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Samsung currently manufacturers LCD screens for the iPhone (right) and CPUs for the iPad 2. Apple hopes to phase out Samsung as a chip supplier, transitioning production to TMSC.  (Source: Sizzle Core)

Analysts say Apple may have difficulty dropping Samsung, though.  (Source: Samsung)
Rivalry between tech giants grows

As predicted, Apple, Inc. (AAPL) is looking to distance itself from one of its top suppliers -- Samsung Electronics Comp., Ltd. (SEO:005930).  

Samsung is one of three top Android smartphone makers.  Getting outsold two-to-one by Android, Apple has sued all three of the top Android smartphone makers including Samsung.  Apple claims that Samsung and other Android makers both ripped off its technology and its patented thin-black rectangular design.  Samsung responded with countersuits.  

The growing legal war has created a bitter divide between the firms and put Samsung's status as one of Apple's top chips suppliers in jeopardy.  Apple is the largest single buyer of Samsung liquid crystal displays.  It also relies on Samsung for DRAM chips (iPad) and CPUs (iPad/iPhone).

According to a Reuters report, the Taiwan Semiconductor Manufacturing Company (TPE:2330) has begun trial production of the A5 CPU found in the iPad 2, in a move that clearly signals Apple's desire to drop Samsung.

However, according to the report, Apple may find doing so difficult.  Samsung helped design the A5, reportedly, and holds key patents on some of its technology.  Also, TMSC may have difficulty replicating the design without defects.  Lastly, despite the companies' awkward relationship, Samsung is actually trying to convince Apple to keep it as a supplier.

Fubon Securities analyst William Wang is quoted as saying, "Apple is trying to diversify its orders but it will still maintain some kind of relationship with Samsung. I think TSMC will get the new chip orders, the issue however is allocation. Apple won't give the whole 100 percent to TSMC. Maybe it'll allocate only 20-30 percent." 

TMSC is an attractive replacement, though.  The company is the world's top contract chipmaker.  It also has extensive experience working with British architecture firm ARM Holdings Plc. (LON:ARM), which makes the underlying architecture for virtually all smart phones and tablets on the market.  TMSC has also just completed a $7.8B USD expansion of its production facilities, including developing new process technologies.

Apple reportedly hopes to go exclusively with TMSC for its next generation CPU.  While the last two generations were named the A4 and A5, respectively, Reuters reports that the next gen CPU will bear a different a non "Ax" branding.

Seo Won-seok, an analyst at NH Investment and Securities in Seoul, South Korea is doubtful that TMSC will earn the majority of the chip production contract, though.  He states, "It won't be easy for Apple to dramatically change its chip provider from Samsung. It has to redesign the chipset, which Samsung has been deeply involved from the beginning and has some intellectual property. Apple could try various suppliers but they (Samsung and Apple) need each other and the relationship will continue."

Nobody knows for sure what will happen, but the unfolding drama is fascinating to watch.  Even as Apple and Samsung directly vie for the top spot in global phone sales, the pair will continue their tug and pull behind the scenes with regards to their customer-supplier relationship.  Apple may try to ditch Samsung, but the Asian chipmaker will seek to make America's largest single phone maker an offer too compelling to refuse.



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I'd Like
By Paulywogstew on 7/15/2011 11:48:38 AM , Rating: 5
I'd like to see Samsung cut all ties with apple lets see how their phones sell with no screen.




RE: I'd Like
By Spikesoldier on 7/15/2011 11:57:35 AM , Rating: 5
apple would have no problem with that. they would source another screen from somewhere else, and the new screen would be a reason to jack the price tag up another $100.

apple will always be sure to pass the savings down to sucker legion, probably to the tune of a 167% markup.


RE: I'd Like
By Omega215D on 7/15/2011 5:34:21 PM , Rating: 2
Of course there was this issue concerning displays made by LG...

Sony might not want to partner up with them considering how HTC and Samsung are coming under fire from Apple. *Sony makes SLCD and their own "retina" display.


RE: I'd Like
By idiot77 on 7/16/2011 11:17:17 PM , Rating: 2
Sony wouldn't meet Apples expectations on quality or reliability.

I had yet another Sony brand product die after 1 year of owning it. Now I get to add portable DVD player to the list of junk I was dumb enough to buy over the last 20 years from Sony.


RE: I'd Like
By tng on 7/18/2011 9:14:31 AM , Rating: 2
quote:
I had yet another Sony brand product die after 1 year of owning it.
Yeah, that is what my Japanese friends call the "Sony Timer". That is where your new, gee whiz Sony gadget dies shortly after the warranty period is up.

