Qualcomm in talks to design custom chips for ByteDance

Qualcomm, the king of the smartphone modem, is in talks to design custom chips for ByteDance. The move would help it escape a shrinking phone market. It also shows US chipmakers will not give up on China.

Qualcomm wants to be a chip designer for the AI age. Its first big customer could be Chinese. The company is in talks to provide custom chip-design services to ByteDance, the owner of TikTok. Four people familiar with the matter told Reuters.

If it lands, ByteDance would become an early customer of a business Qualcomm is only now building out. The logic runs two ways at once. Qualcomm needs a future beyond the smartphone. A Chinese internet giant needs chips it can no longer easily buy from America. That is the real story here.

What is on the table

The talks centre on Qualcomm designing custom chips for ByteDance, according to three of the sources. The parts would draw in part on technology from AlphaWave Semi. Qualcomm bought the high-speed connectivity specialist last year for about $2.4bn. One source said the talks involve video processing units, aiming for mass production by year-end.

The two sides have signed nothing. The outcome remains uncertain, three of the sources stressed. It is unclear whether the talks will lead to a finished design and manufacturing. ByteDance could still pick a different partner. Qualcomm and ByteDance declined to comment. For now this remains a negotiation, not a deal, and the gap between the two often runs wide.

It does not come from nowhere, though. Earlier reporting put the two sides in deeper talks over a much larger supply of inference ASICs, the custom accelerators that run trained AI models. The design-services angle adds the next layer: not just selling ByteDance chips, but helping it build its own. That distinction matters, because it moves Qualcomm from vendor to partner.

Why Qualcomm needs a new act

Qualcomm has a smartphone problem. It dominates modem chips, the parts that handle cellular signals, and phones still bring in most of its revenue. That market is now shrinking. Global smartphone shipments are on course for their steepest annual fall on record this year, as a surge in memory-chip prices unsettles handset makers.

So Qualcomm is racing into the data centre. It now courts customers across three kinds of chip: CPUs, accelerators for inference, and the custom ASICs that hyperscalers increasingly design in-house. That last market is booming, and Broadcom and Marvell dominate it. The two firms turn a cloud giant’s chip ideas into working silicon.

Smaller players, including a wave of well-funded startups, are chasing the same business. Qualcomm wants in, and a marquee customer would prove it belongs.

ByteDance would be exactly that. A win here would give Qualcomm a flagship name for a division it is still trying to establish. It would also pad out a portfolio that has leaned on tuck-in deals, including the AlphaWave purchase, since US regulators sank its planned takeover of NXP Semiconductors years ago.

Why ByteDance is shopping

ByteDance has a problem too, and it mirrors Qualcomm’s. It needs vast amounts of chips to run its AI products, and Nvidia’s most powerful accelerators remain largely off-limits in China under US export rules. So it builds a homegrown supply chain instead.

That effort already runs wide.

ByteDance designs its own CPUs on Arm and RISC-V to feed its data centres, and weighs orders from a string of domestic chipmakers for inference work. Inference is the lighter task of running models for users, rather than the heavy lifting of training them. Chinese alternatives also come closest to good enough there, which is why so much of the shopping targets that workload.

ByteDance has weighed orders from domestic names such as Biren, MetaX, Iluvatar CoreX, Moore Threads and Enflame, and has held manufacturing talks with Samsung over an inference chip of its own. Qualcomm would slot into a crowded, deliberately diversified roster.

Qualcomm fits that picture neatly. American design know-how offers a useful bridge while domestic options mature. Pair it with parts tuned for the inference jobs China most needs to cover, and the appeal grows obvious.

A deal on a political tightrope

The timing is the awkward part. Washington and Beijing keep escalating their fight over AI chips. It has already hit Nvidia, AMD, Applied Materials and Lam Research as export rules tighten. Designing advanced chips for a Chinese champion, in that climate, makes for anything but a quiet commercial decision.

Yet the talks show how much US firms still want Chinese revenue. The pull of the market keeps drawing them back, even as the politics turn hostile, and ByteDance keeps finding willing partners. The export regime mostly polices finished high-end chips, which leaves design services and inference-grade parts in a greyer zone.

That ambiguity is exactly what the broader shift toward custom ASICs in China has learned to exploit.

The case for caution

This is still a long way from silicon. The discussions could collapse, the design might never reach manufacturing, and ByteDance is plainly keeping its options open with several suppliers at once. A year-end production target is ambitious for a chip that has not been finalised. Any of those threads could snap.

Politics could snap them faster. A fresh turn of the export screw, on either side, could put a Qualcomm-ByteDance project out of reach before it ships. The same friction that makes the deal attractive to ByteDance is what makes it fragile. Both sides know it.

None of that makes the strategy wrong. Qualcomm has read the room: phones are fading, AI silicon is where the growth is, and customers shut out of Nvidia are hungry for alternatives.

So the open question is not whether Qualcomm should chase this business. It is whether it can build a new identity as the designer of other companies’ chips while its most promising customers sit on the wrong side of a widening political line. The smartphone era made Qualcomm.

The AI era will test whether it can reinvent itself fast enough, and with whom.