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  (Source: Business Korea)
Oddly world's largest smartphone maker couldn't fix thermal issues; but LG, HTC, and Xiaomi could

Bloomberg is citing sources as revealing that Samsung Electronics Comp., Ltd.(KRX:005930) (KRX:005935) will be dropping Qualcomm Inc.'s (QCOM) latest and greatest 64-bit Snapdragon chipset from its Galaxy S6 flagship smartphone, which should be launching in the next few months.

I. No Snapdragon for You!

This isn't the first time we've heard this rumor.  On Dec. 4, Business Korea, a publication from Samsung's home country with many ties to the electronics giant revealed that Samsung was evaluating dropping the Snapdragon 810 due to overheating issues.  The report cited a source who on Dec. 2 stated:

Qualcomm is faced with hard-to-solve problems. The Snapdragon 810 overheats when it reaches a specific voltage. It also slows down owing to problems with the RAM controller connected to the AP. In addition, there is an error in the driver of the Adreno 430 GPU.

This week's report offers a similar story.  Bloomberg correspondents Jungah Lee and Ian King report:

Samsung Electronics Co. will use its own microprocessors in the next version of the Galaxy S smartphone, dropping its use of a Qualcomm Inc. chip that overheated during the Korean company’s testing, people with direct knowledge of the matter said.

Samsung, the world’s largest smartphone maker, tested a new version of Qualcomm’s Snapdragon chip, known as the 810, and decided not to use it, the people said, asking not to be identified because the issue hasn’t been discussed publicly.

...


The new Galaxy S will be equipped with Samsung’s most advanced chips, one of the people said. A spokesman for Qualcomm declined to comment. Samsung declined to comment in an e-mail.

Since the Galaxy S II Samsung has adopted a two chip strategy for its Galaxy S flagship smartphones. One model would carry Samsung's proprietary Exynos chip design, while the other would carry a Snapdragon processor from Qualcomm.  

Samsung Exynos

For the last two generations most of the volume has been with the Qualcomm model, as Samsung's Exynos chips have trailed Qualcomm's in applications performance, power efficiency, and cellular baseband processing.

Samsung Galaxy S6
The Galaxy S6 is expected to launch in the next couple months. [Image Source: Business Korea]

Seoul, South Korea's HI Investment & Securities Comp. appeared to be aware of this important decision.  Analyst Song Myung Sup commented:

Samsung may release the next Galaxy S as early as March, and it can’t dare to take the risk to use any of the chips in question for its most important model.

At this point there are really only two possibilities -- that the rumors are true or that there's a tremendous amount of misinformation swirling around.  And common sense would say, "when there's this much smoke, surely there's fire."

II. Why Can't Samsung Use the Snapdragon 810 if Rivals Can?

Samsung's Snapdragon 810 woes are rather curious, given that others don't seem to be having this problem.  LG Electronics, Inc. (KRX:066570)(KRX:066575) is using the chip in its LG G Flex 2 smartphone which launches at the end of the month.  A spokesperson wrote to Bloomberg confirming that LG had ironed out any thermal issues it had encountered with the chip, stating:

There will be no problem with the G Flex2 phones.  We are taking every measure to ensure there will be no overheating problem.
 
LG G Flex 2
The LG G Flex 2 uses the Snapdragon 810.

Likewise, Xiaomi -- the world's third largest smartphone maker behind Samsung and Apple, Inc. (AAPL) -- reaffirmed that it would be using the Snapdragon 810 in the Mi Note Pro, its largest, most expensive smartphone/phablet.  And the rumor mill is indicating that HTC Corp. (TPE:2498) will be using the Snapdragon 810 in the upcoming HTC One M9 (2015).  China's Huawei is also prepping smartphones that will use the Snapdragon 810, according to official press releases.

Snapdragon 810
Other OEMs aren't having as rough a time as Samsung with the Snapdragon 810 (pictured).

So why can't Samsung iron out the thermal issues if LG, Xiaomi, and (possibly) HTC have?

There's no clear answers.  One possibility is that Samsung is using a fixable problem as an opportunity to step up its in house efforts, a strategy that has proved highly successful for its arch-rival Apple.  Exynos trails the Snapdragon series, and the current generation may suffer, but in the long term focusing its efforts on one proprietary chip could pay dividends.

Samsung is currently building a $15B USD chip factory outside of Seoul and continues to invest in revamping its existing Austin, Texas and South Korean chip lines.  Samsung is no fresh face in the world of chipmaking.  It spun its first memory chips four decades ago.  And Samsung does have extra capacity since Apple ditched it for orders of the Apple A8 and A8X processors, choosing Taiwan Semiconductor Manufacturing Comp., Ltd. (TPE:2330).  (Samsung is reportedly prepping to produce a portion of Apple A9 orders.)

Samsung building
[Image Source: Flickr]

Thus while a switch to solely using Exynos chips will surely be a test of Samsung's chipmaking divisions, it may not be as catastrophic or infeasible as it might seem.  Samsung may actually be making a move that will pay off in the long run.

Source: Bloomberg





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