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Samsung to cut Qualcomm reliance

Samsung Electronics, the world’s largest smartphone maker, appears to be dramatically reducing its reliance on top U.S.-based telecommunications chipmaker Qualcomm, with the latter unlikely to secure a bigger contract when an existing deal expires later this year, industry sources said on Wednesday.

Samsung currently supplies Qualcomm with 5,000 logic chip wafers each month, which was only half of the 10,000 wafers that the U.S. company had hoped to receive. The wafers are an essential telecommunications component in smart devices.

When the two firms sign on for another year as early as next month, Qualcomm hopes to secure at least 20,000 to 30,000 wafers, but the sources appeared to be skeptical of the possibility.

“Samsung’s supply lines are already stretched due to having to supply its own mobile application, the Exynos Octa 5 processor, which is doing very well in the Samsung-made Galaxy S3 ad S4 smartphones, so the likelihood of the company supplying more for Qualcomm appears to be quite small,” said one source who spoke on the condition of anonymity.

Qualcomm Korea officials declined to comment.

As a foundry partner, Samsung currently supplies Qualcomm with the logic chips.

Some of Qualcomm’s top competitors include Texas Instruments and Nvidia, which are cited as potential customers for Samsung.

Price may also be a factor, industry watchers said, noting that Qualcomm may not have been able to meet Samsung’s demands on the chip costs.

Samsung’s ongoing rivalry with Apple is said to have possibly contributed to the eased dependence on the U.S. chipmaker as well, as Qualcomm boasts strong ties with Apple, as Apple has used Qualcomm’s LTE chips starting with its iPhone 4S, onto the latest iphone 5, sources said.

Qualcomm’s latest announcement on the development of a new chip -- the “RF360 Frond End Solution which enables a single platform to function all existing networks -- is fueling anticipation for even more robust ties.

Another bigger reason, however, explaining why Samsung was possibly “forced” to spurn Qualcomm is because Samsung is reportedly having trouble calculating its processor and memory chip demand, watchers said.

“Samsung has been having trouble calculating the demand, and this is having a toll on its suppliers, including companies like Qualcomm,” said one expert.

Samsung reportedly failed to forecast that Apple would be shipping such a reduced number of smartphones this year.

Figures from Strategy Analytics showed that compared to Samsung’s first quarter smartphone sales, which reached 63 million units worth $23.6 billion, Apple sold $22.9 billion worth to reflect a more than $7.7 billion decline from the previous quarter. Samsung’s sales rose $95.2 million from the fourth quarter. (jemmie@heraldcorp.com)