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Tuesday, December 27, 2011, 12:31 am PT (03:31 am ET)

Docomo, Samsung team up on smartphone chip venture to challenge Qualcomm

Japanese wireless operator NTT Docomo has partnered up with Samsung and several other companies to set up a fabless semiconductor joint venture aimed at producing mobile device chips that will compete with market leader Qualcomm.

Docomo, the largest carrier in Japan, announced the move on Tuesday, revealing plans to invest 450 million yen ($5.8 million) into the endeavor. In addition to Docomo and Samsung, the resulting joint venture company will include investments from Fujitsu, Fujitsu Semiconductor, NEC and Panasonic.

The semiconductor initiative had been rumored to be in the works as far back as September, with The Wall Street Journal (via The Next Web) even telegraphing Docomo's announcement late Monday evening.

According to Tuesday's press release, the venture will focus on developing "feature-rich, small-size, low-power-consumption semiconductor products equipped with modem functionality." The resulting chips will primarily make use of 4G LTE and LTE-Advanced standards. The collaborative company is expected to be established by March 2012.

The joint venture has largely been viewed as a challenge to Qualcomm, which currently dominates the baseband chip market with roughly 80 percent share. Apple switched to using baseband chips from the CDMA inventor earlier this year with the Verizon iPhone 4, eventually releasing the Qualcomm-powered GSM/CDMA iPhone 4S in October.

A recent report out of Japan claimed that Apple was in talks with Docomo to launch an LTE-capable iPad and iPhone on its network next year. However, the carrier denied the report, noting that there is as yet "no basic agreement" with Apple. The two companies are said to have had trouble finalizing an agreement because of Apple's policy restricting pre-installed apps from carriers.

Numerous reports have suggested that Apple will make the transition to LTE as early as next year. The company has admitted that several technical hurdles stand in the way of bringing LTE-capable iOS devices to market, as early LTE chipsets required "design compromises" that Apple was unwilling to make.

In the meantime, Apple has been gradually marshaling its semiconductor resources in order to exercise greater control over the development process. In 2008, the company bought chip designer P.A. Semi, a move that resulted in the iPhone maker's proprietary A4 and A5 ARM-based SoC designs.

Reports surfaced last week that Apple had acquired flash memory company Anobit, which already supplies components for Apple's iPhone, iPad and MacBook air devices, for as much as $500 million. Apple is believed to have purchased the Israel-based company because of interest in its "Memory Signal Processing" (MSP) technology that can improve the reliability, performance, efficiency and endurance of flash memory.

Recent rumors have also suggested that Apple is planning a semiconductor development center in Israel, the first of its kind outside of the company's Cupertino, Calif., headquarters. Such a center would likely capitalize on synergies from Anobit's nearby facilities.

As for Samsung, the South Korean electronics maker has seen its relationship with Apple grow increasingly complicated as it attempts to balance being both a component supplier and direct competitor with the company. Even as Apple is believed to have become Samsung's largest customer this year, the two companies are waging a tense legal battle against each other.

Samsung supplies several key components for Apple's products, including the A5 processor, NAND flash and LCD displays. Rumors had suggested that Apple was interested in moving A-series chip production and flash memory orders away from Samsung, but, for now at least, the company appears set to continue placing orders with the supplier while also working to secure greater diversity in its stable of suppliers.

Samsung Chief Operating Officer Lee Jae-Yong said in October that he had met with Apple CEO Tim Cook to discuss supplying the company with "even better parts" after their current contract ends next year.