Samsung loses Apple A6X production to TSMC

January 2, 2013
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Apple_A6X_chipSpeculation has been growing over the last few months about how Apple will untangle itself from its dependency on Samsung, a company it once saw as a partner but now thinks of more as a rival. At the moment Samsung is responsible for making the ARM processors which power Apple’s iPhone and iPad devices. Apple is seeking to find other suppliers and it looks like the Taiwan Semiconductor Manufacturing Co (TSMC) will start trial production of Apple’s latest CPU, the A6X, which powers the fourth generation iPad.

Ever since Samsung started to each away at Apple’s monopoly in the smartphone market, tensions have been rising between the two companies. This culminated in a landmark court case where Samsung was ordered to pay Apple $1.05 billion in damages when a jury said that Samsung had copied the iPhone to make its Galaxy S smartphones. Samsung is appealing the ruling, however it looks like the two companies will distance themselves from each other more and more.

According to AFP reports, the Taiwanese company, which is the world’s largest independent semiconductor manufacturer, has been contracted to start trial production of the A6X during the first quarter of this year. At the moment the A6X is manufactured by Samsung at a silicon factory in Austin, Texas using Samsung’s High-κ metal gate (HKMG) 32 nm process. It is thought the switch to TSMC will also allow Apple to move to a 28-nanometer process and eventually to 20-nanometer technology.

The loss of Apple’s processor manufacturing contract is thought unlikely to hurt Samsung. According to the DigiTimes, Samsung is currently only able to produce about 30% of the processors it needs for its own devices. Any extra capacity freed from Apple moving to TSMC will likely be used up by Samsung itself.

The contract hasn’t yet been confirmed by Apple or TSMC.

Comments

  • Edward Smith

    Good! Samsung shouldn’t help them make anything anymore with the way Apple is acting.

  • cycad007

    This is just rumor/speculation…although for anyone hoping Apple will be hurt by the transition, I can promise you Samsung will be the bigger loser. The two foundries rumored to take over Samsung’s business are TSMC and Intel. Both of which currently has superior process technology to Samsung.

    • chris

      Spoken like a true Isheep :)

      • cycad007

        So Chris…what exactly is wrong with my previous statement?

        1. Samsung loses manufacturing profits from Apple
        Yes, it might not hurt too much. But given how fiercely Samsung fought to keep Apple as a client…I’d say they would have made quite a bit more money with Apple than without Apple.

        2. Both TSMC & Intel *DO* have better process technology than Samsung.
        TSMC currently has already produced 28 nm chips. Intel is currently at 22 nm. Samsung is currently producing at 32 nm.

        No, I’m no iSheep…I simply stated the facts. To declare you a Android fanboy would stain good Android fans everywhere, therefore I’ll just call you an idiot! :)

        • ijks

          1. Technically, Samsung only uses 30% of their assembly line on their own phones/tablets because they don’t have enough factories to print out enough chips for their own line of gadgets and other companies at the same time. Which is why if you open up a Samsung phone, you will find chips made from different producers. No one knows how much of the assembly line Apple chips took up, but the freed ones will now pump out chips for Samsung phones. With 500 million phones on the way next year, most likely Samsung can have a 100% freed assembly line and they will STILL need to use other companies factories to pump their phones out. Samsung isn’t losing profit at all.

          2. It depends what you see as “better”. TSMC and Intel are early adopters. I remember when TSMC first started their 28nm chip processing and everyone was impressed. Then a month later, they ran back to 32nm because the chips they were printing out were highly unstable. What’s the point of making 10 delicious pies when 7 out 10 of them come out broken? Rather make 10 mediocre pies with just 1 out of 10 coming out broken. Also, Samsung is investing heavily into the Texas chip plant and seems to be experimenting with their 14nm FinFET chips. Forget 28nm and 22nm. Just skip it to 14nm. Herp

          • cycad007

            1. OK, you’re speculated a little. Samsung may indeed use only 30% of their assembly line but to say Samsung isn’t losing any profit over Apple’s departure would be disingenuous. As a business, you strive to maximize your profit margin, not minimize it. Had Samsung been minimizing its profit by producing Apple chips, then it would have no reason to fight tooth and nail to keep Apple as a client. It would make sense that they would want to contract to expire and switch over to producing chips for Samsung devices. Instead, that didn’t happen. No…Samsung *IS* losing profit over Apple’s departure. Just how much nobody outside of Samsung can say.

