Samsung Electronics Co. is seeking to switch the application processors (APs) of some Galaxy S models to its Exynos chipsets next year to lower its reliance on Qualcomm Inc.’s Snapdragon chips due to growing AP purchasing costs.
According to the company's half-year report on Tuesday, the South Korean smartphone giant spent 5.7 trillion won ($4.3 billion) in mobile AP purchases in the first six months of this year, accounting for the largest 17.7% share in its Mobile eXperience (MX) division’s entire raw material and part costs in the period.
An AP plays the role of the human brain in mobile information technology devices like smartphones. It is a system-on-chip (SOCs) with a central processing unit (CPU), a graphics processing unit (GPU), modem chips and other chips in one place together.
The company attributed a 30% on-year jump in AP prices in the first half of this year to its higher AP spending. The AP’s unit price climbed due to the growing demand for AI chips and a rise in foundry costs.
WEAKER BARGAINING POWER
Samsung MX division’s AP expense steadily increased to 11.4 trillion won in 2022 from 7.6 trillion won in 2021 but the rise accelerated this year after the Korean chip giant used Qualcomm’s chipsets in all models of its latest premium Galaxy S23 and foldable Z series after ditching its in-house Exynos chips.
Samsung Galaxy S23 series (Courtesy of Samsung Electronics) Some industry observers noted that Samsung has lost its bargaining power as it entirely relies on the American chip maker’s chipsets for its premium phones.
The Korean smartphone major used both Qualcomm Snapdragon and its in-house Exynos chips in the predecessors of the Galaxy S23 series. The old Galaxy phones sold in Korea, the US and China were equipped with Snapdragon chips whereas consumers in Europe and South America used Exynos-based Galaxy phones.
Samsung Electronics could leverage its two-variant strategy during its price negotiations with Qualcomm.
Earlier Galaxy S model users complained about the poor performance of their phones fitted with Exynos chips, jointly designed by American chip fabless Advanced Micro Devices Inc. (AMD) and Samsung System LSI, Samsung Electronics’ chip designing arm. They were produced by Samsung Foundry.
Qualcomm said its latest processor chip’s graphics processing unit (GPU) can handle graphics 41% faster than previous models while allowing users to enjoy high-end games without interruption.
Samsung Tech Day 2022 (Courtesy of Samsung Electronics) IMPROVEMENT IN EXYNOS PERFORMANCE
The growing cost burden has, however, led Samsung Electronics to seek to return to Exynos chips for the next Galaxy S24 series and release two variants using both the in-house and Qualcomm chips.
It is said to be considering Qualcomm’s Snapdragon chips in Galaxy S24 Plus and Ultra models and Exynos chips in the others.
Samsung Electronics said whether the MX division would use Exynos in its premium phone series depends on consumers’ demand and the performance of the Exynos chip.
