There is a growing possibility that Samsung Electronics and the world's number one AP maker Qualcomm will sign a contract for application processors (APs). If the deal is finalized, Samsung's struggling system semiconductor business is expected to perform better.
According to industry sources on July 16, there is widespread speculation that Samsung is going to sign a contract with Qualcomm for manufacturing next-gen APs. Neither the size of the contract nor the supplying period has been revealed.
When asked about the deal, a Samsung official responded by saying, “We cannot reveal details about our customer company.” However, an official at a foreign semiconductor company remarked, “After announcing its target for 20-nm-class APs, Qualcomm has been looking for various ways to manufacture those mobile processors, as seen by its agreement with Semiconductor Manufacturing International Corporation (SMIC), the largest semiconductor foundry in China, to produce a 28-nm chipset.” The official continued by saying, “There is also the possibility of another agreement for 14nm chips. Thus, Qualcomm is more likely to strike a deal with Samsung, since the Korean firm is the only one that can manufacture 14nm APs.”
The industry believes that if Samsung already closed the deal with Qualcomm, it will be of a great help to improve the performance of its System LSI division, which is a thorn in the side of Samsung's semiconductor business. According to research firm Strategy Analytics, in terms of sales volume, Samsung's share in the global AP market has been cut almost in half, from 12.0 percent in 2011 to 6.3 percent in 2013. In terms of revenue, its market share dropped from 10.1 percent to 7.9 percent over the same period.
To address the problem, Kim Ki-nam, the head of Samsung's semiconductor business, has been trying to expand the system semiconductor business, as witnessed by his decision to sign a license agreement with global foundries for 14-nm FinFETs, so that the company can increase its influence in the foundry market.
According to industry sources, as Taiwan Semiconductor Manufacturing Company (TSMC) recently started to mass-produce A8 Aps - core components for the next-gen iPhone model - through a 20-nm process, Qualcomm's transaction volume with Samsung was reduced. However, there is more speculation that the volume has actually been increasing this year. If Samsung supplies microprocessors to Qualcomm, it will greatly improve the performance of its System LSI division. Meanwhile, a FinFET refers to a three-dimensional transistor aimed at improving the product performance. It is named this way because the conducting channel is wrapped by a thin silicon fin, which forms the body of the device.