Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s biggest chip maker by revenue, has shipped its first batch of microprocessors to Apple as the iPhone maker looks to diversify its overseas suppliers, The Wall Street Journal’s Lorraine Luk reports.
Citing people familiar with the matter, TSMC has supplanted Samsung Electronics as Apple’s chief chipmaker for iPhones and iPads. Apple will continue to rely on the Korean electronics giant for its microprocessors, but as the rivalry between Apple and Samsung heats up in the mobile and soon wearable arenas, the deal with TSMC allows Apple to be less reliant on Samsung and therefore have more leverage with respect to price negotiations for future chips.
Prior to the TSMC deal, which was struck last year, Samsung was the exclusive supplier of Apple’s microprocessors since the very first iPhone launched in 2007. And while a deal over being an exclusive supplier of chips may not seem like a big deal at first, it is.
In addition to microprocessors, Samsung also supplied the displays and memory chips for iPhones and iPads for many years. That is, until things got rocky in 2011 when Apple sued Samsung in a U.S. court for infringing the company’s patents and intellectual properties for its smartphone and tablets. Since then, Apple has been striking deals with other display and chip makers around Asia to reduce its dependence on Samsung.
Samsung has already been feeling the effects from this slowdown in sales. On Monday, Samsung announced operating income for its fiscal second quarter had sunk to a two-year low, blaming “weak” sales of low- and medium-end smartphones as a result of strong competition and subpar demand.
Things could get worse for Samsung as Apple will reportedly increase its chip orders from TSMC, according to WSJ. But while it’s not clear how many microprocessors TSMC has shipped to Apple, sources said the chipmaker has begun manufacturing Apple’s application processors with its advanced 20-nanometer manufacturing technology, which makes the chips faster and less power hungry. The two companies are also testing next-generation microprocessors with an even more advanced 16-nanometer process that will be used in “large scale” next year.
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