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Korea Times: Xiaomi considering building its own processors, dealing further blow to Qualcomm’s chip business

Lei Jun, founder and CEO of China's mobile company Xiaomi, speaks at a launch ceremony of Xiaomi Phone 4, in Beijing, July 22, 2014. China's Xiaomi unveiled on Tuesday its new flagship Mi 4 smartphone, aimed squarely at the premium handset market dominated by Apple Inc and Samsung Electronics Co Ltd. REUTERS/Jason Lee (CHINA - Tags: BUSINESS TELECOMS SCIENCE TECHNOLOGY LOGO) - RTR3ZN52 In an announcement which could deal a further blow to Qualcomm’s slowing processor business, Xiaomi is seemingly about to reveal plans to build its own CPUs in-house. In a report published by Korea Times, it’s claimed that the major Chinese smartphone maker will use the industry-standard ARM license technology to make its own ‘Rifle’-branded SoCs.

“Xiaomi plans to release its in-house Rifle-dubbed mobile APUs at a company event, which has been set to take place May,” an official at Xiaomi’s component partner said, Monday.

Xiaomi is hosting a phone launch event on May 10, where it will unveil the Max, its next phablet. If it also uses the event to announce its own custom processor, it can’t be overstated how big an impact this will have on Qualcomm’s Snapdragon grip on the market.

Among the current global top 5 vendors, Samsung, Lenovo and Xiaomi all offer Snapdragon-powered phones.  Huawei and Apple, of course, use their own custom silicon chips (almost) exclusively.

Huawei is the world’s fastest growing smartphone manufacturer, and although it uses a Snapdragon processor in the Nexus 6P plus a couple of budget phones and MediaTek chips in others, it mostly uses its own Kirin chips. The latest P-series flagship phones all use the latest high-end Huawei Kirin processor.

Samsung does sell Snapdragon-equipped phones and had a hand in developing the SD820, but it uses its own Exynos processors in many of its devices and has slowly been reducing its reliance on Qualcomm, particularly for its flagship phones. The S7 (for instance) is only available with a Qualcomm processor in the US, China and Japan. Everywhere else has the superior Exynos 8890 octa-core SoC (System on a Chip). Likewise, LG, currently in #6, is allegedly planning on making its own processors in the near future too.

Lenovo, of course, has the Motorola-branded phones which all feature a Snapdragon processor of some kind. Lenovo’s own-brand phones use Snapdragon chips, but not exclusively. Some are powered by MediaTek’s cheaper Helio-branded processors.

If Xiaomi ditches Qualcomm and goes it alone, that leaves Samsung and Lenovo as the only major Snapdragon customers among the top vendors. Even then, neither of those is exclusively using Snapdragon chips.

In short, virtually all manufacturers are weighing up royalty costs (which they pay Qualcomm) versus developing and building their own chips, and they’re all opting to build their own. This suggests that Qualcomm charges too much and needs to reduce its royalties if it wants to remain the top-selling processor vendor long-term.

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