Samsung Electronics' newly unveiled foldable phones Galaxy Fold5/Flip5, as well as Galaxy Tab S9 series are all equipped with the Qualcomm's "Snapdragon 8 Gen2 for Galaxy" APs, which have been customized for the Korean tech giant's Galaxy devices. This has sparked market concerns about the resulting advantages and disadvantages for both parties, as well as possible motives behind the collaboration.
It's worth noting that the collaboration between Samsung and Qualcomm began with the launch of the Galaxy S23 series in early 2023, marking the US chipmaker's first instance of supplying dedicated application processors (APs) for a specific company. However, Qualcomm and Samsung exist as both partners and competitors, and their deepened collaboration presents a mixture of benefits and potential hidden motives.
According to a report by the Korean media The Elec, the Galaxy's proprietary Snapdragon 8 Gen 2 APs have both pros and cons for Qualcomm and Samsung. On the whole, Samsung's exclusive Snapdragon 8 Gen 2 for Galaxy not only enhances the competitive edge of its new products, but also buys time for its Exynos processors to be resurrected.
For Qualcomm, providing Samsung with exclusive APs may bring it potential pressure from other mobile device makers raising similar requests. However, solidifying Samsung as a major client could contribute to an increase in Qualcomm's market share for APs. Conversely, if all of Samsung's new flagship models exclusively adopt Qualcomm's mobile APs, it could negatively impact Samsung's own AP market share performance.
According to the data recently released by Counterpoint Research, MediaTek led the global mobile AP market with a 32% share in the first quarter of 2023, followed by Qualcomm with 28%, Apple 26%, and Samsung 4%. Samsung's market share represented a new low since the fourth quarter of 2021, potentially attributable to the exclusive use of Qualcomm processors in the entire Galaxy S23 series.
Currently, Qualcomm has its APs manufactured by TSMC and Samsung, and is believed the largest customer of Samsung's foundry business unit. By strategically maneuvering between TSMC and Samsung through order placements, Qualcomm aims to minimize AP production costs to the greatest extent possible.
Moreover, for Qualcomm, Samsung's Mobile eXperience (MX) division stands as a significant client, with its foldable smartphones and the Galaxy S23 series all adopting Qualcomm APs. This trend extends beyond Samsung, as most other flagship Android devices also incorporate Qualcomm's AP products. Since Qualcomm continues to reinforce its dominant position in the mobile AP market, the bargaining power that Android smartphone vendors have in price negotiations with the company is diminishing.
Mobile AP constitutes the highest proportion of production costs for smartphones, and therefore Samsung's exclusive use of Qualcomm APs might pose significant cost pressures, prompting the company to consider plans to break away from this situation. There are rumors that the System LSI business unit under Samsung's DS (Device Solutions) division is collaborating with its MX division and AMD to jointly develop Exynos processors for smartphones, and such processors are likely to be used in premium flagship devices as early as 2024. If these rumors hold true, it could disrupt Qualcomm's production and sales strategies.
With the global AP market competition intensifying, MediaTek is strengthening its high-end AP deployment strategy, seeking to provide Android flagship smartphones optional APs beyond Qualcomm's offerings. When it comes to the current Android flagship smartphone landscape, Samsung maintains a strong leading position, given that LG Electronics has already exited the market and Sony's sales have been lackluster, while Chinese brands like Xiaomi, Oppo, and Vivo have shown lower sales performances than expected. This will likely further solidify Qualcomm's dependence on Samsung as a major client.
Article translated by Willis Ke