            2. Yes, TSMC has been notorious for their yield problems. However, they’ve now fixed and addressed their 28 nm process issues. Its great to hear Samsung is investing heavily into their Austin plant…more American jobs! The plant is scheduled to produce 28 nm chips in 2nd half of 2013. Producing 14 nm chips will come later down the road for Samsung. At this point, I would give the process lead to TSMC…wouldn’t you?

          • Marvin Nakajima

            1. I could see them losing a bit of profit in the short term till chip fab supply demand stabilize. With the loss of Apple Samsung is unlikely to simply sit and wait for other clients to absorb some of the production that has been freed up. It is highly likely that if the entire capacity freed up by Apple were to be absorbed it would probably be by multiple clients who will be paying more since they will not get the discounts on volume that Apple enjoyed. This may mean that less capacity has to be absorbed in order to regain the profit lost with the departure of Apple as a major client. I suspect that in addition if Apple still purchases other semiconductor products from Samsung that those prices will also increase due to the ‘smaller’ overall order and loss of related discounts.

            2. I understand the Exynos chips for the upcoming S4 will be using the 28nm process. Since the new phone is expected to be announced by April it is highly probable that they are working hard to ramp up production to meet their own chip demand. Since the 28nm process is still relatively new it remains to be seen who will have the better yielding process. For now since TSMC does appear to make the most ‘noise’ we will give them the lead, albeit one that may only last a few months.

          • cycad007

            I would agreed with you on both points.

        • Marvin Nakajima

          Doing a simple Google search on “samsung nm process” results in links to Samsung using 32/28/20/14/10 nm processes for different types of chips. I would think Samsung is nowhere near lagging behind TSMC or Intel. Perhaps they were using 32nm for Apple’s chips so you simply assumed that was the lowest they have tech for.

          • cycad007

            Marvin – Yes…that’s Samsung’s roadmap. They are currently mass producing 32 nm chips. Samsung has yet to mass produce <= 28 nm chips. TSMC, on the other hand, has. This is why I gave the edge to TSMC.

          • juseph

            28 20 nm are used for memory chips at samsung, 14 and 10 don t exist in mass production now.
            32 is smallest process for ARM processors for all samsung devices

        • zeth006

          1. Actually, Samsung DIDN’T fight to keep Apple as a client. At worst, Samsung placed some of its plant assembly plans on hold. By some projection’s Apple’s total business accounted for no more than 4-6% of Samsung’s profits. CPU fabbing was and is just a percentage of that tiny percentage.

          2. I can tell straight off the bat you don’t know what you’re talking about. You’re looking strictly at nm numbers and not at other components that go into chip fabbing, not to mention all the lingering yield issues TSMC had within the past couple of years. Try doing some more research–chip size be damned, Samsung’s 32nm process is using second generation silicone.

          In other words, you’re not stating facts, just pure bullshit.

          • cycad007

            1. Actually, Samsung DID fight to keep Apple as a client. They held an emergency meeting discussing how to keep Apple as a client when they lost the Apple lawsuit. They shot down the Korean Times report stating that Samsung would drop Apple. They contacted Apple to assure them that supplies would remain. Apple takes up close to 80% of Samsung’s application proccesor production. You *ONLY* cited CPU…but Apple previously relied on Samsung on display, DRAM, and flash memory. All that business goes away too.

            2. Really?! Because the overarching theme of my posts is that TSMC has *superior* process technology than Samsung. “Other components”, 2nd gen silicone…whatever. TSMC have now solved their 28 nm yield issues. See the TSMC stock price? Pretty close to an all-time high….one indication that the yield issue has been resolved for TSMC. Ironically, Semiwiki states…”Samsung is behind in both the manufacturing yield and performance curve”. Yup…I do my research.

            OK…like I stated TSMC has superior process technology. Give me a piece/source that states Samsung has better process technology than TSMC *NOW*. Or are you just talking “pure bullshit”?!

          • zeth006

            1. That “emergency meeting” you’re referring to was convened to discuss how Samsung would take on Apple in the legal space, not how to keep them. Contract negotiations are taking place all the time. Many of us already foresaw the rift between Apple and Samsung growing as early as 2011.

            http://www.marketwatch.com/story/samsung-holds-emergency-meeting-after-us-verdict-2012-08-26

            Seriously, this is the internet. It’s easy to make up shit and just as easy to find out it’s shit.

            And again, CPU fabbing, which is what we’re discussing, is a % of the 4-6% of profits Apple’s total business constituted. All you did was misread my statements without adding anything of value.

            2. No one but you claimed so-and-so has superior process technology over the other–please reread my comment instead of pretending I said something I didn’t say.

