Samsung Electronics Co Ltd (005930) Plans Own Exynos Processors for Galaxy S5 Smartphone, Huge Blow for QUALCOMM, Inc. (QCOM)

samsung Electronics (005930)

One of the largest smartphone-maker of the world, Samsung Electronics Co Ltd (KRX:005930), is likely to use its own chips in its flagship Galaxy S5 smartphone, according to unidentified sources. This could be devastating news for QUALCOMM, Inc. (NASDAQ:QCOM) as Samsung was one of the top customers of the chipmaker.

The smartphone maker is likely to launch Galaxy S5 in March this year and with slipping smartphone market share, the company wouldn’t risk using QUALCOMM, Inc. (NASDAQ:QCOM) chips with overheating issues. The latest chip from Qualcomm, Snapdragon 810 chip has faced overheating issues in test results and considering the nearing launch of Galaxy S5, Samsung Electronics Co Ltd (KRX:005930) would rather use its Exynos processors for these devices.

The smartphone company has used these chips earlier in flagship models, although Qualcomm provided majority of the chips. The move to use its own chips perfectly aligns with Samsung’s strategy to boost its chip business and offer support for the ailing industry.

samsung Electronics (005930)

Greg Roh, analyst for HMC Investment, said,

“Samsung will likely show off the new Galaxy S phone in about a month and a half, so one would have to assume that the chips have been tested a fair amount in order for them to be used.”

On the other hand, many analyst groups have come forward supporting QUALCOMM, Inc. (NASDAQ:QCOM) and rejecting the news entirely. Cowen & Co. is one of the primary supporters of the chipmaker and it said that it is quite unlikely for Samsung Electronics Co Ltd (KRX:005930) to make a switch so promptly.

The analysts at Cowen proposed a scenario where Samsung may use its chips for the domestic launch of Galaxy S5 and delay the international launch of the flagship device. Credit Suisse Group AG (ADR) (NYSE:CS) is another analyst supporting Qualcomm in the matter with a bullish trading overview.

This article has been written by Prakash Pandey.

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