Apple’s relationship with Samsung at breaking point

Karen Haslam
16 October, 2012
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A senior Samsung official is said to have told the Korea Times that Apple no longer wants its help designing the A-series of chips that appear in its iPad and iPhone.

This isn’t surprising news, given Apple and Samsung’s highly publicised court room battle over patents, and news that Apple’s A6 chip in the new iPhone 5 is designed by Apple and merely put together on Samsung’s production line.

A Samsung official confirmed this, saying: “Samsung’s agreement with Apple is limited to manufacturing the A6 processors. Apple did all the design and we are just producing the chips on a foundry basis,” notes The Next Web.

Another Samsung official said: “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”.

He added: “The high-profile hiring of someone like Mergard directly from a big rival no doubt increases mutual tension. Apple wants to internalize its management, even for application processors, and to lower its dependency on Samsung for those logic chips,’’ added the source.

Apple hired Samsung’s Vice President and Chief Engineer Jim Mergard in the last few days.

Apple ditching Samsung

Apple is said to be planning to take all its business away from rival Samsung, amid claims is it hoping that Taiwan Semiconductor Manufacturing (TSMC) will manufacture the next generation of A-series processors using their 20nm technology.

Analysts at Citigroup Global Markets believe that TSMC will take on Samsung’s workload over the next couple of years, becoming Apple’s sole supplier for the 20nm processors. Citigroup analyst JT Hus believes these chips could power Apple devices (including the iPad, iPhone, Apple TV, and potentially the rumoured Apple television) by 2014. He expects that production will kick off in the fourth quarter of 2013.

Previous reports had indicated that Apple and Qualcomm had been trying to achieve exclusive access to TSMC’s chip production. However, TSMC had rejected the bids. TSMC is open to dedicating individual factories to single customers, reports MacRumors.

Samsung stands to lose out if Apple does move its business away. As we noted previously, Apple’s business is a significant revenue stream for the South Korean company. Apple is Samsung’s largest customer and accounts for 9 percent of Samsung’s revenue. As we wrote, the Apple contract was worth $2.1 billion to Samsung this year alone.

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