As Qualcomm attempts to reverse its ongoing slump with a ‘Strategic Realignment Plan’ involving cutting costs and possible shake-ups of its corporate structure, questions have been raised over whether the problems might be more fundamental to the industry.
Qualcomm’s business relies on selling chips to smartphone manufacturers, with Samsung traditionally being one of its biggest customers. Apple devices use Apple’s own chipset design, while Samsung takes up a huge 30 percent share of the Android market.
Unfortunately for Qualcomm, Samsung’s latest S6 model, which has been considerably more successful than the S5, uses its own chip, produced in-house by Samsung.
This not only means that Qualcomm is not sharing in the windfall from the new device, but may also have a new competitor in the smartphone chipset space.
"You can envisage a scenario where Samsung becomes a semiconductor provider," says Roberta Cozza, Research Director at Gartner.
"I don’t see why they shouldn’t (move into the chipset market) now that they have an investment there."
Samsung was the second biggest semiconductor vendor by worldwide revenue in 2014, according to figures from Gartner, with Intel in first place and Qualcomm in third. It is spending $15 billion on opening a new semiconductor factory in South Korea by 2017.
Samsung is not alone among smartphone manufacturers in weaning itself off the chipset providers. Huawei has been experimenting with its own line of processors to replace Qualcomm in higher-end devices, while second-largest Android vendor Lenovo, accounting for 7.7 percent of the Android market, generally relies on lower-end manufacturer MediaTek.
Meanwhile, Qualcomm’s biggest customer in China, Xiaomi, has started to use a local Chinese company, Leadcore, to manufacture chips. Next year it will use in-house design for its low-end devices, according to Gartner analyst Roger Sheng.
If Qualcomm is having a rough quarter, the same cannot be said for rival chip-maker ARM, which this week announced that it ended H1 2015 with Q2 revenue of £228.5 million, a year-on-year rise of 15 percent.
However, its reliance on the electronics giant was shown by a plummet in its stock price after Apple announced disappointing results.
All-in-all, Gartner figures suggest that it is a mixed future facing the chipmakers. Revenue is expected to reach $348 billion in 2015, up 2.2 percent from 2014, but down from the previous quarter’s forecast of 4 percent.
Gartner siad in a statement: "In the smartphone market, Apple’s iPhone is the bright spot for the market with strong unit growth and increasing average selling prices, driven by the strong performance of the iPhone 6 and iPhone 6 Plus.
"However, lacklustre performance in high-end Android smartphones and general softness in the smartphone market in China will continue to impact growth."