            TSMC is an established player, but their market share has been eroding lately. They’ve lost key customers to newcomers like Samsung. In fact, according to some analyst projections, Samsung’s chip manufacturing costs are actually lower than TSMC’s even though their market share is lower. There are numerous synergies created from having multiple chip design and fabbing operations contained in-house. That’s why many of us actually foresee TSMC having a tough time keeping up moving into 2014 and forward.

          • cycad007

            1. Yes…this is the Internet. Information is everywhere. Do you trust the Verge?
            http://www.theverge.com/2012/8/27/3272032/samsung-apple-component-partnership-firewall

            2. You stated I was talking “pure bullshit”. Naturally, any one not “bullshitting” would take offense to that notion. You stated that TSMC lost key customers….yes, but only so far that those key customers returned to TSMC as soon as those yield issues were resolved. I’d be interested to know the source saying Samsung’s chip manufacturing costs are lower than TSMC’s. Regardless, TSMC’s profit margin per chip is significantly higher than Samsung’s…so whether Samsung’s manufacturing costs are lower or not is a moot point.

            Who knows that the future will hold? But its hard seeing TSMC having a tough time in 2014 when:

            1) TSMC just nabbed Samsung’s biggest customer (Apple). Revenues will increase but yes..while profit margins fall, manufacturing profits will strengthen TSMC’s research/development. You’ll have to explain to me how TSMC loses marketshare when they might have nabbed Samsung’s biggest & most important client.

            There are only *TWO* big threats to TSMC. Intel (which is more an in-direct threat) and Samsung. GlobalFoundries hasn’t even turned a profit.

            2) Samsung competes with virtually all its customers. Samsung’s customers don’t appreciate the competition. Take HTC and Qualcomm as examples.

            3) You’re using Intel’s exact argument about the “numerous synergies of multiple chip design and fabbing in-house”. That’s why TSMC counters with their ‘Open Innovation Platform’. From my perspective, its quite an effective argument.

            4) TSMC revenue is projected to grow 15-20% in 2013…and that may just be a conservative estimate.

            5) Here is a news article regarding TSMC having a lead over Samsung in process technology:
            http://focustaiwan.tw/ShowNews/WebNews_Detail.aspx?ID=201208150019&Type=aECO

            I honestly respect the back & forth with you but I don’t appreciate you calling my posts to be “pure bullshit” or adding no value. From what I see, you’ve added quite a bit of bullshit & “no value” statements yourself.

          • zeth006

            Again, you just posted a bunch of fluff and failed to address any of my points. For the last time, I never made any claims about Samsung’s or TSMC’s technology being superior. If you’re missing the not-so-subtle distinction, I can’t help you there.

            And yes, making up shit about Samsung supposedly going batshit over losing Apple is, well, bullshit. You haven’t addressed the fact that I basically called you out on fabricating information.

            And the The Verge article you linked is irrelevant. Yes, Apple was a key customer, but that doesn’t really illustrate or support anything in our discussions. All it proves is you’re fumbling around for evidence that doesn’t support a flimsy conclusion

          • cycad007

            Exactly what information did I fabricate here? The Verge article added support that Samsung fully *WANTED* to keep Apple as a customer. If you don’t see that…well, then I can’t help you either. Of course, you probably don’t see losing a few billion dollars annually of Apple’s business to be significant either.

            TSMC fixed their yield issues in Q4. Who cares about their previous yield issues? TSMC is far and away the preferred ARM chip manufacturer. No one wants to partner with Samsung…after all, who wants to be Samsung’s bitch?!

            If TSMC lost key customers, its only because they don’t have enough capacity. When Qualcomm and Apple offers you a billion dollars for exclusive rights to one of your 11 or so fabs, then you’re probably doing something right.

            First you ask me for evidence, then you state I’m “fumbling around for evidence”. Quite the contrary, its you who don’t seem to have a clue & fabricating information. For example, just where is this report stating Samsung’s chip manufacturing costs are actually lower than TSMC’s? Did you not know of or never heard of TSMC’s ‘Open Innovation Platform’ when you mentioned that synergies crap?!

            I’m no Apple fanboy…I’ve never owned any Apple products. But then you seem to like making assumptions and speculations about things. I’m sure you get a kick calling out people for what you see as “lies”…but sadly, I actually haven’t found much substance to your statements either. You make the same unsubstantiated statements just like the Apple fanboys you hate or perceive.

          • zeth006

            In other words, all you did was take my take on your blathering and hurl it back at me to no avail.

            I don’t have anything further to discuss. I already caught you making stuff up multiple points, so the discussion’s over. Cry all you want, I won’t be replying.

