Qualcomm Snapdragon Chips Snapped Up
April 20, 2012

Qualcomm Snapdragon Chips Snapped Up

Peter Suciu for Redorbit.com

Someone has been snapping up chips, but this wasn't a raid on the cookie jar that should tech analysts. Qualcomm, the world's largest mobile phone chipmaker, this week announced that it cannot meet the demand of some of its processors, including its popular Snapdragon processor.

This could impact Android and Windows based handset makers. Qualcomm reportedly underestimated demands for the S4 Snapdragon chipset. The company does not produce its own chips, but sources them from contract manufacturers including TSMC (Taiwan Semiconductor Manufacturing Co.).

The Taiwanese company reported trouble ramping up its production of the 28-mn process, and the two companies are looking at alternate contract manufacturers to increase the supply.

These chips are used in a number of smartphones and tablets, including those announced by HTC and Lenovo earlier this year.

Currently more than 370 Snapdragon devices are on the market, while more than 400 are being developed, of which 150 designs rely on the S4 chip. The S4 is based on ARM architecture and it includes a 3G.4G radio and graphics core. Microsoft has been working to develop windows-based ARM devices with Qualcomm, Nvidia and Texas Instruments.

Company CEO Steve Mollenkopf confirmed the problem, but noted that solutions were being considered.

“In any constrained environment, people look for any alternative they can in order to solve the problem,” said Mollenkopf in a call to financial news site Seeking Alpha.

The shortage of the S4 chips may impact the prices of smartphones and tablets, but it will likely further affect Qualcomm´s launch of Windows on ARM devices. This may result in a shift of chips intended for phones towards tablets, or vice versa based on consumer demand.

It is also been seen as good news, as it suggests a greater than expected demand for devices using the chips. This could however lead to a slowdown in the rollout of more advanced LTE handsets.

Past supply issues have shown to have wide reaching affects.

Last year's March 11 earthquake in Japan resulted in a supply issue for chips deemed for use in the auto industry. The production of the car's smallest element - the microchip - practically brought the Japanese auto industry to its knees last spring. Suppliers of the chips had had low inventory levels prior to the earthquake, which further slowed production.

Earlier this year Nvidia scaled-back sales expectations for its Tegra-3 processors, which are also used in mobile devices. This was in reaction to a hard drive shortage, which was caused by flooding in Thailand last year.

The shortage of S4 chips has already forced some Qualcomm licensees to look for alternatives, and this could include the Nvidia Tegra 3, which has since seen an increase in production, as well as the OMAP chips from Texas Instruments. Qualcomm expects supply to be constrained throughout the rest of 2012, and return to normal levels only next year.