Qualcomm, the largest supplier of application processors and system-on-chip devices for smartphones, on Wednesday said that demand for its latest Snapdragon S4 application processors and made using 28nm technology exceeds TSMC's ability to manufacture the chips using the latest process tech. As a result, Qualcomm will outsource production of 28nm devices to other foundries.

"We are seeing very strong demand for our industry-leading Snapdragon 4/MSM8960 and other 28nm products. Although the manufacturing yields are progressing per expectations, there is a shortage of 28nm capacity. We are working closely with our partners to bring additional capacity online. However, the constraints on 28nm supply are limiting our potential revenue upside this fiscal year. [...] We are increasing our operating expenses to facilitate additional 28-nanometer supply," said Paul Jacobs, chief executive officer and chairman of Qualcomm, during the latest conference call with financial analysts.

At Mobile World Congress in Barcelona, Spain, several leading suppliers of smartphones and consumer electronics, including Asustek Computer, HTC, Huawei, Lenovo and Panasonic, unveiled their first handsets based on dual-core Snapdragon S4 system-on-chip devices. Qualcomm itself demonstrated quad-core Snapdragon S4 APQ8064 with four Krait (similar to ARM Cortex-A15) general purpose cores and Adreno 320 graphics core and promised its availability in the second half of the year.

Qualcomm confirmed that it is working with its other partners among contract makers of semiconductors to manufacture the Snapdragon S4 and potentially S5 products at their capacities. Since that required significant redesign of chips as well as creation of new masks, validation and a lot of other actions, the company will have to spend additional OpEx [operating expenditure] money to enable second or third sources for 28nm products.

"One of the things that you do when you look in to bring on additional sources, you tend to have more unplanned tapeouts. Essentially, you are taping out at a faster rate in order to move the ramp faster than you might have had to do it earlier. That is what we are doing today," said Steven Mollenkopf, chief operating officer and president of Qualcomm.

Qualcomm expects situation with Spapdragon 4/28nm chip supply to improve moderately in Q2 of its fiscal 2012, which ends in late June, as Taiwan Semiconductor Manufacturing Technology will slowly increase output of 28nm chips. The company hopes that as new manufacturing sources come into play in its Q3 FY2012 (which ends in late September), the situation will get tangibly better.

Although Qualcomm never officially mentioned the names of additional sources for 28nm capacity, it is believed that the company is working with Samsung Electronics and United Microelectronics Corp.

Tags: Qualcomm, TSMC, Snapdragon, 28nm, Semiconductor, Adreno, Krait