragon models but turned to its own Exynos processor this time. Samsung manufactures the chip using an advanced production process that the company says brings performance and power-savings benefits.
“Samsung has always mixed up their vendors,” says Patrick Moorhead, an analyst with Moor Insights & Strategy.
Samsung must consider factors such as keeping its chip factories running at capacity, Moorhead said, in addition to the product-design priorities. The company has a massive plant in Austin, Tex., that supplied Apple-designed processors for that company’s iPhones.
Apple switched from Samsung to Taiwan Semiconductor Manufacturing Co.TSM -0.49% to build chips for the iPhone 6. But Bloomberg this week reported that Apple will switch back to Samsung to supply chips for its next model.
Moorhead, meanwhile, said Samsung may switch back to Qualcomm for its flagship smartphones, once the chip maker comes up with a new version of its Snapdragon line that uses more original circuitry.
The Chipworks teardown revealed not only an Exynos chip and a Samsung modem, but several other kinds of Samsung chip including two processors for managing power, an image processor and a Wi-Fi chip. Samsung, the biggest maker of memory chips, also supplied two varieties of that technology in the Galaxy S6: NAND flash memory and dynamic random-access memory, Chipworks said.

http://blogs.wsj.com/digits/2015/04/03/samsungs-chip-choice-is-a-mixed-verdict-for-qualcomm/