Qualcomm Inc (QCOM)

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Samsung May Produce Qualcomm¡¯s CDMA Chips

By Cho Jin-seo
Staff Reporter

http://times.hankooki.com/lpage/biz/200511/kt2005111517595111870.htm

Samsung Electronics is expected to sign a contract with Qualcomm soon to produce CDMA modem chips used in cellular phones for the U.S. wireless technology company.

The two firms are in the final stage of negotiations and will make an announcement as early as this month, local newspapers reported, citing industry sources.

Responding to the media reports, Samsung said that it is negotiating with major non-memory chip designers to manufacture chips on behalf of the companies. But Samsung declined to identify the companies.

``What we can say now is that we will start the `foundry¡¯ business soon to produce high-end non-memory chips,¡¯¡¯ said the company¡¯s spokesperson Hong Kyung-sun.

Foundry refers to the making of semiconductor chips tailored to the orders of companies with no fabrication plants. Samsung has said it will expand non-memory operations to reduce its dependence on the relatively volatile memory businesses.

In September, Samsung Electronics, the top maker of dynamic random access memory (DRAM) and flash memory chips, pledged to start the foundry business next year on their newly-built manufacturing line in Kihung, Kyonggi Province.

CDMA, or code-division multiple access technology, is a telecommunication standard developed by Qualcomm. Around one-third of mobile phones are using the platform in countries such as South Korea, the United States, Canada, Japan and some parts of China.

Qualcomm has a de facto monopoly in the CDMA modem chip market. The San Diego-based firm has been outsourcing production of their chips to foundry firms such as Taiwan Semiconductor Manufacturing Co (TSMC).

The partnership between Samsung and Qualcomm is likely to benefit both companies as almost half of the CDMA phones are being assembled in South Korea, at firms such as LG Electronics, Samsung Electronics and Pantech. The Korean mobile phone makers have been paying enormous amounts in royalties to Qualcomm every year.

About 150 million CDMA phones are expected to be sold this year, and Qualcomm estimates the market will continue to grow next year by about 30 percent.



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11-15-2005 18:02