Qualcomm officially chose TSMC to mass-produce its upcoming Snapdragon 8 Elite Gen 6 and Gen 6 Pro processors. The San Diego tech giant will exclusively use TSMC’s advanced 2nm process to build these new mobile chips. This final decision marks yet another year where Qualcomm and Samsung failed to reach a manufacturing agreement. The two massive companies simply could not close the deal, leaving TSMC to take all the profitable orders for the next generation of smartphones.
Samsung is currently facing major technical problems at its fabrication plants. A recent business report shows that the South Korean company struggles with severe stability issues on its new 2nm GAA node. Factory engineers simply cannot get the production yield past the 60 percent mark. To put that into perspective, if the factory produces 100 computer chips, 40 of them fail quality control and go straight into the trash. Those high failure rates create a massive rift between the two companies and prevent them from forming a reliable business relationship.
Sticking exclusively with TSMC creates a painful financial reality for Qualcomm. TSMC guarantees timely shipments and top-tier quality, but the Taiwanese company charges a massive premium for its cutting-edge services. Industry insiders estimate that a single 2nm silicon wafer costs well over $30,000 to produce. Qualcomm originally wanted to split its massive orders between TSMC and Samsung to force the two rival factories to compete on price. This smart dual-sourcing strategy would easily save Qualcomm over $5 million a month when shipping out 1 million chips to global smartphone makers.
Unfortunately, changing manufacturing partners at this late stage is completely impossible. Chip designers finalize their complex blueprints many months before the actual physical manufacturing begins. Qualcomm has already locked in the designs and sent the final files directly to TSMC to ensure a timely launch. Moving production to Samsung now would disrupt the entire smartphone market and disrupt release schedules for major phone brands worldwide. MediaTek and Qualcomm both considered shifting some chip orders to Samsung earlier this year, but the poor factory yields made the switch way too risky.
Despite these setbacks, Samsung still has a small window of time to turn things around. The company has a few important months left to scale its operations and push past that frustrating 60 percent yield barrier. This task sounds incredibly difficult, but TSMC actually experienced the same 60 percent success rate during its own early trial runs for the 2nm process. If TSMC solved the manufacturing puzzle, Samsung engineers should eventually possess the knowledge and skills to fix their own assembly lines.
The South Korean giant plans to test its factory improvements very soon. Samsung will use its second-generation 2nm node to build its own Exynos 2700 processor later this year. If the new Exynos launch goes smoothly and the factory proves it can deliver reliable chips at a high volume, Samsung can finally approach Qualcomm again. Delivering a flawless production run could convince Qualcomm to sign a massive dual-sourcing contract next year, saving both companies an absolute fortune in the long run.
