Billion dollar deal: Samsung to exclusively produce Qualcomm Snapdragon 820 chips
Feeling the pinch from slowing mobile device profits, Samsung is looking to its chip fabrication business to make up the gap. And to do so, it's going to product next-generation mobile chips for one of its business rivals in the business: Qualcomm.
Samsung announced mass production of its second-gen 14nm FinFET process technology on Thursday and made a point of noting it would make Qualcomm's Snapdragon 820.
That's Qualcomm's super-chip expected to power high-end handsets and tablets in the first half of this year. In the past, Qualcomm has given Tawian Semiconductor Manufacturing Company (TSMC) its chip-building business.
Either due to design or build issues, however, Qualcomm's main chip in 2015 - the Snapdragon 810 - exhibited thermal challenges leading to widespread reports of overheating and aggressive chip throttling that reduced performance.
Indeed, Samsung itself took an unprecedented step by not relying on the Snapdragon 810 last year. Instead, it decided early in 2015 that it would opt for its own Exynos processor in flagship handsets such as the Galaxy Note 5 and Galaxy S6 line-up.
It's interesting that Samsung is building chips for one its main competitors but it's not the first time this has happened. Samsung has previously won chip fabrication business from Apple and builds some of that company's A-line of processors used in iPhones and iPads.
So what does Samsung's new 14nm FinFET process bring to the table?
The company touts more power efficiency from the 3D structure on transistors: A 15 percent higher speed boost and 15 percent lower power consumption over the prior generation. While Qualcomm will benefit from that, so too will Samsung, which is using the same process for its own Exynos 8 chips this year.
The production win will help Samsung's bottom line as well; an important point as the company struggles to keep growing profits in its mobile division on weakening handset sales.
Reuters notes that the Qualcomm deal could bring more than $1 billion in revenues to Samsung and that Samsung will be the sole manufacturer for the Snapdragon 820.