TLDR
- Qualcomm is in talks to provide custom chip-design services to ByteDance, the parent company of TikTok.
- The proposed chips would partly use technology from AlphaWave Semi, which Qualcomm acquired last year.
- Discussions include designing video processing units (VPUs), with a target to begin mass production by end of 2026.
- The talks come as Qualcomm looks to reduce dependence on the smartphone market amid a projected record decline in global handset shipments.
- QCOM stock fell 8.01% on Monday to close at $204.13, though it is still up 18.01% year-to-date.
Qualcomm (QCOM) stock fell 8.01% on Monday to close at $204.13, even as reports emerged that the company is in talks to provide custom chip-design services to ByteDance, the Chinese parent of TikTok. The stock is still up 18.01% year-to-date.
Four sources familiar with the matter told Reuters that the talks are ongoing, though the outcome remains uncertain. ByteDance could still choose a different partner.
The proposed chips would be partly based on technology from AlphaWave Semi, a high-speed connectivity company that Qualcomm acquired last year. The two companies have not commented publicly on the negotiations.
One source said the discussions involve designing video processing units, or VPUs, with an aim to begin mass production before the end of 2026. Reuters had previously reported that ByteDance is also developing its own AI chip for inference tasks and custom CPUs.
If a deal is reached, ByteDance would become an early customer of Qualcomm’s chip-design services unit — a business line the company is actively building out.
Qualcomm’s Smartphone Problem
Qualcomm is the world’s largest supplier of smartphone modem chips. But the smartphone market is under pressure. Global handset shipments are projected to post their steepest annual decline on record this year, and a surge in memory-chip prices has added further strain.
The ByteDance talks are part of a broader effort by Qualcomm CEO Cristiano Amon to diversify revenue. The company is developing CPUs, AI inference accelerators, and custom ASICs for the data center market — competing with the likes of Broadcom (AVGO) and Marvell Technology (MRVL).
Amon has also said Qualcomm is working on more than 40 AI-powered devices, including smart jewelry, earbuds, pins, and watches designed to function as personal AI assistants.
U.S.-China Tensions Still a Factor
The talks are a reminder that U.S. tech companies continue to seek business in China, even as Washington-Beijing friction over AI chip exports has hit companies like Nvidia (NVDA), AMD, Applied Materials, and Lam Research.
At the same time, ByteDance is hedging its bets. The company has also been reported to be in discussions with Chinese chipmakers Iluvatar CoreX and Baidu (BIDU) for AI chips, with Iluvatar CoreX potentially becoming its third major domestic GPU supplier.
Qualcomm has also been reported to be eyeing a $4 billion deal for AI company Modular Inc., and is in talks to acquire AI chip startup Tenstorrent to further expand its AI chipmaking capacity.
Benzinga data shows QCOM with a Momentum score in the 86th percentile and a Growth score in the 43rd percentile.
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