Qualcomm has enterred an agreement with Chinese contract manufacturer Semiconductor Manufacturing International Corp (SMIC) for the production of the Snapdragon processors, the company said on Thursday. The move would offer Qualcomm more capacity for future demand but it could also improve Qualcomm's relationship with the government in China, where the U.S. chipmaker has been under antitrust scrutiny. China's anti-monopoly regulator has accused Qualcomm of overcharging and abusing its market position, and the chipmaker could face a fine more than $1 billion.

Qualcomm said it is working in China with SMIC on 28 nanometer manufacturing technology used to make its Snapdragon chips, which are used widely in smartphones.

The two companies had been cooperating in the past on the production of power management and other chips.

Qualcomm of course remains a major customer of Taiwan Semiconductor Manufacturing Co Ltd. In 2012, a slower-than-expected launch of 28 nm production at TSMC affected the supply of chips to customers including Qualcomm and Nvidia.