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HTC planning own phone chips: Where’s the sense?

HTC is thinking about developing its own chips for smartphones reports the China Times on Monday. The Taiwanese company has signed a memorandum of cooperation and Unwired View suggests that ST-Ericsson will build the chips. For the past several years, HTC has relied up on Qualcomm(s qcom) to supply chips for HTC handsets and has recently turned to Nvidia’s(s nvda) quad-core Tegra 3 chip for non-U.S. versions of the new HTC One X handset. This wouldn’t be the first time HTC has developed a chip; its new HTC One line uses custom silicon for image capture.

ST Ericsson(s eric) already sells its own smartphone application processor in its NovaThor chips; the Sony (s sne) Xperia Sola, which was introduced last month, uses a dual-core NovaThor processor, for example. But from the initial reports, it doesn’t appear that HTC intends to simply add a third chip supplier option by simply using a current ST Ericsson system on a chip. Instead, it sounds as though HTC wants to design a custom processing chip just as Apple (s aapl) and Samsung have done with their A5 and Exynos chips.

The reports suggest that HTC is looking to use this custom chip in low-end smartphones, which is a bit of a surprise. There are plenty of current earlier-generation chips that are cheap enough to suffice for entry level Android handsets. To spend research and development efforts or financial investments to “reinvent the wheel” simply doesn’t make much sense at this point in time. Instead, the suggestion of chip development is another example of how HTC hasn’t quite figured out how to differentiate its phones from others in the Android market; its $300 million Beats Audio investment was much the same.

Make no mistake: Any custom chips for HTC would have to be for Android (s goog). Clearly, HTC isn’t going to make iPhones. WebOS(s hpq) is the slimmest of possibilities, but as an open source platform with an ecosystem smaller than that of struggling Research In Motion (s rimm), there’s not much hope there. HTC could yet work a deal to license BlackBerry, but processor chips won’t make any such deal a success. And Microsoft(s msft) currently has strict hardware requirements for Windows Phone devices: Only Qualcomm’s Snapdragon chips are approved for now. There’s nothing left but Android.

I’m curious to see what comes from any HTC chip development, especially after seeing how well the HTC One S takes stills and videos. With the custom chip, speed to focus and snap pictures is very fast. But a full-blown applications processor with HTC design isn’t likely to pay off in the long run unless the company can work some magic that long-time silicon makers haven’t.

4 Responses to “HTC planning own phone chips: Where’s the sense?”

  1. tinotino

    About f-ing time.

    They probably want to do low end chip first and build up the expertise to eventually catch up to Snapdragon S series of chips.

    It took Huawei a lot to get here and so far none of the non-Qualcomm manufacturer has come up with a LTE solution. No even Samsung.

  2. keninca

    I don’t know if it’s such a bad idea. Other than Samsung, the mobile SoC vendors are all fabless, and have at least 50% gross margins, implying that a company with enough volume might be able to save 40% or so. If they’re paying $20 for a SoC now, and can buy it from TSMC (disclosure: I own shares of TSMC) for $12, and can sell 20M of those phones a tear, investing $100M in developing their own chip would be paid off in less than a year, and allow them to either sell the phone for $15 less, or make more profit on each one. And I don’t think it would cost them $100M to develop a SoC, there is a lot of proven IP they can license.

  3. I would be surprised if they actually did this. Most likely, they are just trying to negotiate better pricing out of QCOM and are using this as a public marketing stunt. If I recall correctly, Samsung used to do the same thing in the past.