          • cycad007

            Oh please….I only asked you to back up your statements. When presented with that challenge, you take the ball and go home. Sorta like the Apple fanboys, eh?

            I asked you STRAIGHT UP…what did I make up. You can’t answer. Multiple points…bullshit. You’re a LOSER. By not replying, you simply give and make made my day. THANK YOU LOSER ZETH006!! >:)

          • cycad007

            I’m feeling much better now…thank you very much! :)

          • cycad007

            Can I say ‘HA HA HA HA’ too? It just makes me feel better knowing you submitted.

  • Talha Asghar

    Apple loses not SAMSUNG

    • cycad007

      Exactly why would Apple lose by not using Samsung? Given there are so many reasons for companies *NOT* to use Samsung. Unlike TSMC, I don’t see many companies offering a billion dollars to Samsung just to have exclusive rights to one of their foundries.

      Ever wonder why Qualcomm, HTC, Nvidia, AMD, VIA, Marvell *ALL* prefer doing business with TSMC? If you don’t know the answer to this question, you have no business talking.

      • mjolnirxz

        you give way too much credit to TSMC. Earlier last year the gpu wafer yields were pretty disappointing on the 28nm for AMD and Nvidia, which also lead to why kepler was delayed for quite a bit. Moving away from 32nm on samsung could be smart technologically, but when it comes to reliability and consistency samsung still wins.

        • cycad007

          No doubt that TSMC had yield issues regarding the 28 nm process. However, there is *NOTHING* to say Samsung is any more reliable than TSMC. TSMC has a failure rate of < 0.1 ppm in 2009. What exactly are you basing your statement on?

          Your love of your Samsung devices or solid proof? If so, show me and then we'll talk so more. Otherwise, I call BS.

      • ijks

        Do you really want me to answer the question for you? TSMC is the biggest semiconductor foundry in the world. Samsung uses TSMC, not just Qualcomm, HTC, Nvidia, etc. Intel uses TSMC. Every known company that produces chips uses TSMC. It isn’t they “prefer” doing business with TSMC. TSMC is the go-to place when companies like Qualcomm, Samsung, Intel, etc. has their chip assembly line running on full 100% and are in need of more chips.

        There is a reason Apple signed a contract with Samsung and not TSMC. TSMC, has in the past, multiple-times, produced unstable chips over and over again. There is no other company right now that can mass-produce chips as efficiently and stable as Samsung. Don’t you wonder why the biggest Smartphone maker in the world only uses 30% of their OWN assembly line? Because, companies WANT to use Samsung factories and will pay a premium for it.

        • cycad007

          Agree with your first point. Let’s argue your second point…

          TSMC is quite proven when it comes to reliability. Like you stated, they are the world’s largest dedicated independent semiconductor foundry for a reason.

          TSMC’s last published failure rate was 0.1 parts per million field failure rate in 2009…which is considered exceptional. What are the “multiple-times, produced unstable chips over and over” cases you’re referring to?

          Are you referring to “bumpgate”? If so, it was not caused by a silicon wafer defect but the inter-connecters that connects the chip to the external wires. In other words, it was more a problem of the Nvidia *assembly* and not the production of the TSMC chips themselves. If not, what other instances?

          There will no doubt be manufacturing issues to solve when Apple switches over from Samsung to TSMC…its quite a complex switch after all. But switching to TSMC helps Apple in the long run.

          No company can mass-produce chips as efficiently and stable as Samsung!? I call BS on that. If you’re saying TSMC & Intel have inferior processes then prove it. Lay out your sources where they specifically state this…because I’m betting you’re speculating (again) as in your previous post.

          Ummm….*WHY* would companies *WANT* to use Samsung factories in the first place? Samsung virtually competes with every one of their clients! More importantly, revealing important designs and IP to your biggest competitor is *NOT* a winning strategy. No…there’s a reason why companies like Nvidia & Qualcomm PREFER using TSMC and everyone else before having to use/rely on Samsung.

          Pay a premium for using Samsung!? If that’s the case why does TSMC have a much *HIGHER* profit margin than Samsung Semi? According to your logic, Samsung’s profit margins would be higher than TSMC’s wouldn’t it? I would include the link that specifically shows this…but I’ve already wasted enough of my time knocking down your “speculations”. Google this yourself!

          • Tony NoName

            Why? lol….. are you aware that Samsung hasn’t won the Top CiCi Award in America as the #1 investor too many times to count? When has either TSMC or Apple ever been in the Top 15 here? Never…. and Apple has never been higher than #43. What do you think our state and federal government has given Samsung for investing more money than any foreign or domestic company in America?

