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Falling smartphone IC ASPs discouraging device vendors from developing chips in-house

Device vendors including Xiaomi, LG Electronics and Sony have all expressed their intention to develop smartphone chips in-house. Nevertheless, the average selling price for smartphone SoCs has been trending down, while the cost of developing advanced chips using 10nm and below process technologies is high.

Consequently, these device vendors are being discouraged from developing their own smartphone SoCs, and will be cautious about increasing adoption of in-house developed chips in their own-brand smartphones, according to market sources.

The decelerating global smartphone market is another factor discouraging those device vendors' development of chips particularly high-end ones in-house, said the sources. With the industry heading towards sub-10nm nodes, the cost of developing advanced chips is pretty high. Profits from selling devices may not be able to offset the cost paid for the effort, the sources indicated.

Meanwhile, despite being less optimistic about profits made from their in-house developed chip businesses, Apple, Samsung and Huawei are gearing up to introduce their next-generation products built using 10nm process technology in 2017, the sources noted.

The smartphone market growth has been decelerating in 2016. Among the first-tier smartphone vendors, Apple could be the only one able to maintain its usual profit growth in 2016, according to sources at Taiwan-based IC design houses. Meanwhile, China-based Oppo and Vivo will continue to improve their EPS while other brand smartphone firms will likely see their earnings shrink or even suffer losses, said the sources.