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Qualcomm may consider building its own fab

by Tarinder Sandhu on 28 June 2012, 16:08

Tags: Qualcomm (NASDAQ:QCOM)

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As reported on earlier this month, Qualcomm CEO Paul Jacobs, during a roundtable discussion at Uplinq 2012, confirmed that his company is still struggling to provide enough Snapdragon chips for its customers.

Following the fabless model, Qualcomm designs the Snapdragon architecture and then contracts production to established manufacturing foundries that make the actual chips that goes inside smartphones and tablets. Helping ensure that Snapdragon silicon is the best-performing and most power-efficient available, the chips are produced on a leading-edge 28nm process by the Taiwan Semiconductor Manufacturing Company (TSMC).

Qualcomm isn't the only company having difficulties in obtaining sufficient number of 28nm chips from TSMC, as NVIDIA has also been blighted by supply problems. Addressing the situation, TSMC boss Morris Chang commented that 28nm supply issues would likely not be resolved until next year.

Qualcomm's Jacobs said that while there "were early questions about yield issues, it wasn't yield but a lack of capacity" that hampered the supply of Snapdragon chips. He went on to concede that Qualcomm had "left an opportunity for the competition to take some share" while his firm looked at alternative foundry companies to ease supply problems. Samsung, UMC and GLOBALFOUNDRIES have been touted as likely suppliers of additional Snapdragon chips.

Speaking about whether it made sense for Qualcomm to invest some of its significant cash reserves into building a fabrication plant, Jacobs said that, while possible, "right now, our inclination is to retain the (fabless) model we have." However, speaking about the future, Jacobs didn't rule out the possibility of Qualcomm fab ownership by saying that "today it's not that we're writing big checks to do that (own or part-own a fab), but if that's what it took, in the future, I'm willing to take note of that... it may be possible."

Qualcomm is clearly reluctant to take on the multi-billion-dollar challenges associated with running and maintaining its own fabrication plant - the fabless model has historically worked very well - but chip-supply problems negatively impact the bottom line and leave opportunities for competitors such as NVIDIA to shoehorn Tegra 3 technology into desirable upcoming products such as the Google Nexus 7 tablet.