Report: Samsung to drop Qualcomm Snapdragon chip for Galaxy S6

Samsung Electronics will eschew a Qualcomm (NASDAQ:QCOM) chipset and use its own silicon for the next version of its flagship Galaxy S smartphone because the Qualcomm processor overheated during testing, according to a Bloomberg report.

The report, citing unnamed sources with direct knowledge of the matter, said Samsung tested a new version of Qualcomm's Snapdragon 810 chipset and then decided to use its own chips. In the past Samsung has used its in-house Exynos processor for certain variants of its products, including Galaxy S smartphones, but Samsung has typically used Qualcomm silicon for certain markets like the U.S. because of Qualcomm's ability to integrate LTE modems with its application processors.

Qualcomm and Samsung declined to comment, the report said.

If Qualcomm were to be cut out of the design for the next Galaxy S phone, it would represent  a significant blow, not only in terms of potential lost unit sales totaling in the millions but it would also be a knock on Qualcomm's reputation. Samsung has built itself into the world's leading smartphone maker while Qualcomm has become the world's top supplier of smartphone chipsets, especially for higher-end phones in Western markets. Indeed, in its last fiscal year, Qualcomm's sales at its chip division clocked in at $18.7 billion, up 12 percent from the year earlier.

Yet Samsung has been trying to cut costs in an effort to boost profit margins, and is also looking to develop more components in house. Samsung already has huge memory and chipset businesses and is investing $15 billion to build a new silicon factory outside of Seoul in South Korea.

At the same time, Samsung is counting on the next Galaxy S phone to be a bigger hit than the Galaxy S5, which fell below sales expectations. Samsung clearly has a great deal riding on the success of the next Galaxy S phone, rumored to be the Galaxy S6, as it looks to pare down the number of new smartphone models it will introduce in 2015 by as much as a third.

"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," HI Investment & Securities analyst Song Myung Sup told Bloomberg.

Qualcomm said in April its latest 808 and 810 processors would start appearing in phones at the beginning of this year--LG Electronics and Xiaomi are among the OEMs preparing to release models with the Snapdragon 810. Indeed, as The Verge notes, LG will soon release its Snapdragon 810-powered smartphone, the curved G Flex 2, which has shown no overheating issues. The Galaxy S6 is rumored to be Samsung's first phone with an all-metal back, which might have contributed to any overheating problems.

Meanwhile, Samsung's first smartphone running the open-source Tizen operating system, the Z1, received a chilly reception after it went on sale in India, according to Reuters. The weak reception indicates that Samsung will face an uphill battle gaining traction in a market with a great number of low-cost, high-quality Android phones.

"Samsung has been delaying the launch of this Tizen phone for a long time and when they finally did it, it turned out to be an under-powered phone," Mumbai-based filmmaker Samir Ahmed Sheikh told Reuters as he shopped for a phone for his wide. The phone's 3.15-megapixel primary camera and 300,000-pixel front camera are "like a phone from 2010," he said.

IDC analyst Karan Thakkar said that although the Z1's $92 price is cheaper it still faces a multitude of competitors. "It's not always about the cheapest, customers are looking for specs ... There are already a plethora of devices running on Android that Indian customers can choose from," he told Reuters.

In response, Samsung touted Z1's "exclusive benefits" including a simple interface, long battery life and faster page-loading speeds courtesy of Tizen.

For more:
- see this Bloomberg article
- see this The Verge article
- see this Reuters article

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