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Samsung looks for more buyers of its chips as Apple moves away

As Apple gradually weans itself from Samsung chips, the South Korean tech giant is now seeking to offer its products to emerging markets as well as to the steadily expanding Chinese mobile makers, said Samsung’s chip business chief.

Apple Inc is Samsung’s biggest buyer of chips and together, both companies take almost 50 percent of the global smartphone market . Samsung’s chip division supplies components to Apple devices like the iPads and iPhones. Samsung mobiles are also using the company’s chips in its own range of phones and tablets.

However, with the ongoing patent wars between the two companies, Apple finds itself looking for a different source of chips for its devices as it now tries to ramp down its purchase of Samsung display screens and memory chips. The move concerns Samsung as it can potentially lower its processor revenue in the near future.

Stephen Woo, head of Samsung’s System LSI business, a division that supplies processors to the company rival Apple, said: “As there are just two smartphone makers that are doing really well, chipmakers supplying them have grown in tandem. So we plan to bolster our relationship with those key customers.”

Being the main supplier for Apple devices make Samsung’s system chips business ahead of the competition.

Samsung’s AP chip sales this year should be good, said Goldman Sachs forecast, as it estimates the South Korean company will be making 9.3 trillion won or $8.8 billion, translating to about 80 percent of the total spending of Apple on processors, flat screens, and memory chips.

However, Goldman Sachs also think the current figure will tumble next year to 2.5 trillion as Apple trims down its purchase of Samsung chips, a gradual move that would culminate by 2017, Goldman Sachs said.

Woo, in a keynote speech during the annual Consumer Electronics Show in las Vegas on Wednesday, said that Samsung needs to look for more customers, especially the Chinese cell phone makers.

Meizu, one of the local Chinese phone vendor, is currently using the Exynos quad-core chip of Samsung for its MX mobile. Lenovo’s K860 LePhone is also running the Exynos.

The chip business of Samsung is primarily dependent on both Apple and Samsung’s own need for chips for its Galaxy series. In contrast, Samsung’s rivals in the chip business like Qualcomm Inc, Nvidia, and Texas Instruments have more customers that include cell phone makers Nokia, LG Electronics, HTC Corp, Google’s Motorola, and Huawei Technologies.

“We see emerging players who have potential to grow in smartphones and we will continue to make efforts to supply them with our chips,” Woo added.

The recent shift from personal computing to mobile use has been a great opportunity for the semiconductor market to thrive. The ever growing sales of chips needed for tablets and smartphones has helped the industry regain its footing following declining sales from personal computers. Research company Gartner forecasts that the mobile processor market will further grow 30 percent this year, translating to $13.5 billion, and will eventually reach $16.5 billion the following year.

As a move to enhance its chip capability, the South Korean firm acquired the UK-based CSR Pic’s technology for mobile connectivity and location for a price of $310 million last year. Samsung is now looking at how it can further improve its current modem chip technology, focusing on the baseband chip solution that lets wireless gadgets radio communications to work.

“Baseband is a very important segment, but we don’t have it. Given its importance, we’re reviewing various options,” said Woo said, hinting at a possible another potential way to produce innovative products.

Right now, Qualcomm leads the pack as the biggest chip company that owns 50 percent of the market. It is followed by Mediatek, Texas Instruments, and Broadcom.

Makers of chips are trying to look for ways to create a single chip that would incorporate modem chip, AP, connectivity chips for Wi-Fi, NFC communications functions, and Bluetooth. This is a popular package for low-end smartphones because it allows makers to put all the needed components in compact devices.

Nut Woo also indicated that Samsung is not shifting into a single chip option. He said that it will continue to use the AP chips popular among high-end phones because it lets hardware makers determine their hardware offerings when using various chip combinations.

The booming smartphone market was a great opportunity for Samsung’s chip business because it is the biggest maker of ARM-based chips like its own Exynos and Apple chips. Intel  Corp, the world’s top chipmaker, is currently struggling to grab a sizeable mobile market share dominated by ARM Holdings. Intel’s market share in mobile gadgets is only 1 percent, with UK chip maker ARM getting the rest.

Woo also clearly indicated that Samsung is cracking the desktop and server processor market, which Intel still dominates, though these markets are also under threat from the vaunted ARM-based chips featuring compact design and low power consumption.

“For the time being, our focus will pretty much be on enhancing our AP offering, especially for high-end mobile devices,” Woo added.

source: reuters

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