Apple’s Independence from Samsung: Apple Works with TSMC for Manufacturing of A8 | BusinessKorea

Wednesday, August 05, 2015

Apple’s Independence from Samsung

Apple Works with TSMC for Manufacturing of A8

18 December 2013 - 1:09pm

Apple is giving concrete shape to various measures to reduce its dependence on Samsung Electronics’ application processors (APs). 

According to industry sources, Apple has recently placed an order to TSMC in Taiwan for its next-generation AP, tentatively dubbed the A8. It is expected that TSMC’s AP supply to Apple will be increased down the road, capitalizing on its newly established 20 nm production lines, which will be put into operation in January next year. 

Meanwhile, Samsung Electronics’ A8 production volume is likely to decrease with time. At present, Samsung is supplying most of the APs for the iPhone and iPad. TSMC has had difficulties in expanding production due to some product yield problems. 

However, TSMC’s expansion in production at this time is expected to result in double-digit sales growth. Its CEO Mark Liu has recently explained that his company will start mass production in the 16 nm process at the earliest time possible next year. 

Credit Suisse researcher Andy Abrams, in the meantime, predicted that the APs for Apple would account for 6.5% of TSMC’s total sales for next year. Daiwa Capital Markets analyst Eric Chen estimated the percentage to be over 10%. The Taiwanese company recorded US$5.53 billion in sales in the third quarter of this year. 

Under the circumstances, it is expected that Apple will accelerate its efforts to rely less on Samsung Electronics next year. The purpose is to take an advantageous position in its patent lawsuits against Samsung that are going on in the United States, Korea, and Germany. 

Apple is still working with Samsung Electronics’ Device Solutions (DS) Division while continuing its legal battle against its IT Mobile (IM) Division. Samsung’s subsidiaries are supplying Apple with APs, memory, NAND flash memory, LCDs, and many other key components. “Apple is no match against Samsung’s IM Division unless it is supplied with the DS Division’s components,” said an industry insider, adding, “As such, it will be very important for Apple to reduce its dependence on Samsung Electronics in the long term.”

If Apple sticks to its plan, Samsung Electronics may be required to separate the IM from DS Division in a two-track strategy. Experts are pointing out that the DS Division will have to further beef up its technological and cost competitiveness. 

At an Analyst Day event held on November 6, Samsung Electronics announced that it would apply 14 nm and 10 nm microfabrication processes to its foundry business. These are a couple of generations ahead of TSMC’s 16 nm process. “We are currently working on the 10 nm process and will provide our foundry customers with advanced technologies such as FinFET and 10 nm,” said Wu Nam-seong, president of the System LSI Business Unit of the DS Division of Samsung Electronics.

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