Apple Inc’s move to seek a second source for its advanced chips apart from Samsung Electronics Co — possibly Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) or GlobalFoundries Inc — is likely to take a few years rather than a few quarters, a semiconductor industry insider said.
However, Samsung’s increased ambitions in the foundry business will push it to challenge GlobalFoundries for the world’s No. 2 position as soon as this year, IC Insights Inc president Bill McClean said in his latest industry report, issued on Tuesday.
Last year, Samsung nearly doubled its foundry sales to US$4.33 billion, from US$2.19 billion in 2011, surpassing Taiwan’s United Microelectronics Corp (UMC, 聯電) to become the third-largest semiconductor foundry in the world.
TSMC remained the world’s top foundry, with sales increasing 18 percent year-on-year to US$17.17 billion last year, which was almost four times that of second-ranked GlobalFoundries, whose sales grew 31 percent annually to US$4.56 billion, according to the US-based semiconductor market research firm.
UMC was the fourth-largest foundry last year, with sales decreasing 1 percent year-on-year to US$3.73 billion, followed by China’s Semiconductor Manufacturing International Corp (SMIC, 中芯), which saw its sales rise 27 percent to US$1.68 billion, IC Insights said.
“Samsung has the ability (ie, leading-edge capacity and a huge capital spending budget) and desire to become a major force in the IC foundry business,” McClean wrote, adding that he believes the company has set its sights on the No. 2 spot this year after expanding its foundry sales by 98 percent last year and 82 percent in 2011.
McClean said Apple last year accounted for 89 percent of Samsung’s total foundry sales and therefore the South Korean company would have to seek ways to make up for the potential sales loss if Apple shifts to other foundries to produce its custom processors, such as TSMC, GlobalFoundries and possibly Intel Corp.
Last month, Credit Suisse’s regional research head, Manish Nigam, said in a report that he expected TSMC would likely secure orders from Apple to produce next-generation processors as early as the second quarter of this year, faster than his original prediction of either late this year or early next year.
However, McClean disagreed, saying for the time being Apple must still rely on Samsung for advanced processors used in iPads, iPhones and high-end iPods. Moreover, it would be difficult for TSMC to allocate much of its production capacity to Apple because the Taiwanese firm was working at over 100 percent utilization throughout the first three quarters of last year, he added.
“One important factor that is oftentimes overlooked with regards to the Samsung/Apple IC supply relationship is the large amount of memory, both DRAM and flash, that Apple buys from Samsung,” McClean wrote in the report.
“Since Apple is such a big memory customer, Samsung is able to ‘bundle’ its IC offerings to Apple and deliver a cost-effective high-volume supply of leading-edge flash memory, DRAM and application processors to the company,” he said.
While the two companies will still engage in patent lawsuits and in market competition in the foreseeable future, Apple will continue its “marriage of convenience” with Samsung at the chip level, McClean said.