Apple Renews Contract With Samsung Over A-Series Processors

tlhIngan writes "In an interesting move since Apple decided to partner with TSMC a few weeks ago, the Korea Economic Daily is reporting that Apple has re-signed a contract with Samsung to produce the A-series chips Apple uses to power its iPads, iPhones and iPods. TSMC is still to produce chips for Apple, though Samsung is poised to take over from 2015."

Comments

Simple business decision

[ackthpt]

Apple knows which side of the iPad the butter goes.

Re:Simple business decision

[Bill_the_Engineer]

More like Apple learned the danger of having single-sourced components a long time ago.

Re:Simple business decision

[binarylarry]

It must be really hard to be the Apple guy in this situation.

You have to sit across from these people that have totally stolen your lunch and smile as you give them more business. Because you know if they decide to stop doing business with you, your other options are far, far worse.

Re:Simple business decision

[tooslickvan]

The glass side is the butter side since the iPad always lands glass-side down.

Re:Simple business decision

[Anonymous Coward]

It's not like Samsung is going to turn down a contract with one of the world's largest device makers either. It's guaranteed business.

Apple makes a lot of devices. Some will continue with Samsung designs. (No brainer. Refine, upgrade, sell next version. No reason to shake up a product line that's selling well) And some will use Apple's new chips fapped at TSMC.

That said, it would suck if your main competitor in the high end smartphone biz decided to squeeze your supplies because they felt it convenient to do so. Samsung is a monstrous company with plenty of dirty business under it's belt. They practically control the SK govt and operate with impunity in that country. If you live in SK, you don't cross that company. Ever.

Re:Simple business decision

[ygtai]

The reality may simply be Samsung offered a very low price that Apple cannot refuse. TSMC, while maintaining a 40%+ profit margin, doesn't have to lower its price; customers are well queued in line. However Samsung wants to expand their foundry business badly.

Re:Simple business decision

[fredprado]

In the long term maybe not. In the short term it is certainly worse, though, and everybody only thinks about the next Quarter these days...

Re:Simple business decision

[ShanghaiBill]

Seems like Apple in US...

Not even close. Samsung accounts for nearly 20% of the Korean economy. Much of the rest of the economy is controlled by one of the other four big chaebol (conglomerates). Samsung has their tentacles into every part of the economy and government. Many politicians have close links to company, and many are open about being in their pocket because "what's good for Samsung is good for Korea!" In the past, whenever Samsung wanted to enter a new line of business, the government would inform their incumbent competitors to either sell out, shut down, or face the consequences (audits, arson, arrest, etc.). Today it is just a bit more subtle.

Re:Simple business decision

[Anonymous Coward]

If you aren't interested in the story, I suggest you don't click on it and spare us your bitching.

Re:Simple business decision

[icebike]

However Samsung wants to expand their foundry business badly.

What is your source for this?
The only reason they would want to expand their foundry business would be if it was hugely profitable, and offering Apple even bigger discounts than they already were getting would make it LESS profitable. Further, Samsung already can handle Apple's total chip requirements, so this wouldn't involve an expansion at all.

Samsung might not want to IDLE any of their foundries by losing Apple business, but with Android sales surging to 70% market share world wide, there is little risk of that having any long term effect.

Re:Simple business decision

[ShanghaiBill]

Apple can get away with whatever it does in US, at least as much as Samsung can in Korea.

You should read up on the history of Samsung, the history of Korea, the intertwined political/economic dynasties, and the current state of politics in Korea before you make such a ridiculous statement.

Re:Simple business decision

[oxdas]

Samsung takes it to a whole new level. Their CEO has been convicted of felonies twice (two separate occations) and had the verdict put aside because he was deemed too valuable to the Korean economy. American Corporations have power, but in Korea, Samsung, and to a lesser extent the other Chaebol, are truely above the law.

Re:Simple business decision

[Rockoon]

Our CEO's are powerful enough to avoid being convicted of felonies to begin with.

Re:Simple business decision

[oxdas]

I have lived and worked for corporations in both places. I saw a difference. It may be one of degree, but it certainly was a difference.

Re:Samsung

[ObiWanKenblowme]

Then where would Samsung turn to for their product designs?

