SAN FRANCISCO—Qualcomm Inc. said Wednesday (July 18) it expects supply of 28-nm chips to remain constrained until the end of the calendar year, despite acknowledging that the firm is now engaged with four foundries at that node.
Qualcomm executives said a tight supply of 28-nm capacity continues to drag on the company's sales amid strong demand for 28-nm devices. The comments on the state of 28-nm supply came following Qualcomm's fiscal third quarter financial report, in which the company came up short of analysts' estimates for sales and profit. Qualcomm (San Diego) also trimmed the high end of its guidance for the fiscal year, which closes in September.
Steve Mollenkopf, Qualcomm's president and chief operating officer, said Qualcomm expects the 28-nm capacity/demand gap to be alleviated by the end of Qualcomm's first quarter of fiscal 2013, which closes in December. "In the beginning of the [December] quarter we [will] still have a gap that we need to deal with, but it [will improve] throughout the quarter. We think it matches up toward the end."
Qualcomm said in April it engaged with other foundry suppliers amid a shortage of 28-nm capacity at its longtime foundry partner, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC). Mollenkopf did not name the four foundries Qualcomm is now engaged with at 28-nm, but they would presumably include Globalfoundries Inc., United Microelectronics Corp. (UMC) and Samsung Electronics Co. Ltd., in addition to TSMC. Earlier this month, the Taiwan Economic News reported that Qualcomm signed UMC and Samsung to build its 28-nm chips.
"Right now we are supply limited," Mollenkopf said. "But it's going quite well in terms of bringing up additional sources."
Later, Mollenkopf added that 28-nm Qualcomm is seeing increases in both supply and demand for 28-nm products and that the company is "trying to match those two ramps." He added, "We are just in execution mode right now."
Paul Jacobs, Qualcomm's chairman and CEO, characterized the fiscal third quarter as a strong one overall, but acknowledged that it could have been better and said the company was "disappointed" it couldn't secure enough capacity to meet strong demand for 28-nm products.
"We'll work through this near term," Jacobs said. "We are looking forward to a very strong close to the calendar year."
Jacobs said adoption of 3G and 3G/4G technologies continues around the world, driving strong year-over-year growth in the company's chipset and licensing business in the fiscal third quarter. But he said estimates for growth of 3G/4G device shipments in the calendar year have moderated slightly. The company has also reduced its outlook for fiscal fourth quarter device shipments from previous estimates, Jacobs said.
Paul Jacobs, Qualcomm chairman and CEO, said the company is “disappointed that it could not secure enough capacity to meet strong demand 28nm product”. In my opinion it is not capacity issue, but device performance issue because some time ago Mr. Jacobs made a similar statement that it has a strong demand for its Snapdragon S4 processor chips manufactured by TSMC, but TSMC could not deliver. The Snapdragon chips are originally designed to run the full blown Microsoft OS, Windows 8. In order to run Windows 8 Pro, high speed or high performance is required as well as low power. TSMC’s planar bulk 28nm can’t deliver such low power and high performance because when performance is increased, power or leakage current also increases. On the other hand, significantly lower power and higher performance compared with TSMC’s bulk 28nm are achieved by Intel’s Tri-gate 22nm based Ivy Bridge chips, thus ideal to run on Windows 8. Recently, Microsoft announced to adopt Intel’s Ivy Bridge processor chips to run its Windows 8 and may adopt Qualcomm’s Snapdragon chips for Windows RT which is a striped down version of Window 8. Ivy Bridge chips are in high volume manufacturing today. It is reported that Windows 8 based tablets and ultrathin notebooks become available third quarter this year. Intel’s FD (fully depleted) tri-gate technology is published at 2012 VLSI symposium for the first time and is at least three to four years ahead of its rivals. TSMC has no capacity issues for manufacturing the low power and low performance chips for ARM, but not for Qualcomm Snapdragon chips. That is why Mr. Jacobs is so disappointed. Qualcomm and ARM are engaging in vain with multiple foundries, hoping that they could deliver ultralow power and high performance chips. That is the reason why Mr. Jacobs is even contemplating to have its own fab, even though it is highly unrealistic but what he can do if the multiple foundries can’t deliver?
And... which of the Qualcomm products belong to the 28nm process? Which are the Qualcomm's products on a low supply?
I suppose this directly impact some mobile phone manufacturers which depend on their chips. But certainly this has to be only for this and perhaps the upcoming quarter. Unless this isn't enough time to make the new foundries capable of producing their chips. Last I heard this was an enormous job meaning it would take a long time. Around how long would this take?
Even in a supply constrained situation for its high-end products the company is making something like a 25% profit. Not bad considerting some of its customers struggle to get into double digit net profit percentages.
I don't know that Qualcomm has given a specific date on that, but it sounds like it's been longer than we initially thought. They announced in April that they had engaged other foundries, but I suspect it was a while before that. Mollenkopf made a comment on the call to the effect that Qualcomm typically works with multiple foundries at any given time. Seems like the strategy of casting a wider net is going to continue. But Qualcomm execs said, as they have said before, that they need to do a better job of anticipating demand at new technology nodes and planning for it.
Porting the design from one foundry to another is 9-12 months process if everything is going well evenif the process so called compatible to each other. If you face yields and reliability issues in the middle of, it could potentially drag you much longer. So I assumed Qualcomm engaged with the other two foundries at the end of 2011.
How long has it been since Qualcomm engaged with the other 3 foundries? I'd suspect there really won't be too great an impact to Qcualcomm's sourcing issues yet. Perhaps they got pricing concessions or similar out of TSMC as a result, though that won't show up on their books yet, either. Down the road a little (December?) this could work out well for Qualcomm, though now they will have to juggle libraries and flows for 4 fabs not one. Any "unified" libs and flows will be full of compromises.
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