Qualcomm (NASDAQ:QCOM) is in discussions with China’s ByteDance about providing custom chip-design services, according to people familiar with the matter, as the U.S. semiconductor company seeks to broaden its business beyond its core smartphone market.
If an agreement is reached, ByteDance, the owner of short-video platform TikTok, would become one of the first major customers for Qualcomm’s growing custom chip-design business.
Potential Custom Chip Project Under Discussion
Sources said Qualcomm is currently exploring the development of bespoke chips for ByteDance. According to three people familiar with the talks, the proposed designs would incorporate technology obtained through Qualcomm’s acquisition of AlphaWave Semi, a specialist in high-speed connectivity solutions, completed last year.
While discussions are ongoing, the outcome remains uncertain. Sources cautioned that negotiations may not ultimately result in a finalized chip design or manufacturing agreement, and ByteDance could choose to work with alternative suppliers.
Details regarding the proposed products remain limited. However, one source indicated that the discussions involve video processing units (VPUs), with mass production potentially targeted before the end of the year.
Reuters previously reported that ByteDance has been developing its own artificial intelligence inference chips as well as custom central processing units (CPUs).
Neither Qualcomm nor ByteDance responded to requests for comment. The sources requested anonymity because the negotiations are private.
Qualcomm Seeks New Growth Engines
A potential ByteDance contract would represent an important strategic victory for Qualcomm as it works to reduce its reliance on the smartphone sector, which remains its largest source of revenue.
The company has faced increased uncertainty from handset manufacturers this year amid rising memory chip costs and weakening industry conditions. Global smartphone shipments are expected to record their steepest annual decline on record this year.
The discussions also highlight the continued willingness of major U.S. technology companies to pursue business opportunities in China despite growing tensions between Washington and Beijing over advanced semiconductor technologies.
Recent export restrictions and geopolitical pressures have affected several major chip industry players, including NVIDIA, AMD, Applied Materials and Lam Research.
Expanding Presence in Data Centre and AI Markets
Qualcomm has increasingly focused on expanding its footprint in the fast-growing data centre and artificial intelligence infrastructure markets.
The company is currently developing and marketing three key categories of products: central processing units (CPUs), AI inference accelerators, and application-specific integrated circuits (ASICs).
The ASIC segment has become one of the semiconductor industry’s fastest-growing markets, attracting significant investment from competitors such as Broadcom and Marvell.
A successful partnership with ByteDance could strengthen Qualcomm’s position in custom silicon design and support its broader push into AI and data centre computing, areas viewed as major long-term growth opportunities beyond smartphones.