), the largest mobile chipset manufacturer in the world has
almost solved its chipset supply issue as two of its biggest
vendor has increased their productions. Resolving the chipset
supply shortage will bring to an end a major problem for
Qualcomm, as it struggles to meet with the rising demand of its
popular Snapdragon S4 processor.
Three of its major suppliers, Samsung Electronics Co.,
Globalfoundries Inc. and Taiwan Semiconductor Manufacturing
Company (TSMC) are all ramping up their production to meet the
growing demand of smartphone chips.
The popularity of Snapdragon S4 dual-core processors is always
on the rise as they are mainly used in high-end smartphones and
tablets. They also support LTE technology, better graphics, high
network speed and increased battery life, which make them more
popular among the top smartphone manufacturers.
In mid-June, Qualcomm announced that there will be a shortage
of S4 chipsets for the rest of 2012. In order to avoid the
crisis, the company opted for some alternative chipsets called
Fusion 2, which can be used in the mid-range smartphones and
tablets. The company also collaborated with a third party chipset
manufacturer, TSMC to accelerate the supply of chipsets.
However, TSMC failed to properly estimate the demand for chips
in 2012, thus resulting in lower production of processors.
Therefore, to mitigate the shortage of chips, Qualcomm not only
joined hands with
United Microelectronics Corp.
) but also selected Samsung Electronics Co. to further boost its
S4 processor supply.
According to research firm Gartner, tablet device sales are
expected to increase by nearly 98% to 119 million units by the
end of fiscal 2012. Solving the chipset issue will be a major
boost for Qualcomm to meet the soaring demand from
), HTC Corp. and Samsung Electronics Co.
Additionally, Qualcomm will be in a better position to compete
) Tegra 3 quad-core processors, which is a major competitor to
its 28 nanometer S4 processor.
We maintain our long-term Neutral recommendation for Qualcomm.
Currently, it has a Zacks #3 Rank, implying a short-term Hold
rating on the stock.
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