Pick a rumor, any rumor:

[edxwelch]

so far:
TSMC to make Apple chips
GlobalFoundries to make Apple chips
Apple to buy it's own foundry
and now Samsung to make Apple chips

Re:Pick a rumor, any rumor:

[BLToday]

They may all be true.
TSMC: Apple is feeling them out with older Apple A-series designs for Apple TV.
GF: Maybe Apple is going to use the AMD's A-series APU (Xbox ONE and PS4) in some unknown device (console?) or iMac Retina. Apple needs fast graphic performance more than CPU performance on their Retina series of devices.
Samsung: A proven and reliable source, so Apple would have a lot of reasons to continue to use them.
Own fab: why not control your own destiny

Re:Samsung

[fredprado]

To the same place Apple did. ;)

It's a $4-9 Billion Option

[Nova Express]

Apple could do it, but it's a very expensive bet.

TSMC spent $9.4 billion on their latest 300mm fab, and it will be running pretty much 24/7/365 for many, many years. And if Apple broke ground tomorrow, it's still likely to be 3 years before the fab is fully built, equipped, staffed, qualified, and running at full speed. Unless Apple is sure it can get chip volume high enough to achieve real cost savings, it's probably not worth doing.

And by then the industry might have started transitioning to 450mm.

Apple is one of the few companies in the world who could drop that much out of actual cash-on-hand without blinking, but it's a very risky bet with potentially a lot more risk than reward.

Re:It's a $4-9 Billion Option

[Rockoon]

Its a bet that is practically guaranteed to lose, so just like the lottery.

The issue isnt if they can they afford it. The issue is if it will save them money. It wont.

Apple would not just have to build the FAB, but they would also have to sell its service to others in order to make it worthwhile. Then they are in the full FAB business and then its not just $9.4 billion.. its $100 billion in R&D over the next 10 years, not to mention landing CxO's thats in-the-know about being a supplier and can make that work.

There is a reason that companies like Motorola got the fuck out of the FAB business.

Think about this one people

[Groo Wanderer]

Stop and think about this.

1) When was the last time Apple leaked plans like this?
2) The level of detail is too high for a 2015 part
3) Apple never gives the foundry product names
4) They also never specify time frames even to their foundry that far out.
5) Apple and Samsung are not on good terms.
6-17) See 5)
18) Apple is trying to get away from Samsung, cost is not an issue
19) Samsung is not any better than the other two common platform partners for tech.
20) Apple has signed with TSMC for 20nm
21) Losing Apple is a big deal for Samsung Semi, and enough of a big deal to be unpleasant for their stock
22) The source for the story is a Korean newspaper that is likely quite beholden to Samsung

You can draw your own conclusions from the above, mine is damage control on Samsung's part.

                -Charlie

Re:Think about this one people

[Anonymous Coward]

So let's think.

1) When was the last time Apple leaked plans like this?

Irrelevant. If it's a leak, it's not by Apple, but by Samsung. And leaks have been far more frequent since Jobs no longer had the power to unleash vengeance upon the leakers.

2) The level of detail is too high for a 2015 part

This is a good point. And 14nm finfet is quite speculative from Samsung. Still, it could be something like 'if you can pull it off we'll buy it' - not very likely in itself, but seeing the past performance of TMSC moving to new nodes, not completely impossible.

3) Apple never gives the foundry product names

Probably speculation in this one anyway.

4) They also never specify time frames even to their foundry that far out.

Seeing as 14nm is still quite a way off for anyone who's not Intel, planning further ahead might not be too unusual.

5) Apple and Samsung are not on good terms.

6-17) See 5)

18) Apple is trying to get away from Samsung, cost is not an issue

This does not increase likelihood, but it's not as bad as it sounds. Count the suppliers Apple can go to for this type of order Charlie, I know you can. Now imagine TMSC will as usual *ahem* develop 'difficulties' with the 14nm node initial runs.

19) Samsung is not any better than the other two common platform partners for tech.

You're rambling here. The other partners are IBM and GloFo. Neither has the capacity (available, that is) and the ARM expertise of Samsung. Well, IBM will probably not take Apple's order anyway, and GloFo, well, you know the answer to that one. So it's irrelevant.

20) Apple has signed with TSMC for 20nm

Rambling again? this is about 14nm, not 20nm. And Apple is yet to receive any meaningful volume from TMSC on those 20nm units. The rumour mill has them signed up for 16nm and 10nm as well, but that's not what you're arguing (and honestly, it's more likely Apple took out an option to sign up for the next nodes contingent on the 20nm performance)

21) Losing Apple is a big deal for Samsung Semi, and enough of a big deal to be unpleasant for their stock

Not really. It's all about margin, see?

22) The source for the story is a Korean newspaper that is likely quite beholden to Samsung

Aaaand ... a good point again, finally.

Really Charlie, the SNR here is a bit embarrassing. Do try to make a better argument next time, will you?

