Qualcomm Chip Shortage Eases on Samsung, TSMC Output

Qualcomm Inc. (QCOM), the largest seller of mobile-phone semiconductors, said a shortage of its advanced smartphone processors is almost resolved as manufacturing partners including Samsung Electronics Co. (005930) boosted production.

“It’s virtually behind us,” Chief Operating Officer Steven Mollenkopf said in an interview in Hong Kong today. Three major partners -- Samsung, Globalfoundries Inc. and Taiwan Semiconductor Manufacturing Co. (2330) -- are all “ramping up” output, he said.

Qualcomm said earlier this year that supplier TSMC couldn’t keep up with orders for smartphone chips offering the fastest connections to the Internet. The San Diego-based company increased spending and enlisted other vendors to meet demand from Apple Inc. (AAPL), Samsung and HTC Corp. (2498) as they released new products to win customers in the estimated $219 billion smartphone industry.

“We did have a situation where I don’t think our fab partners were quite ready for the fact we had some incredible demand,” Mollenkopf said. “We believe we’re going to be out of the supply situation by the end of this year.”

The shortage of smartphone chips with a circuitry measuring 28 nanometers had been a “big issue” until as recently as October, Mollenkopf said. One nanometer, equal to one billionth of a meter, measures the size of connections within a chip. A smaller number implies more advanced technology, allowing semiconductors to be smaller and more powerful.

Low-Power Displays

“It’s almost an arms race in smartphones,” he said.

Samsung plans to start mass producing its own brand of 28- nanometer processors for mobile devices by early next year, said Chris Chung, a Seoul-based spokesman for the company. He declined to comment on the foundry business with Qualcomm.

Qualcomm has capitalized on the popularity of devices that allow users to download games, play movies and surf the Internet. The company’s chip sales will probably grow 27 percent this year, making it the world’s third-largest chipmaker, industry researcher IHS ISuppli said Dec. 4.

“It’s been a pretty good year for us,” Mollenkopf said. He declined to say whether the IHS estimate is in line with the company’s own projections.

Apart from chips, Qualcomm is also betting on low-power display technologies that let screens stay lit constantly, Mollenkopf said. As part of the plan, the chipmaker agreed to a capital tie-up of as much as $121 million with Sharp Corp. (6753)

Sharp Deal

Sharp, the Osaka, Japan-based TV maker that warned last month about its ability to survive, will sell 30.12 million shares to Qualcomm this month for 4.94 billion yen. Sharp may sell another 4.94 billion yen of stock if certain conditions are met, it said in a statement yesterday.

“Obviously, they’ve had some difficult times,” Mollenkopf said. “We’ve had numerous times where we worked with people through good times and bad times on their side. We hope it’s going to be a very different picture moving forward for them.”

The companies plan to cooperate on developing displays using Sharp’s IGZO technology and Qualcomm’s Micro Electro Mechanical System, or MEMS, display technology, Sharp said.

“This technology probably fits a need that doesn’t exist today,” Mollenkopf said. “You are going to see things like displays that are on all the time. It’s not clear if you can get there with the existing, traditional display technologies.”

Qualcomm shares rose less than 1 percent to $63.63 in New York trading, leaving them up 16 percent this year.

To contact the reporter on this story: Jun Yang in Hong Kong at +815-2977-4628 or jyang180@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at +852-2977-2109 or mtighe4@bloomberg.net

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