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Taiwan Semiconductor May Win iPhone Chip Biz

Taiwan Semiconductor May Win iPhone Chip Biz

The important decision awaiting Apple in 2014 -- when its chipmaking agreement with Samsung expires -- is highlighted in a published report that says if and when an iPhone 6 comes out, it may have chips from a Taiwan-based supplier. Even if the report doesn't pan out, the list of potential foundry suitors eager to work with Apple is starting to coalesce as Cupertino looks to end its relationship with Samsung, its main smartphone rival.

By Rachelle Dragani MacNewsWorld ECT News Network
04/03/13 5:00 AM PT

Apple might be ditching Samsung as a chip partner in favor of Taiwan Semiconductor Manufacturing Company, according to a report from Taiwan's Economic Daily News.

Samsung has been making all of Apple's mobile chips since 2010, but the company's contract is set to expire in 2014. When that happens, Apple is reportedly going to rely on TSMC to make a so-called "A7" processor -- a next-generation chip that would power a future iPhone.

Speculation that Apple wants to drop Samsung -- its chief smartphone rival -- as a chip partner is not new. Given that the relationship between the two companies is only growing more bitter by the day, though, it's not surprising that the rumors about Apple picking a new partner are gaining momentum, said Jim Turley, founder and principal analyst at Silicon Insider.

Switching chip providers is not an overnight change, Turley added, noting that it can take up to a year to get a new, proper fit between a product and chip. Given Apple's place in the smartphone market, though, many companies would be willing to make that happen.

"Apple's volumes are high and it would be considered a prestige client," he told MacNewsWorld. "TSMC, GlobalFoundries, SMIC and other foundries would bend over backwards to get Apple as a customer, and most would willingly assign some of their own engineers to help Apple's engineers make the necessary changes."

New iPhone, New Foundry

If Apple is ready to make that change -- or even if it will just add a chip supplier instead of dumping Samsung entirely -- TSMC is a logical choice, said Jim McGregor, founder and principal analyst at TIRIAS Research.

"They are the world's leading foundry, they have engineering talent to assist Apple if necessary, and a broad IP portfolio to protect Apple, which is one of the most critical aspects of these foundry relationships," he told MacNewsWorld.

The reports from the Taiwanese paper said that the TSMC chips wouldn't launch until Apple debuted its iPhone 6. Other published reports point to a so-called iPhone 5S to begin production next quarter, which could mean a summertime launch for a new model. That means the updated semiconductors wouldn't appear in the newest iPhone or iPad models.

Even if they were, though, the consumers gobbling up the new products probably wouldn't notice the change, Turley said. As much of a shake-up as it would be for the companies involved and the competitive relationships in the chip industry, Apple's mobile devices will likely remain the same in the eyes of the consumers.

"As far as customers are concerned, they won't notice any difference at all," he said. "Sure, changing foundries is a big deal to the engineers involved, but to the average person it's a non-event."

Thumbs Up From China After Apple Says 'Sorry'

Apple also received worldwide attention this week after it publicly apologized to Chinese iPhone customers who had raised concerns about the company's customer service and warranty policies.

The negative press attention wouldn't be welcome anywhere, but it is especially damaging in China. The country is quickly becoming one of the world's most important markets for smartphone sales, and Apple is working to secure a sales lead amid stiff competition from Android, BlackBerry, and popular and affordable Chinese vendors.

CEO Tim Cook responded to the criticism by issuing a public letter apologizing for the misunderstanding and vowing to provide better customer support going forward.

In a country that values the humility needed for such a public acknowledgement of a mistake, the apology was well received.

The Chinese media outlets that had spent the past few weeks criticizing Apple publicized the company's apology Tuesday. Many, including the tabloid Global Times, which is published by the Communist Party publication The People's Daily, praised Apple in comparison to other U.S. companies, according to a report from Reuters.

Apple did not respond to our request to comment for this story.


Rachelle Dragani is a freelance reporter based in Brooklyn, NY. She enjoys staying on top of e-commerce deals, reporting on what new gadget is coming your way, and keeping tabs on anyone trying to hack into your info. Feel free to e-mail her at rachelle.dragani@newsroom.ectnews.com.


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