That being said, Sony is a OEM for a great number of things. So you think Sony LCD screens are crap? Own a Toyota with a nav screen in it? Made by Sony. Ever have it go out? Probably not, other companies that buy components from Sony impose their own QA and design standards on Sony so they are better products.

Sony products fail not because of the individual components that make them up, but because of the way Sony has put them together in my experience.


RE: I'd Like
By StevoLincolnite on 7/18/2011 10:55:21 AM , Rating: 2
quote:
Sony products fail not because of the individual components that make them up, but because of the way Sony has put them together in my experience.


Just like the exploding batteries. That was a nasty and costly recall.


RE: I'd Like
By Omega215D on 7/20/2011 10:38:05 AM , Rating: 2
The Droid Incredible and Incredible 2 uses Sony's SLCD and is very reliable and of good quality. Same goes for their higher end displays on their Sony-Ericsson Xperia phones.


RE: I'd Like
By ApfDaMan on 7/15/2011 12:18:30 PM , Rating: 3
that would be a very bad deal for apple and samsung.

i would laugh regardless because i hate apple. it would probably be worse for apple, not being able to produce their iPhone quickly enough / at all until apple found a new supplier.

i thought samsung made some of the ipad2 screens as well? and LG make some?


RE: I'd Like
By Tony Swash on 7/15/2011 2:39:04 PM , Rating: 2
quote:
that would be a very bad deal for apple and samsung.

i would laugh regardless because i hate apple. it would probably be worse for apple, not being able to produce their iPhone quickly enough / at all until apple found a new supplier.

i thought samsung made some of the ipad2 screens as well? and LG make some?


Samsung is more vulnerable as it is in a worse state financially and isn't sitting on a 100 billion in cash. Samsung Electronics' reported its lowest quarterly profit in almost two years in April 2011 as demand for its products continued to fall.

Net profit for the first three months of the year stood a 2.78 trillion won ($2.6bn; £1.6bn) a 30% drop compared with the same period last year. The electronics maker has been hit hard by weak demand and falling prices of TVs and LCD panels. Losing a customer as big as Apple would not be good.


RE: I'd Like
By troysavary on 7/15/2011 5:12:00 PM , Rating: 2
Yeah, Samsung is sure in trouble from falling LCD prices. Maybe they should diversify into other areas, like washers, dryers, fridges, stoves, hell, why stop at appliances, why not go into banking, health care, education, retail? Oh, wait, they already do all of this, and more. My bad.

Seriously, sales to Apple are such a small part of Samsung's overall business. They are WAY more than just TVs and phones. Samsung would weather an Apple-Samsung divorce way better than Apple would.


RE: I'd Like
By ltcommanderdata on 7/15/2011 7:03:37 PM , Rating: 4
http://gizmodo.com/5759956/what-apples-78-billion-...

Apple is reportedly Samsung's biggest customer with a $7.8 billion deal signed earlier this year. If Apple completely cuts all ties to Samsung it'll be like weathering a hurricane rather than a simple storm.

http://www.crn.com/news/channel-programs/18809048/...

Apple has also been paying for the construction of Samsung's LCD factories as far back as 1999. It'll be interesting to see what type of deal exists and whether if Apple leaves they take those Apple funded, Samsung run factories with them.

http://www.isuppli.com/display-materials-and-syste...

Apple has been is rumoured to have also funded LCD factory construction for LG, Sharp and Toshiba so Apple is well diversified in guaranteed LCD production from multiple sources through factories Apple themself are helping to build.


RE: I'd Like
By BZDTemp on 7/16/2011 6:24:53 PM , Rating: 2
quote:
Apple is reportedly Samsung's biggest customer with a $7.8 billion deal...


$7.8 billion is a big amount of cash, but let's not forget Samsung has lots of customers and while none may shell out that much big number are not unheard of. For instance some 3 months ago Maersk ordered two drillships from Samsung for $1.3 billion.


RE: I'd Like
By troysavary on 7/17/2011 7:13:18 PM , Rating: 2
Samsung Electronics 2010 revenues were $133.78 billion. That is not including all Samsung's other subsideries. Samsung could afford to lose Apple, even if they couldn't find new buyers, which is an absurd idea, considering the fact there is a shortage of the very componants Apple gets from Samsung. Apple needs Samsung, Samsung does not need Apple.

Apple invested $100 million in Samsung's LCD business, according to that link. That would make them a very small partner, not, as you put is, the builder of the business. Samsung's LCD business is worth many billions of dollars. $100 million is a drop in the bucket.

Added to this, Apple's other large supplier of panels is LG, who also happens to make Android phones as well. Is Apple going to sue them also? LG would also benefit from Apple having supply problems for their iDevices.


