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Samsung will fabricate at least some of Qualcomm's X60 modem
chips, which will connect devices such as smart phones to 5G
wireless data networks. The X60 will be made on Samsung's
5-nanometer process, the sources said, which makes the chips
smaller and more power-efficient than previous generations.
One of the sources said TSMC is also expected to fabricate
5-nanometer modems for Qualcomm. Samsung and Qualcomm declined
to comment, and TSMC did not immediately respond to a request
for comment.
Best known among consumers for its phones and other electronic
devices, Samsung is the world's second-biggest chip manufacturer
through its foundry division, self-supplying many of its own
mobile phone parts and also fabricating chips for outside
customers such as International Business Machines Corp <IBM.N>
and Nvidia Corp <NVDA.O>, among others.
But much of Samsung's semiconductor revenue historically has
come from memory chips, whose prices can swing wildly as supply
and demand fluctuate. In an attempt to cut its reliance on that
volatile market, Samsung announced a plan last year to invest
$116 billion in non-memory chips through 2030.
The Qualcomm deal shows progress in winning customers to that
effort. Even if Samsung has won only part of the orders,
Qualcomm represents a flagship customer for Samsung's
5-nanometer manufacturing technology. Samsung plans to ramp up
that technology this year in an attempt to regain market share
against TSMC, which is also starting mass production of
5-nanonmeter chips this year.
The Qualcomm win could boost Samsung's foundry business because
the X60 modem is likely to be used in many mobile devices as
they shift to 5G. In the fourth quarter of 2019, Samsung had
17.8% market share versus TSMC's 52.7%, according to data from
TrendForce.
In a separate announcement, Qualcomm said on Tuesday it would
begin sending samples of the X60 chips to customers in the first
quarter of this year. Qualcomm did not disclose who would
manufacture the chips, and Reuters could not learn whether the
first batches of chips would be made by Samsung or TSMC.
The Taiwanese company was faster to ramp up high-volume
production of chips using the previous 7-nanometer manufacturing
process, winning customers such as Apple Inc <AAPL.O>.
Last month, TSMC executives said they expect to begin ramping up
5-nanometer production in the first half of the year and expect
it to make up 10% of the company's revenue for 2020.
Asked during a January investor conference call how Samsung will
compete with TSMC, Shawn Han, senior vice president at Samsung
Foundry, said the company planned to expand 5-nanometer mass
production by "diversifying customer applications" this year.
Qualcomm designs its own chips but works with outside companies
to manufacture them. It has used manufacturing services from
both Samsung and TSMC in the past, as well as from China's
Semiconductor Manufacturing International Corp <0981.HK>,
depending on which foundry's technology and pricing met its
needs for the product at hand.
(Reporting by Stephen Nellis in San Francisco and Heekyong Yang
and Hyunjoo Jin in Seoul; Editing by Greg Mitchell and Matthew
Lewis)
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