Samsung seeks broader chip base as Apple cuts loose

Wed Jan 9, 2013 5:04pm EST
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By Miyoung Kim

LAS VEGAS (Reuters) - Samsung Electronics Co is looking to supply chips to more Chinese and other emerging smartphone makers, the head of its system chip business said, to counter any fall-off in demand from Apple Inc, which is weaning itself off Samsung chips used in its iPhones and iPads.

Samsung and its main U.S. rival, and biggest customer, together account for more than half the global smartphone market, and the South Korean group is the main supplier of mobile processors, or application processors (AP), powering both Apple devices and its own range of Galaxy phones and tablets.

But, as Apple looks to be less reliant on its rival for parts for its gadgets - it is already buying fewer Samsung memory chips and display screens as the two have gone to war over patents - concerns have grown that Samsung may see its processor revenues tumble.

"As there are just two smartphone makers that are doing really well, chipmakers supplying them have grown in tandem. So we plan to bolster our relationship with those key customers," Stephen Woo, president of Samsung's System LSI business, which makes processors for Apple products, said in an interview.

Supplying processors for Apple products has been the mainstay of Samsung's system chips business.

Goldman Sachs estimates Samsung's AP chip sales to Apple will rise to 9.3 trillion won ($8.8 billion) this year, or nearly 80 percent of Apple's spending on Samsung processing chips, memory chips and flat screens. But that could tumble to just 2.5 trillion won next year, as Apple will shift 30 percent of its AP business from Samsung and eventually 80 percent by 2017, according to Goldman.

"(We) should diversify our customer base and are making such efforts already, adding some Chinese customers," Woo told Reuters ahead of his first keynote speech at the annual Consumer Electronics Show in Las Vegas on Wednesday.

China's Meizu, one of the local smartphone newcomers, uses Samsung's Exynos quad-core chip for its MX smartphone, and Lenovo's K860 LePhone is also powered by Exynos.   Continued...

Stephen Woo, president of Device Solutions Business for Samsung Electronics, talks about the new Samsung Exynos 5 Octa processor during a keynote address at the Consumer Electronics Show (CES) in Las Vegas January 9, 2013. The processor is faster and uses less power than Samsung's previous models, Woo said. REUTERS/Steve Marcus (UNITED STATES - Tags: BUSINESS)