Why Qualcomm’s Chips Are Selling Like Hotcakes

Qualcomm’s (NASDAQ:QCOM) supply of its Snapdragon S4 processors has fallen short of increasing demand, prompting the company to warn of its inability to manufacture the “28 nanometer” chips until the end of the year.

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Qualcomm’s chief operating officer Steve Mollenkopf confirmed that the chip maker has underestimated demand for its S4 Snapdragon chips. In the meantime, Qualcomm will try to push for some of its alternative products. According to Taiwan-based handset supply chain makers, the situation has pushed international smartphone vendors, including Samsung, LG Electronics, HTC, and Sony (NYSE:SNE) to consider other suppliers. The shortage will also impact Google’s (NASDAQ:GOOG) Android and Microsoft’s (NASDAQ:MSFT) Windows-based phone makers, who had planned to use the Snapdragon chips in new devices.

Taiwan Semiconductor Manufacturing Company’s 28nm foundry capacity is not sufficient to meet burgeoning demand, nor is the yield rate of the process high enough, which is the reason that the Snapdragon S4 is in short supply. The shortage of the Snapdragon S4 has prompted Nvidia (NASDAQ:NVDA), ST-Ericsson (NASDAQ:ERIC), and Intel (NASDAQ:INTC) to compete for urgent orders for their own chips. Sources have indicated that these Qualcomm rivals are pushing for the adoption of their own chip solutions from those vendors. Nvidia has plans to offer LTE SoCs with integration of quad-core Tegra 3 processor and an Icera modem in 2013. Meanwhile, Ericsson also plans to offer LTE soCs in 2013.

Shares of Qualcomm fell over 7 percent in after-hours trading following the announcement, before making a partial recovery. The stock is up .46% at $61.74 per share in today’s trading.

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