Sat, Apr 04, 2015 - Page 13 News List

Samsung may make iPhone chip

U-TURN:Apple had picked TSMC to produce A8 processors for the iPhone 6 and iPhone 6 Plus after the relationship with Samsung soured because of legal disputes

Bloomberg

Samsung Electronics Co is to manufacture the main chip in Apple Inc’s next iPhone model, regaining a customer previously lost to Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people with direct knowledge of the matter said.

Samsung is to start making Apple A9 processor chips at its Giheung plant in South Korea, the people said, asking not to be identified because the contract has not been discussed publicly. Additional orders are to go to Samsung’s partner, GlobalFoundries Inc, according to another person familiar with the arrangement.

Winning the order from Apple is expected to help the world’s second-largest chipmaker rebound against TSMC, which last year ended Samsung’s monopoly over contracts to make iPhone and iPad chips. Both manufacturers have boosted capital expenditure to gain business from Apple and Qualcomm Inc in the more than US$300 billion semiconductor industry.

The Apple order might lead to additional business, HI Investment & Securities Co Seoul-based analyst Song Myung-sup said.

“If GlobalFoundries quickly adopts Samsung’s most advanced technology and increases yield, it could also win orders from Qualcomm,” Song said.

Samsung spokeswoman Kelly Yeo declined to comment.

GlobalFoundries spokesman Kevin Kimbal said the firm does not comment on customer relationships.

Apple spokesman Josh Rosenstock declined to comment.

TSMC spokeswoman Elizabeth Sun (孫又文) also declined to comment.

Apple picked TSMC to produce the A8 processors for the iPhone 6 and iPhone 6 Plus devices. Those agreements came as the relationship between Apple and Samsung soured because of legal disputes dating to 2011.

Apple’s decision to turn back to its rival for the supply of crucial components might vindicate Samsung’s investments in trying to grab the lead in manufacturing technology. Apple spent US$25.8 billion on chips last year, accounting for 7.6 percent of industry purchases, researcher Gartner Inc said.

Cupertino, California-based Apple has yet to announce specifications or unveil a design for its next iPhone. In the past, Apple has introduced interim versions denoted with an “S,” leading to speculation the next device out this year will be the iPhone 6s.

Supplying chips for the iPhone and its own S6 smartphone is expected to help Samsung turnaround its non-memory semiconductor business from a 1 trillion won (US$916.9 million) loss last year to a 1 trillion won gain, Song said.

Samsung and TSMC said they would invest heavily this year to put advanced production capabilities in their plants, moves that analysts said were based on the assumption they would get orders from Apple.

The South Korean company is spending US$15 billion on a new chip plant outside Seoul.

TSMC, the world’s biggest contract manufacturer of chips, budgeted a record US$12 billion for plants and equipment. Chairman Morris Chang (張忠謀) told investors in October last year that TSMC would lose ground to Samsung in the most advanced chip technology, before reclaiming the upper hand next year.

Whether Samsung can hold onto the contract exclusively might depend on how quickly TSMC can bring online more advanced production and the pricing that both companies are willing to offer Apple.

UBS AG estimates Samsung spent US$3.7 billion on capital expenditure for its processor business last year and might raise that to US$4.9 billion this year.

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