RE: I'd Like
By tng on 7/18/2011 9:24:45 AM , Rating: 2
quote:
Oh, wait, they already do all of this, and more.
You missed that at one point, when Hyundai introduced their new cars in Korea, Samsung bought a whole factory from Mitsubishi to compete with Hyundai (their biggest rival). If I remember the story correctly, the government stepped in to stop the nonsense.


RE: I'd Like
By michael2k on 7/15/2011 2:00:25 PM , Rating: 3
It's called the AppleTV.

Also, the screen is manufactured by LG Display, not Samsung.


RE: I'd Like
By omnicronx on 7/15/2011 2:53:35 PM , Rating: 2
Depends which device, the Retina display used in the iPhone4 and iPod gen 4 are all made by LG, but Samsung now makes iPad displays which are not supplied by a single vendor. I'm pretty sure Samsung actually shipped the most iPad 2 displays in Q1 of 2011.


RE: I'd Like
By omnicronx on 7/15/2011 2:28:32 PM , Rating: 2
Samsung makes the SOC's and most displays for pretty much all of the iPod and iPad lines..

How exactly would that make good business sense when they are currently one of the top smartphone manufacturers while at the same time supplying the highest margin smartphone/tablet provider in Apple?

It makes perfect sense for Apple to 'attempt' to drop ties, not so much for Samsung whom essentially control a large portion of the market as it currently stands..


Get a ARM-license LOOSERS !!
By Peter898 on 7/15/2011 2:30:02 PM , Rating: 5
Why don't they just buy a ARM-license themselves ?
Oh wait a second .. That would require them to build a factory that actually PRODUCES something instead of using rented Communist-slaves !




RE: Get a ARM-license LOOSERS !!
By michael2k on 7/15/2011 2:42:24 PM , Rating: 2
They do have an ARM license.

What's the difference between owning vs renting a factory? Slaves are slaves.


RE: Get a ARM-license LOOSERS !!
By omnicronx on 7/15/2011 4:21:32 PM , Rating: 2
Eh? Apple is an ARM licensee.... In fact were once the largest stakeholder of ARM holdings and owned over 25%..

They sold it all off starting in 98 and 6-7 years after most of the stock was depleted. ARM then went on to become the centrepiece of Apple's top selling products.

Oh the irony..


Make up your mind...
By aksafari on 7/15/2011 12:21:53 PM , Rating: 3
Is it TSMC or TMSC?




RE: Make up your mind...
By peternelson on 7/15/2011 9:52:43 PM , Rating: 3
It's TSMC. A point well made by comments of other readers.

I agree such inconsistency is irritating, even giving the impression of being lazy. It's not like they are a little minor company of no relevance.

The error TMSC appears three times in the body of the article and also (more importantly) in the article title.

If such errors become widespread imagine how difficult it will become to effectively search for articles.


RE: Make up your mind...
By piroroadkill on 7/20/2011 5:27:44 AM , Rating: 2
I was about to comment on this, but I see it's already done.

Taiwan Semiconductor Manufacturing Company


So much misinformation..
By vision33r on 7/17/2011 11:45:00 PM , Rating: 2
Right now, Apple does not need Samsung. Remember the customer is always right. Samsung is providing Apple only the SOC production.

If you guys look at ifixit, clearly they don't need Samsung. Very few components actually are made by Samsung.

http://www.ifixit.com/Teardown/edit/5071/22968

IF you look at the Teardown and parts list, where exactly does Samsung show up here?

The SSD NAND memory is made by Toshiba, various parts are all sourced directly from other chip providers.

LG makes the nice IPS display.

Foxconn does the whole assembly and packaging.

The conclusion is that Samsung needs Apple more than Apple needs Samsung. Apple is their biggest customer. Samsung will take a huge hit losing Apple. The Samsung Galaxy Tab is only 7% of the marketshare. Apple has 79%

The only difficult position is Apple needs Samsung for various patents covering the manufacturing of the A5 SOC which they will have to redesign some areas to get around the patents.

Samsung didn't play fair, it's not right when the company that produces the chip for the customer competes with the customer in the same markets. It's an unfair practice that is prohibited in the U.S.

You don't see Intel makes a laptop or PC to compete with Dell and Gateway.




RE: So much misinformation..
By tng on 7/18/2011 10:19:30 AM , Rating: 2
quote:
Samsung didn't play fair, it's not right when the company that produces the chip for the customer competes with the customer in the same markets. It's an unfair practice that is prohibited in the U.S.
What? LOL... Apple is not making the chip and does not even hold the patent on the Arm, they are just a licensee for it. Samsung and them hold some patents on the design currently used in Apples devices. Samsung is not using the processors in Samsung branded phones.

