Teardown of new Samsung Galaxy smartphone suggests deeper loss for Qualcomm

[April 03, 2015] By Se Young Lee and Noel Randewich

SEOUL/SAN FRANCISCO (Reuters) - Samsung Electronics Co Ltd used more of its own chips to power the new Galaxy S6 smartphone than it did for the predecessor S5, according to an early teardown report, in a blow to U.S. chip supplier Qualcomm Inc.

Samsung is not only using its own Exynos mobile processor, as had been widely reported, but also decided to rely on its in-house semiconductor business to source other parts, including the modem and power management integrated circuit chips, Ottawa-based consultancy Chipworks said in a web posting dated April 2.

Samsung is counting on its new flagship Galaxy S6 and S6 edge phones to help revive earnings momentum after a disappointing 2014. Strong sales of system chips such as its Exynos processor could also help boost earnings, analysts and investors say.

The Galaxy S6 also comes with Samsung's Shannon modem chip, U.S. phone carrier AT&T said on its website.

"It's pretty clear if they're using Shannon for the modem for AT&T that they're trying to use all-Samsung silicon," said Jim McGregor, an analyst at Tirias Research. "With their market share going down they're under pressure to increase profit margins."

The findings suggest a deeper loss of business for Qualcomm in the new generation of Samsung's flagship handsets than anticipated previously. Teardown reports of the predecessor Galaxy S5, released last year, showed the U.S. chipmaker supplied several components that Samsung has supplanted with its own this year, based on the phone Chipworks investigated.

Qualcomm said in January that a key customer declined to use its new Snapdragon processor in an upcoming flagship phone presumed to be Samsung's Galaxy S6. But it had been unclear whether Samsung would drop Qualcomm's modem chips as well.

Qualcomm is the industry leader in LTE, the most advanced modem technology, but Samsung, Intel, MediaTek and others have developing their own offerings.

Samsung and Qualcomm did not immediately reply to requests for comment.

(Editing by Tony Munroe and Ryan Woo)

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