Samsung's big infrastructure investments pay off

Samsung Electronics Comp., Ltd. (KSC:005930), the world's largest smartphone maker, is celebrating a blockbuster win.  Qualcomm, Inc. (QCOM), the world's largest maker of smartphone system-on-a-chip (SoC) designs, has committed, according to a report in the Taiwan Economic News, to producing some of its Snapdragon 4 SoC stock on Samsung's Texas chip line.

The pairing seems somewhat unlikely given that the pair are rivals in the SoC market.  Samsung's Exynos 4 looks to challenge Snapdragon 4 for market dominance late this year.

But Samsung has invested greatly in its chip-making facilities, and has already proven liberal in licensing its top-of-the-line fabrication facilities to rivals.  Despite Apple, Inc. (AAPL) looking to sue the pants off it in court, Samsung continues to produce the chips found in every Apple iPhone or iPad.

At the same time Qualcomm's traditional partner, Taiwan Semiconductor Manufacturing Comp., Ltd. (TPE:2330), has reportedly struggled with yield issues on the 28 nm node.  Reportedly TSMC could not fulfill an order for as many chips as Qualcomm wanted; hence the unlikely deal with Samsung was born.

Samsung smartphone chip wafer
Qualcomm is shacking up with Samsung, an unlikely partner. [Image Source: BSN]

The deal is great news for Samsung as the company can hedge its bets, allowing it to profit even if the Exynos chip line struggles.  It also helps to justify the company's deep R&D investments.  After all, if Samsung can outperform TSMC, it may be awarded even more of Qualcomm's business in the future.

There was also good news for another smaller fab -- United Microelectronics Corp. (TPE:2303).  UMC, a local rival to TSMC, also signed a contract with Qualcomm to produce between 2,000 and 3,333 wafers a month, starting in Q4 2012 when its 28 nm fab comes online.

UMC is moving aggressively to reach the 20 nm node, which is expected to be the next jump for ARM chipmakers.

TSMC currently plans to produce approximately 15,000 28 nm Snapdragon 4 wafers a month this fall, once production hits full swing.

Source: Taiwan Economic News

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