Samsung has announced that it plans to develop a 2nm Exynos mobile chipset processor by next year, which it may use to prevent price increases on its top phone and wearable products in 2025.
This year, Samsung priced the Galaxy S24 Ultra $100 higher than its predecessor, the Galaxy S23 Ultra. The increase in retail price was due to the switch to a lighter and sturdier titanium frame, as indicated by the BOM analysis for both the S23 Ultra and S24 Ultra.
Chipsets have become the most expensive component in phones.
According to Counterpoint’s BOM report, the most costly component in the Galaxy S23 Ultra is, in fact, the processor and modem combo from Qualcomm, known as the chipset.
The days when expensive OLED displays were a new technology and the most expensive component in phones are long gone. With all phones now equipped with dynamic refresh rate and wide color gamut coverage, attention has shifted to AI processing power and support for global 5G connectivity bands.
The research and development in those areas are costly, and Qualcomm is recovering its research investments by charging high markups on each new Snapdragon generation. If you believe that the $160 Samsung currently pays Qualcomm for its Snapdragon chipsets is too much, analyst Ming-Chi Kuo has some surprising news for you.
The SM8750 (Snapdragon 8 Gen 4), set to begin mass production in the second half of 2024, is anticipated to have a price 25-30% higher than the current flagship chip SM8650 (Snapdragon 8 Gen 3) which costs $190-200. This price hike is mainly a result of switching to TSMC’s newest and pricier N3E node. With the increasing demand for high-end smartphones driven by artificial intelligence, shipments of the SM8750 are expected to grow at a high single-digit rate compared to the SM8650.
Given Qualcomm’s control over Galaxy AI feature processing and exclusive rights to the 5G modem in the US, Samsung must follow suit and include the Snapdragon 8 Gen 4 chipset in the Galaxy S25 Ultra, at least in the American market.
The continuous price increases in AI processing power have resulted in record stock prices for Qualcomm and other AI chip manufacturers as well. Mr. Kuo stated that Qualcomm will be utilizing TSMC’s superior 3nm production method for the Snapdragon 8 Gen 4 tapeout, which is also being used for the Apple A18 chipset in the iPhone 16.
Qualcomm will have to price the Snapdragon 8 Gen 4 30% higher than the previous model in the Galaxy S24 Ultra due to the superior foundry technology, which comes with higher costs. This means the processor in the S25 Ultra is expected to cost $200 each for Samsung and will likely make up a larger portion of its bill of materials.
Samsung will not increase the prices of the Galaxy S25 Ultra and Watch 8.
A 30% increase in the cost of Samsung’s most expensive phone component has already resulted in a $100 price hike for the Galaxy S24 Ultra. It may be difficult to justify another $100 increase for the S25 Ultra, especially if the upgrades are not visible to the user, such as a new design, additional camera, or improved display. Samsung may attempt to offset the rising cost of the Snapdragon 8 Gen 4 by utilizing their own Exynos mobile chipsets to maintain the price of the Galaxy S25 Ultra.
During the Samsung Foundry Forum 2024 expo, the semiconductor manufacturer revealed its intentions to develop and launch its upcoming chipsets using the emerging 2nm technology.
Samsung boasted that its mobile processor division would release 2nm chips next year, potentially in time for the launches of the Galaxy S and Watch lines currently equipped with 3nm chipsets. This is earlier than the speculated 2026 launch for the next-generation Exynos 2600 chipset, which is expected to replace the AMD GPU with Samsung’s own design.
If Samsung successfully incorporates a sufficient number of 2nm Exynos 2600 chipsets into the processing power of the Galaxy S25 series, it may be able to counteract the price hikes of Qualcomm’s Snapdragon. The same applies to the Galaxy Watch 8, with the potential upgrade to a 2nm version of the penta-core 3nm Exynos chip expected in the Galaxy Watch 7 series.
In summary, if Qualcomm were to pressure its customers into using a $200 Snapdragon 8 Gen 4 chip from TSMC, Samsung would have limited options to increase the price of the Galaxy S25 Ultra. They could potentially cut production costs in other areas to make up for the difference instead.
