Apple moves supplier relationship status with Samsung from ‘frenemies’ to ‘enemies’

Just before we heard Apple was not using an ARM-designed processor and instead its first custom CPU design for the new iPhone’s A6, we also heard reports that Apple was reducing component orders from Samsung due to the two companies’ ongoing patent disputes. While we knew Samsung was still—at the very least—manufacturing the new chip, a report from KoreaTimes gives more insight into the company’s involvement directly from a Samsung official. According to the report, the A6 is the first of Apple’s iPhone chips where Samsung did not contribute to development of the technology:

According to industry sources, Apple has not collaborated with Samsung in the process to develop its A6 microprocessor used in its latest iPhone 5. Samsung has handled the manufacturing of the processors used in previous iPhones and believed to have contributed in their design to some degree… It now appears that the structure of the deal has been dramatically adjusted…Apple is still relying on the Korean firm to manufacture its chips but has made it clear it will no longer use its rival’s technology.

We heard conflicting reports in September regarding Apple’s decision to reduce component orders from its biggest supplier, Samsung. Reuters claimed the reduction in orders was an attempt to simply “widen its supply chain,” while others reported Apple is actively reducing orders of displays, memory chips, and batteries specifically due to increasing tension between the companies. According to the report’s source, an unnamed senior Samsung official, Samsung is now only manufacturing the A6 chips on a “foundry basis”:

“There are three kinds of chip clients. Some want us to handle everything from chip design, architecture and manufacturing. Some want us to just design and manufacture. Some want us to just make the chips. Apple is now the third type,’’

Related to today’s report: Apple’s recent hiring of Samsung chip designer Jim Mergard. The report claimed the hiring of Mergard, who was working specifically on ARM chip designs at Samsung and prior, increases the “mutual tension”… Read more

Samsung looks to make Apple parts beyond 2012 and into 2013-2014


Samsung manufactures the Apple-designed A5 chip found inside iPhone 4S and provides 512MB DDR2 RAM for the processor.

Samsung and Apple are working towards a resolution to the differences that have been plaguing their long-standing relationship, which culminated with some twenty patent infringement claims filed before courts in a dozen countries around the world. Quoting industry sources, Korea Times, asserted Monday that Samsung might provide Apple with custom-built A6 chips for upcoming new iPhone and iPad models.

Today, Yonhap News reports that Samsung COO Lee Jae-yong said his company would continue to supply the Cupertino, California client with crucial components, including Apple’s in-house designed A-family of chips powering their iOS devices. The supply chain ties with Apple, he told reporters upon arriving at a Seoul airport, continue to be long-term. The executive sat down the previous day with Apple CEO Tim Cook following a private memorial service for Steve Jobs, to which he had been invited. His two-hour meeting with Apple’s boss touched on parts for the 2013-2014 period, he told journalists:

For the 2013-2014 period, we discussed how best to supply even better parts.

The executive, pictured below the fold, also spoke of “a need to compete in a fair manner for the benefit of the consumer”, adding “this stance existed in the past, is taking place now and will occur in the future”. Another indication of attempts to diffuse the ugly legal brawl comes in another report quoting Samsung’s mobile chief Shin Jong-kyun as saying that the Galaxy Nexus smartphone, which was unveiled yesterday with great fanfare, is designed to bypass potential legal attacks from Apple:

Now we will avoid everything we can and take patents very seriously. We will see if it will be 100 percent free [from Apple lawsuits]. I think it is just a start and [the lawsuits] will last for a considerable time. I don’t think there is much gain [from lawsuits against Apple]. What we are losing is the pride in our brand.

Now, despite Apple’s rumored chips deal with Taiwan Semiconductor Manufacturing Company (TSMC), Apple reportedly isn’t taking risks. The company sold a quarter billion iOS devices to date and hopes to grow sales even faster in the years ahead.

Apart from Samsung’s semiconductor fab in Austin, Texas, other chip vendors may not be capable of producing mobile processors for Apple in volume, without affecting quality and all the while meeting Apple’s high standards. Remember, we’re talking up to 200 million chips for iPhones, iPads and iPods in 2012. As for Apple cozying up to TSMC…
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Digitimes: TSMC confirmed as Apple’s new processor fab

The rumors have been going on for months, but Digitimes is today saying Apple’s new processor foundry is Taiwan Semiconductor Manufacturing Company (TSMC). The move by Apple is believed to be precipitated by Apple’s ongoing legal battles with Samsung, who has provided Apple with processors since the original iPhone was released in 2007 through Apple’s release of “its own” A4 processor and A5 iPad processor earlier this year.

Apple has recently signed a foundry partnership agreement with Taiwan Semiconductor Manufacturing Company (TSMC), industry sources have claimed. Under the terms of the agreement, TSMC will apply its 28nm and 20nm process technologies to produce Apple’s next-generation CPUs, according to the sources.

The contract appears to be long and lucrative for TSMC..

TSMC is believed to have quietly secured Apple’s contract, and even succeeded in extending the deal to cover the manufacture for the A6’s successor, the sources said.

In addition, the agreed contract quotes are favorable to bring little impact on TSMC’s profitability, the sources revealed. TSMC managed to negotiate a good price, allowing gross margins yielded by Apple’s orders to be similar to its overall gross margin performance at present, the sources indicated. TSMC’s gross margin for the second quarter of 2011 arrived at 46%.

The details weren’t released publicly and as can be expected, neither company is commenting on the move.

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Samsung no longer exclusive chip supplier as Apple turns elsewhere for A6 processor?

Samsung, a producer of critical parts for Apple’s gadgets, may be on the verge of suffering another financial blow from Apple. A new report alleges that the Cupertino, California-headquartered personal electronics maker began lining up alternative suppliers for the A6 chip. The in-house designed processor should debut in iPad 3 next year and eventually make its way into iPhone 6 .

Trade publication DigiTimes has it on good authority that Apple recently visited an assembly line of packaging and testing firm Siliconware Precision Industries (SPIL). Based on what they saw, they concluded that officials from Apple are reportedly willing to discuss the possibility of working together on the upcoming A6 processor:

Apple recently conducted a visit to SPIL’s assembly line, and both parties discussed opportunities for cooperation, the sources revealed. SPIL stands a chance of becoming the first packaging and testing service provider designated by Apple, cutting into the supply chain of the vendor’s processor line, the sources said.

The report explains SPIL is likely to “snatch outsourcing orders” for the A6 chip. Needles to say, SPIL is denying the story, which is what companies caught up in juicy Apple rumors always do.

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The A5 chip almost twice the size of A4, fabbed on Samsung's 45nm process


Floorplan comparison: Apple’s A4 chip (left) and the latest A5 processor (right)

Reverse engineering wizards over at Chipworks put the A5 chip under a microscope. Yes, it’s a Samsung – confirming our hunch. The experts came to this conclusion by putting the chip under a microscope and examining dielectric layers and the shape of the transistor gates. The teardown analysis also revealed a die almost twice the size of the A4 chip from the previous-generation iPad and iPhone 4, the 45-nanometer manufacturing process and other interesting tidbits.

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