Samsung to use its own microchips in Galaxy S

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Samsung to use its own microchips in Galaxy S

Samsung Electronics will use its own microprocessors in the next version of the Galaxy S smartphone, dropping its use of a Qualcomm chip that overheated during the Korean company’s testing, people with direct knowledge of the matter said.

Samsung, the world’s largest smartphone maker, tested a new version of Qualcomm’s Snapdragon chip, known as the 810, and decided not to use it, the people said, asking not to be identified because the issue hasn’t been discussed publicly. Qualcomm shares fell on a day when the Philadelphia Stock Exchange Semiconductor Index gained.

The decision is a blow to Qualcomm, the world’s largest maker of semiconductors used in phones, which has been supplying Samsung with chips that run the company’s best-selling handsets. The South Korean company, the world’s second-largest chipmaker, is trying to become more self-reliant and boost its own processor-making division as it spends $15 billion on a new factory outside Seoul.

The new Galaxy S will be equipped with Samsung’s most advanced chips, one of the people said. A spokesman for Qualcomm declined to comment. Samsung declined to comment in an email.

“Samsung may release the next Galaxy S as early as March, and it can’t dare to take the risk to use any of the chips in question for its most important model,” said Song Myung-sup, a Seoul-based analyst at HI Investment & Securities.

Application processors are the main semiconductor component in smartphones, running everything from the operating system to games and the camera. Qualcomm is also the biggest provider of modems that convert the cellular signal into voice and data.

Qualcomm’s Snapdragon processors, combined with its cellular baseband chips, have dominated the market for smartphones and made the San Diego-based company one of the biggest beneficiaries of the explosion of mobile Internet use.

In its last fiscal year, sales at its chip division were $18.7 billion, a gain of 12 percent from the year earlier. Samsung is Qualcomm’s second-largest customer, providing about 12 percent of its sales, according to Bloomberg supply chain analysis.

“This is huge news,” Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners in Singapore, said in an email.

Qualcomm said in April its latest 808 and 810 processors will start appearing in phones at the beginning of this year and will feature more advanced computing, graphics and radio capabilities. Xiaomi and LG Electronics are among the manufacturers preparing to release models with the Snapdragon 810.

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