Qualcomm entrusted the production of their next-generation 7nm semiconductor chips to the Taiwanese company, TSMC. Qualcomm is said to have been designing and developing their 7nm application processor with the tools distributed by TSMC since the second half of last year. The choice is made between TSMC and Samsung Electronics, in which Samsung apparently loses the deal. This marks the second major partner loss of the South Korean giant in recent months. As we all remember, Apple recently switched from Samsung to TSMC to produce the entire 16nm A10 application processors for the iPhone 7 and is reportedly working on the 10nm chips for the next-generation iPhones due to release next year.

Samsung has been the partner of Qualcomm in recent years for the production of 14nm Snapdragon 820 and 821. Qualcomm’s recent flagship chip, the Snapdragon 835 is also built using Samsung’s cutting-edge 10nm process and was debuted on Samsung Galaxy S8 this year. But TSMC also has made a history with Qualcomm with the production of their previous generation flagship AP’s, Snapdragon 808 and 810.

TSMC is leading the competition ahead of Samsung and Globalfoundries with the race to the next-generation 7nm node. Samsung missed out on 10nm AP to invest more quickly on a 7nm process and is expected to meet the production volume for the 7nm chipset by the end of 2018, which means it will never be used on smartphones until 2019. TSMC is also way ahead of Samsung in terms of production volume the company is able to accommodate, and the use of newer Extreme Ultraviolet Lithography technology, raising concerns over Samsung’s capability to be able to meet Qualcomm’s demand by early 2018.

Samsung focused more on the 10nm process rather than 7nm process thinking the process will last long giving them more time developing the 7nm AP. TSMC, on the other hand, skipped the production of 10nm process and started developing the 7nm process giving them enough time to produce the chips before even Samsung started to work with the technology. The missed strategy of Samsung lead the company to lost major customers. Samsung has lately been relying on their semiconductor business to give the company a state of equilibrium from their ups and downs in the competitive market of smartphones.

Qualcomm and Apples’ s switch from Samsung Electronics to TSMC will put the company’s semiconductor business into major financial performance drop in the coming years. However, Samsung has been doubling down their workforce on their semiconductor business by moving around 200 employees from their consumer electronics division to their LSI business unit.

“Samsung Electronics already knows the situation that it is in and is working hard to secure new customers… Although it has been filling gap that was left by losing Apple with orders from Qualcomm, it will be hard for Samsung Electronics to continue filling this gap starting from next year as it has lost orders to TSMC.” – said a representative for an industry.