I have to wonder about exactly what you are thinking. Samsung manufactured various devices from semiconductor chips of all kinds to cellphones and washers and has been in the business of this long before Apple came to them. The touch screens they use (despite Apples advertising) are really quite ordinary and they could get them from half a dozen other manufacturers and do for other products.


RE: So much misinformation..
By bob1029384 on 7/18/2011 10:32:06 AM , Rating: 2
Speaking of misinformation... Guess where Toshiba gets a large portion of their flash memory wafers from.


Samsung should drop Apple
By troysavary on 7/15/2011 12:16:59 PM , Rating: 3
Samsung could find buyers for their screens a lot easier than Apple could find a new supplier. There aren't many makers of small, high-res LCD displays, and probably no one else that makes sufficient volume. On the other hand, handheld device makers are springing up all over the place. Besides, even if Samsung didn't sell to a new vendor, that just means more screens for their own phones.

This isn't even taking into account the fact that Samsung also makes the Flash memory and most likely the RAM as well. So Apple is looking to replace those as well? I don't think TSMC makes memory.




RE: Samsung should drop Apple
By tng on 7/18/2011 10:06:58 AM , Rating: 2
quote:
There aren't many makers of small, high-res LCD displays,
Actually there are quite a few makers of LCD's that would love to get the business from Apple.

On the RAM you are correct, Samsung is one of the largest suppliers in the world, but again they are not the only one. While I agree that Samsung should just drop Apple, there are allot of manufacturers of everything from screens to semiconductors of all kinds that are pushing to get the business. They would only use TSMC because they are a foundry and they can design their own processors and have TSMC make it, although it sounds like they needed Samsung's help last time to design the A4 and A5.


TSMC, not TMSC
By Amoro on 7/15/2011 12:22:22 PM , Rating: 5
It stands for Taiwan Semiconductor Manufacturing Company.




RE: TSMC, not TMSC
By aksafari on 7/15/11, Rating: -1
ya know what.
By sprockkets on 7/15/2011 3:35:27 PM , Rating: 2
Feelings mutual apple! We don't want your business! Plenty of other customers want our stuff, and won't sue us in the process.

Take your big fat "i" and shove it up your ass Steve! See how well LG's light leaking screens kill your "magical" ipads!




By overlandpark4me on 7/17/2011 12:15:51 PM , Rating: 2
How do you sue for a shape and a thin design. It just shows me how arrogant theses idiots are. They think their sh*t doesn't stink, but will sue other companies for what they have been doing for years. This is the same company that would probably sue Samsung if they dropped apple, stating something moronic like unfair business practices, etc. Pot. Kettle.




Pu$$y
By AstroGuardian on 7/18/2011 4:07:30 AM , Rating: 1
"Getting outsold two-to-one by Android, Apple has sued all three of the top Android smartphone makers including Samsung?

What a pussy...




xcvzx
By bishanliu on 7/17/11, Rating: 0
Not the A5
By Phynaz on 7/15/11, Rating: -1
RE: Not the A5
By CyborgTMT on 7/15/2011 11:43:03 PM , Rating: 2
iPad 2 is an A5

Phynaz can't even research correctly.


in before either one posts...
By inperfectdarkness on 7/15/11, Rating: -1
By sweatshopking on 7/15/2011 12:06:43 PM , Rating: 5
doesn't matter to me. i want to make out with both of them.


RE: in before either one posts...
By acer905 on 7/15/2011 12:15:18 PM , Rating: 3
Nope, different styles. Tony comes off more high and mighty. Devdude is like the henchman type, desperately fending off attacks on his master


RE: in before either one posts...
By Tony Swash on 7/15/11, Rating: -1
RE: in before either one posts...
By fcx56 on 7/15/2011 12:22:29 PM , Rating: 3
I've also believed Pirks was somehow involved, particularlly now that he's come full circle bashing Apple while also foaming at the mouth about anything WebOS. I feel that was only accomplished by making some alternate personalities where he could still show his Apple love. It's likely not relegated only to the online world, my guess is that one day he came across a Pixi or something and his mild appreciation of it created a catch-22 in his brain that caused both zealots in him to clash to the point he finally split mentally.


RE: in before either one posts...
By chick0n on 7/15/2011 1:09:40 PM , Rating: 4
what does it matter? All 3 of them are retarded.


RE: in before either one posts...
By Tony Swash on 7/15/11, Rating: -1
RE: in before either one posts...
By Tony Swash on 7/15/11, Rating: -1
"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs














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