Earlier this year, Qualcomm (QCOM -2.46%) disclosed to investors that its flagship Snapdragon 810 processor would not be inside of Samsung's (NASDAQOTH: SSNLF) then-upcoming Galaxy S6 flagship smartphone. This development, the beginning of what has become a series of unfortunate events for the wireless giant's chip business, meaningfully affected the company's financial results.

According to a recent leak on Weibo, Samsung is apparently testing Qualcomm's upcoming Snapdragon 820 processor for use in Samsung's 2016 flagship, the Galaxy S7.

If Qualcomm wins this spot, this could substantially boost profitability of its chip business
Microprocessor analyst Linley Gwennap estimates that Qualcomm lost approximately $2.3 billion in business when Samsung ditched Qualcomm for its own Exynos 7420 applications processor in the S6. Additionally, since Qualcomm would have sold Samsung relatively high average selling price/margin silicon, this loss has likely had a disproportionally high impact on the operating margin of Qualcomm's chip business.

If Qualcomm can win back some models of the Galaxy S7 (for example, the ones sold in North America), then this could go a long way to boosting the profitability of the company's chip business.

Indeed, Qualcomm management has said that the company expects that, following its restructuring actions, operating margins in its chip business will be at-or-above 16% by the fourth quarter of its fiscal 2016 assuming current industry conditions persist. Winning the S7 would provide a revenue boost and potentially an operating margin boost for the company's chip business.

Will it win it, though?
I believe that Qualcomm has a very good shot of winning some portion of the Galaxy S7 spots. Recently leaked specifications of the 820 point to a very compelling system-on-chip solution that integrates a host of best-in-class intellectual property blocks.

Additionally, the Snapdragon 820 is expected to be built on a FinFET manufacturing process (the aforementioned leaks suggest Samsung's 14nm technology), so Qualcomm will no longer be at a manufacturing disadvantage to Samsung's own internal Exynos applications processors as the 810 was relative to the Exynos 7420.

I don't think it's reasonable to expect that Qualcomm has a chance of winning the entirety of the Galaxy S7 spots; even when Qualcomm powered a good chunk of Samsung's flagships, Samsung still shipped devices with its own Exynos processors as well as its own modems (as well as modems from other vendors).

Further, if Qualcomm is able to win a spot inside of the Galaxy S7, then that might suggest that the chip giant has a strong chance of winning back a spot inside of Samsung's flagship Galaxy Note series of products (the upcoming Note 5 is expected to be Exynos-only in a similar vein to the S6). 

Investment takeaway
At this point, I believe that investors have baked in, in my view, an excessive amount of negativity around Qualcomm's chip business. Things aren't great there today, and Qualcomm certainly has a lot of work to do, but I'm not convinced that the chip story at Qualcomm is "finished" because of one less-than-stellar product cycle.

That said, if the Snapdragon 820 hits the market and it, like the Snapdragon 810, winds up being a disappointment from a power/performance perspective, then it would be reasonable for investors to question whether Qualcomm is still capable of delivering leadership mobile products.

Until then, though, I plan to remain long shares of Qualcomm and, subject to The Motley Fool's trading restrictions, may add additional shares of the company to my portfolio while Wall Street is still negative on the stock.