Qualcomm, Inc. (NASDAQ:QCOM) Could Reclaim Lost Samsung Sockets

Image credit: Coolcaesar at en.wikipedia

Qualcomm, Inc. (NASDAQ:QCOM) could return to supplying processors for Samsung Electronics Co Ltd (KRX:005935)(OTCMKTS:SSNLF)’s future smartphones. However, it is possible that Qualcomm’s re-exposure to Samsung could be morelimited than in the previously case – capturing only a few sockets. Winning back Samsung would be an important lift for Qualcomm that is already facing looming drought as smartphone market matures.

Qualcomm, Inc. (NASDAQ:QCOM) isn’t saying a word about the chances of it recapturing some Samsung sockets. However, media reports from South Korea indicate that Samsung could limited the use of its own processors in next year’s high-end smartphones in favor of Qualcomm chips.

Only for U.S./China markets
If the speculations are true, Qualcomm, Inc. (NASDAQ:QCOM)’s Snapdragon 820 processors could sit inside some premium smartphones coming out of Samsung’s factories next year. However, Samsung will only yield ground for Qualcomm in smartphone targeted for sale in the U.S. and China. For the rest of the world, Samsung intends to keep chip supplies in-house, according to people familiar with the company’s supply chain plans.

Pain of losing Samsung
Samsung abandoned Qualcomm in the cold when it exclusively used its own processors in this year’s Galaxy S6 and Galaxy S6 Edge. Losing Samsung business has been a source of frustration for Qualcomm, with worried investors sending the stock down nearly 20% YTD.

Qualcomm’s loss of Samsung business has been compounded by a smartphone market that is almost hitting saturation, thus limiting growth.

Qualcomm’s problems run deep
Although reclaiming Samsung sockets is important for Qualcomm, Inc. (NASDAQ:QCOM), the company’s problems are likely to persist. Part of the reason is that Samsung’s smartphone market share in China has been seriously eroded. Apple Inc. (NASDAQ:AAPL) and local Chinese firms such as Huawei and Xiaomi have upped their game, taking share from Samsung.

The other reason is that the major challenge for Qualcomm, Inc. (NASDAQ:QCOM) is how to unlock new growth because smartphone market is losing its luster. The company’s efforts in IoT and other markets outside smartphones are likely to take years before they begin to pay dividends.

Sources: forbes.com