Samsung seen dropping Qualcomm chip from its next Galaxy smartphone

January 21, 2015, 9:33 AM UTC

Samsung Electronics Co. (SSNLF) is set to drop Qualcomm Inc’s (QCOM) chips from its next Galaxy smartphone, in what may be a damaging loss of business from one of San Diego company’s biggest clients.

Bloomberg reported Wednesday that Qualcomm’s Snapdragon chip, also known as the 810, had overheated during testing of Samsung’s new Galaxy S, and that the Korean company had consequently decided to use its own chips instead. The phone is due to be launched as early as March.

Qualcomm is the world’s biggest maker of chips used in smartphones, and the Snapdragon 810 has already been adopted by other big phone makers such as Xiaomi and LG. Samsung accounts for some 12% of Qualcomm’s $18.7 billion in chip sales, according to Bloomberg.

But neither of those has the fall-back of an in-house chip, and Samsung, whose profit fell for the first time in three years in 2014 due to competition from Xiaomi and others in the smartphone market, has said it will focus more on its component business to restore profitability in the next few years. In particular, it is pouring money into a huge new semiconductor facility, positioning itself for the expected surge in the number of connectable devices worldwide as the ‘Internet of Things’ becomes a reality.

Samsung expects that all of its products, from TVs to vacuum cleaners, will be connectable to the internet in the medium term.

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