Re:Think about this one people

[Cassini2]

Apple is shipping 5.4 million iPhones and iPads per week. PC sales are at 5.9 million units per week. These numbers were pieced together from macworld and reuters. Assuming all of Apple's dreams come true, in 2015 Apple must plan for the case it is selling more processors than Intel, which will mean that Apple needs all the fab capacity it can get. Additionally, given the recent track record on new product launches at TSMC and GloFo, Apple needs a backup plan if one or more fab suppliers have problems.

Even if Apple purchased a new fab, additional reserve capacity might be needed. That may be enough to ink a deal with Samsung. Samsung is the only company with the proven ability to make enough cell phone and tablet processors to cover the majority of the world wide market, including Apple.

Re:Apple has bought a fab according to semiaccurat

[slew]

The rumor (depending on who you heard it from) is that Apple...

- is in negotiations to buy UMC outright
- is going to be a Fab investment partner in Chartered Semi or Global Foundaries (both are owned by Abu Dhabi's Advanced Technology Investment Co.)

Any of these options would give them a reasonably cutting edge process and the capacity to provide the chips they need. The advantage of Global is that it is a member of the same common platform group as Samsung and IBM. Since Apple already fabs at Samsung, it's quite possible that they can easily port over all their custom ARM cpu designs to Global Foundaries co-owned Fab and tape out SOCs based on one CPU design. The added benefit of using Global Foundaries would be that it would allow them to avoid tipping off Samsung about how many wafers they are running or when they are taping out or what frequency their CPU runs at with what yield... Global is also looking for a partner to help build-out a monster $10B fab in upstate NY. I'm sure they are courting Apple big-time...

Of course, this rumor might be total BS, but at least it makes a modicum of sense...

Apple/Samsung Dialog

[sl4shd0rk]

Apple: Rounded corners, square design! You loose sucka! Pay!
Samsung: *m-ok* here, have $450M.
Apple: Muahahaha!! *twirling mustache*

            (1 year later in Apple board room....)

Engineer: It's a new design. More cores, cache and video on die.
Exec: Great! Send those plans to TI!
Engineer: Uh... it's not something they can do
Exec: But we are investing in America! Get TI on the phone!
TI: The design is outside the capabilities of our manufacturing limits.
Exec: *m-ok* get Samsung on the phone...

Samsung: Muahahahaha! *twirling mustache*

Re:Apple/Samsung Dialog

[AmiMoJo]

Except that Samsung hasn't actually paid them, they are still appealing. Cool story though.

yeah right

[slashmydots]

I think they're going to pull a "Parks and Recs" on them and they'll open up the box of first chips and every one will have "go fuck yourself" etched into it and basically be solid ceramics.

Good guys team up!

[RubberDogBone]

Comic books don't interest me but I would not mind seeing some sort of hero team-up where companies like Samsung, Apple, Google, Nokia, even Microsoft, all used their powers together to make the world a better place instead of spending a lot of their time in communal battle, either actual, in courts, or in the minds of the rabid customer base.

It will never happen because shareholders would freak, and because competition spurs innovation. But it should not be inherently wrong for Apple to source parts from Samsung and allow the best apps Google can offer for iOs. The people who lose out when the territorial walls go up are in fact the customers.

On a broader level, the future of the human race may eventually depend upon companies and even countries putting aside differences to work together toward common goals, and it seems to me that we are generally unaccustomed to and perhaps incapable of that sort of cooperative effort, and as such, we may never inherit the stars because we're too busy suing each other about the patents on the latest space toilet seat.

Re:Apple has bought a fab according to semiaccurat

[Groo Wanderer]

You do realize that the UMC rumor came from the Mac sites who all wrote me asking for free access to essentially republish my work openly. Before I could even respond they flat out made up that I was saying it was UMC, which I did not do. They got this flash of inspiration from the metatags my editor put in. For some reason they picked out UMC and ignored the five other fabs in the tag list. Could it be that UMC was the last one? Did they miss that the tags get alphabetized by the system? Are they that ignorant? Don't answer the last one.

Short story is that the morons at the Mac sites flat out made up the UMC thing and attributed it to me. That is modern 'journalism' for you.

            -Charlie

WHOOSH

[SuperKendall]

You seem to have utterly missed my point that money does not matter, this is about control.

You seem to be ignorant as to what Apple would do with chips produced (as in potentially every product, not just AppleTV's).

You seem to be dumb enough to think that Apple wouldn't upgrade the FAB over time...

Basically, you just aren't thinking.