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Qualcomm among Samsung's top 5 clients for 1st time due to foundry biz

Economy 16:06 May 17, 2022

By Woo Jae-yeon

SEOUL, May 17 (Yonhap) -- U.S. chipmaker Qualcomm was included among Samsung Electronics Co.'s top five clients in the first quarter, a document showed Tuesday, largely due to chip contract manufacturing.

In a quarterly corporate filing, the South Korean tech giant named Apple, Best Buy, Deutsche Telekom, Qualcomm and Supreme Electronics as its five biggest clients. Combined, they accounted for 14 percent of Samsung's total sales.

Qualcomm made it into the list for the first time, replacing Verizon.

In December, Qualcomm CEO Cristiano Amon confirmed the company was using Samsung Foundry's 4-nanometer process to produce its Snapdragon 8 Gen 1 processor.

The U.S. company, however, is said to have switched to TSMC, Samsung's biggest foundry rival, for its latest processor, Snapdraon 8 Gen 1 Plus, which is widely expected to make its debut this Friday.

The move stoked market speculations that the alleged issues concerning Samsung's chip yields, or defect rates, might have led Qualcomm to use TSMC's 4-nm node instead.

According to industry tracker TrendForce, TSMC took up 52.1 percent of the global foundry market, followed by Samsung with 18.3 percent, in the fourth quarter of last year.

This file photo, taken Aug. 10, 2021, shows the corporate logo of Samsung Electronics Co. at its office building in Seoul. (Yonhap)

During an earnings call last month, Samsung moved to assure investors that the demand from its key customers "is above our capacity" and "very solid."

Samsung said its foundry business achieved its highest quarterly sales in the January-March period, on solid demand from all applications and improved yields of the advanced processes.

"We have entered into long-term contracts with our key customers ... And through this, we are able to gain comfort in terms of stable fab operations and supply stability," Kang Moon-soo, senior vice president and head of Samsung's foundry market and strategy team, said during the call.

"If you look at our order book for the next five-year period, the (total) orders are around eight times our previous year's revenue," he added.

Last week, Bloomberg reported Samsung was in talks with foundry clients to hike the contract chipmaking prices.

While Samsung officials said they could not comment on the matter linked to its clients, the move is in line with the industry-wide trend to charge more for chip manufacturing amid high inflation and rising raw material costs.

Russia's ongoing war in Ukraine has stoked fears about the supply and prices of raw materials. Both countries are major exporters of important materials, such as neon gas and palladium, used in making chips.

Samsung has already hinted at raising foundry costs sooner or later.

"We will continue to grow the foundry business through capacity expansion at Pyeongtaek S5 line and a realistic pricing policy to secure resources for future investment" Suh Byung-hoon, vice president and head of the investor relations division at Samsung, said during an earnings call in July.

The need to charge clients more to build chips was mentioned again during last month's conference call.

"Setting product prices at a realistic level is necessary for continuous investment," Samsung said.

TSMC is also widely expected to raise prices by 5-9 percent in 2023.

jaeyeon.woo@yna.co.kr
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