Qualcomm Expects Persistent 28nm Chip Supply Constraints to Limit Its Revenue Opportunities

Qualcomm Confirms Four Partners Contracted to Manufacture 28nm Chips

by Anton Shilov
07/18/2012 | 10:20 PM

Qualcomm on Wednesday again complained about limited supply of chips produced using 28nm fabrication process and said that such constraints would affect its revenue opportunities this fiscal year, which ends in late September, 2012. The company also indirectly confirmed that it had contracted four leading-edge foundries to make application processors, system-on-chips and modems at 28nm nodes.

 

"We are continuing to see strong demand for our new Snapdragon S4, and other 28nm chipsets, and that demand continues to exceed our available supply. We will continue to ramp capacity in the upcoming quarters consistent with our prior expectation. However, the constraints on 28nm supply are continuing to limit our potential revenue upside this fiscal year," said Paul Jacobs, chief executive officer of Qualcomm, during quarterly conference call with financial analysts.

Qualcomm Snapdragon S4 family of application processors and system-on-chips has over 175 design wins to date. Just one model - Snapdragon S4 MSM8960 (two Krait ARM cores, Adreno 225 graphics) - powers over 15 popular devices, such as Samsung Galaxy S III and HTC One S. Furthermore, Qualcomm has over 90 design wins for its 3G/4G/LTE modem MDM9015-series that are also made using 28nm fabrication process. All-in-all, Qualcomm's demands for chips produced at leading-edge nodes are very high.

The world's leading designer of chips for mobile devices has confirmed it has four sources to manufacture chips using 28nm process technology, which clearly points to Taiwan Semiconductor Manufacturing Co., United Microelectronics Corp., Samsung Semiconductor and Globalfoundries. Thanks to four leading contract manufacturers, Qualcomm hopes to meet demand for its latest chips by the end of this calendar year. At the same time, the company admits that taping-out processors at different foundries is an expensive process that increases costs of chips for Qualcomm.

"We continue to be supplies constrained on our 28nm products, but are ramping supply with multiple foundries in the September quarter and again into the December quarter consistent with our prior expectations. We currently project that we will be able to closely match supply with demand as we exit the calendar year. The reduced demand profile and ongoing 28nm supply constraints, as well as our increased efforts to bring additional 28nm capacity online and continue investments in our QRD and mobile computing programs in advance of the opportunities ahead are driving lower operating margins in the fiscal third and fourth quarters versus historical norms" said Steven Mollenkopf, chief operating officer of Qualcomm.

For the third quarter of fiscal 2012, which ended on June 24, 2012, Qualcomm reported $4.63 billion in revenue, up 28% year-over-year and down 6% sequentially. Net income of the company was $1.21 billion, up 17% annually and down 46% quarter-over-quarter.