            Lots of great Tax benefits in their FTZ (Federal Trade Zone) and Samsung’s customers like Apple have been getting some serious Tax and Duty Free benefits on parts made here and shipped to China for Assembly and returning as finished products! ….those are benefits TSMC can’t offer Apple!

            Now…. with TSMC unable to invest the Big Bucks Samsung spends on CapEx it’s a matter of musical chairs. Apple goes there and Nvidia, Broadcomm and Qualcomm have come over here! ;-P

            And profit margins???? lol… Samsung has invested enough in CapEx the last few yrs, they could have easily bought TSMC! hahaha… and here’s a translation for what TSMC’s Chang recently said about SAMSUNG, “Samsung is like a 700 pound Gorilla with Big Fat 2 Ton Wallet coming in taking our customers”! :DDD

  • http://www.facebook.com/marteeeen Martin Henderson

    The contract between crapple and Samsung doesn’t expire until 2014. This is old
    news. It will be positive for both of them. Currently Samsung has to buy
    processors for a portion of their own phones because of their production
    commitments to crapple. The only affect it will have on Samsung is to free up
    their facilities for their own phones. Good for Samsung and us.

  • Mi20

    Hopefully TSMC knows what they’re doing, because that would be a nasty piece of work (if Samsung/TSMC A6Xs behaved differently, what a nightmare that could turn out to be) Also switching its chip manufacturing from Samsung to TSMC is expected to be a complex
    transition that could take Apple as long as 18 months to complete.

    • cycad007

      Nobody said it was going to be easy or without “teething” problems. However, their 28 nm process technology is currently superior to Samsung’s 32/28 nm.

      Apple is currently doing a trail with TSMC. We’ll all see how it goes….

      • Tony NoName

        Superior? ahhaha…. says who? I don’t think Nvidia, Qualcomm or Broadcomm would agree with that and Apple sure won’t early after paying more and that’s only if….. A6x gets successfully ported to TSMC’s Gate Last process, that’s had far more problems than Samsung’s Gate First Process has ever had and it’s been turning out higher Yields at better quality than TSMC’s process longer! …..get the facts before you mouth off.

        They haven’t even had test chips come off line and TSMC was no help to their other customers, because they don’t have the design expertise or MONEY Samsung has. Besides the fact that TSMC only licensed Intel’s half node Gate Last Process and Intel is infamous for not lifting a single finger in helping licensees. Whereas IBM as a part of the Common Platform Alliance has got their hands dirty with members ARM, SAMSUNG, GLOBAL FOUNDRIES…. etc!!! ;-P

        btw…. Nvidia is bragging up their latest Tegra 4 chips (as they did Tegra 3’s in Nexus 7) now coming off line on Samsung’s Superior Gate First Process. Those low Yields Intel was yelling about on IBM’s SOI process vs their Bulk process? Must got deliverd to the wrong address in Taiwan instead of Austin Texas! lol….. hahaha… ^_*

  • Tony NoName

    CrApple got whooped on in Smartphone sales so bad, they’re being caught crying swiming all the way across the Pacific to TSMC. Samsung had already took away their volume discount and had already been hitting up TSMC’s best customers for their own far better Gate First HKMG 28nm Process over the last year and a half.

    Nvidia was the first to get smart and had Tegra 3 chips converted over and ramped up by last March in Austin Texas. When I say smart…. I mean 1st to realize part of the reason Apple is making obscene profits was because under Samsung’s agreement to invest Billions in America, they were able to offer some really great Tax and Duty Free benefits to customers here. Apple loved that part…. but didn’t cotton to having their volume discount taken away! hahaha….

    Samsung then got Qualcomm to bring some 28nm chip production to Samsung Semiconductor Foundry in Austin. Along with Broadcom who is also having chips coming off line here. Now Samsung is also set to bring Fin Fet 3D Stacked chip benefits to customers at 20nm/22nm process. I guess CrApple was in such a rush to keep Samsung from making same Revenue and selling more Smartphones (64 million vs 47 Million) they blew chunks on getting ahead of them. Now they’re stuck at the back of the Asian TSMC Bus for inferior chips. Also minus volume discounts and those wonderful tax and duty free status on iDevices coming into the USA! lol….

    Loved when those claiming to have Thermonuclear Weapons like N. Korea has nukes and weapons. Obviously…. CrApple claims of “We Vill Destroy You” came out of Nikita Khrushchev’s nuclear threats against us that also failed to materialize! hahaha….. so something tells me Apple is going to be making a whole lot less Profits in the Future! ….hey maybe that’s why their share price tanked? lol…..