Samsung wins Qualcomm 5-nanometer modem chip contract

Samsung Electronics’ semiconductor manufacturing division has won a contract to make new Qualcomm 5G chips using its most advanced chip-making technology.

Samsung will fabricate at least some of Qualcomm’s X60 modem chips, which will connect devices such as smart phones to 5G wireless data networks.

According to sources, the X60 will be made on Samsung’s 5-nanometer process, which makes the chips smaller and more power-efficient than previous generations.

One of the sources said TSMC also expects to fabricate 5-nanometer modems for Qualcomm.

Samsung and Qualcomm declined to comment, and TSMC did not immediately respond to a request for comment.

Samsung is the world’s second-biggest chip manufacturer through its foundry division, self-supplying many of its own mobile phone parts.

It also fabricate chips for outside customers such as International Business Machines and Nvidia, among others.

But much of Samsung’s semiconductor revenue historically has come from memory chips, whose prices can swing wildly as supply and demand fluctuate.

In an attempt to cut its reliance on that volatile market, Samsung announced a plan last year to invest $116 billion in non-memory chips through 2030.

The Qualcomm deal shows progress in winning customers to that effort.

Even if Samsung has won only part of the orders, Qualcomm represents a flagship customer for Samsung’s 5-nanometer manufacturing technology.

Samsung plans to ramp up that technology this year in an attempt to regain market share against TSMC, which is also starting mass production of 5-nanometer chips this year.

The Qualcomm win could boost Samsung’s foundry business because the X60 modem likely used in many mobile devices as they shift to 5G.

In the fourth quarter of 2019, Samsung had 17.8% market share versus TSMC’s 52.7%, according to data from TrendForce.

In a separate announcement, Qualcomm said on Tuesday it would begin sending samples of the X60 chips to customers in the first quarter of this year.

Qualcomm did not disclose who would manufacture the chips, and Reuters could not learn whether the first batches of chips would be made by Samsung or TSMC.

The Taiwanese company was faster to ramp up high-volume production of chips using the previous 7-nanometer manufacturing process, winning customers such as Apple Inc (AAPL.O).

Qualcomm designs its own chips but works with outside companies to manufacture them.

It has used manufacturing services from both Samsung and TSMC in the past.