Apple To Replace Samsung As Chip Supplier, Shifting to TSMC

By Alexandra Burlacu | Oct 14, 2012 09:57 AM EDT

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Apple is reportedly preparing to sole-source its quad-core processors from the Taiwan Semiconductor Manufacturing Company (TSMC), ditching long-time supplier Samsung Electronics.

TSMC specializes in the 20-nanometer process and is expected to become the sole supplier of such chips to Apple. This would be a multi-billion dollar hit to Samsung, as Apple is one of its largest customers. Apple is still under contract with Samsung, but will reportedly move to TSMC as soon as it fulfills its current obligations.

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According to China Economic News Service, a research note from Citigroup analyst J.T. Hsu states that Apple is working with Taiwanese chip manufacturer TSMC as its only supplier for future quad-core chips based on the more efficient 20-nm process. The timeline Hsu estimated indicated that the quad-core chips could make their way into Apple products in 2014.

"Citigroup Global Markets' market research fellow, J.T Hsu, pointed out that Apple began verifying TSMC's 20nm process in August this year and may begin risk production in November with the process. Volume production is expected to start in the fourth quarter of 2013, raising the possibility that TSMC will hike capital expenditure to US$11-12 billion in 2013 and 2014," reported China Economic News Service.

"Hsu estimated Apple to design quad-core processors into iPad, iTV, and even MacBook. iPhones will still be powered by duo-core processors to highlight its low power consumption merit."

While Taiwanese TSMC is still in the early stages of developing its 20-nm process, the company pledged to make significant improvements with the technology.

"TSMC's 20nm process technology can provide 30 percent higher speed, 1.9 times the density, or 25 percent less power than its 28nm technology. TSMC 20nm technology is the manufacturing process behind a wide array of applications that run the gamut from tablets and smartphones to desktops and servers."

Apple is currently working with Samsung as the manufacturer of its A-series chips for its iOS devices, testing out a 32-nm process with a revised A5 chip earlier this year. For the new A6 chip packed in the iPhone 5 Apple went all-in with the 32-nm process.

Over the past 18 months or so there have been several rumors suggesting that Apple is looking to switch its ARM-based based chip production to TSMC, but so far the company has stuck with Samsung, despite their high-profile litigations. A report in late August claimed that Apple and Qualcomm had each attempted to secure exclusive access to TSMC's chip production, but TSMC ultimately rejected both offers.

On the other hand, TSMC has indicated that it is open to dedicating individual factories to single customers. Based on the latest reports, it seems that Apple is interested in pursuing this route to take advantage of TSMC's expertise.



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