Qualcomm (QCOM +1%) has struck a deal with SMIC (SMI +2.5%) to have the Chinese foundry to produce 28nm Snapdragon processors. SMIC has previously manufactured (less demanding) power management and connectivity ICs for Qualcomm.
The deal comes ahead of Apple/Samsung's fall hardware refreshes, and undoubtedly has much to do with tight 28nm capacity at main foundry partner TSMC (TSM +1.5%). Digitimes has reported Qualcomm and MediaTek (among others) are looking to secure 28nm capacity from SMIC, UMC, and Globalfoundries due to TSMC's supply constraints.
Digitimes states Qualcomm has booked over half of SMIC's 28nm capacity, and that MediaTek will be placing orders of its own. The site has also reported Qualcomm has placed orders with Globalfoundries and Samsung for their next-gen 14nm process (set to go live in early 2015).
TSMC's efforts to ramp 20nm production for Apple could be contributing to its 28nm crunch. JPMorgan expects TSMC to produce 120k-130k 20nm wafers for Apple in Q3, up from just 30K-40K in Q2. It sees Apple respectively making up 13% and 15% of TSMC's Q3 and Q4 revenue vs. just 4% of Q2 revenue.
Yesterday: Qualcomm buys WiGig chipmaker Wilocity