As Samsung start the sales of its flagship S6 worldwide this month, Samsung has also achieved yet a significant economic milestone for its chip division (Samsung Electronics), as it was awarded the order from Apple o manufacture the next-gen iPhone main chip. This means Samsung has won back one of their main customers whom they previously lost to Taiwan Semiconductor Manufacturing Company (TSMC), as sources were revealed from people with first information of the matter.
The order of Apple next-gen iPhone main chip will be manufactured by Samsung Electronics at its Giheung Plant, South Korea. Additionally, Samsung long-term partner, Global Foundries, will benefit from this order through partnership to achieve the demand volumes that is required for this order.
Winning this order from Apple means Samsung Electronics, currently ranked as world’s second largest chipmaker, will be able to have yet another competitive advantage to take over first position from TSMC. Last year 2014 has ended Samsung’s monopoly over iPhone and iPad chips contracts. Both manufacturers have been consistently boosting their capital expenditures to gain business from Apple and Qualcomm in the current $300 billion semiconductor industry.
The Apple order may lead to additional business, if Global Foundries picks up the pace quick enough from Samsung’s advanced technology to increase its yield. That will mean it has chanced to win orders from Qualcomm.
The winning streak that Samsung had enjoyed was due to the legal disputes that Samsung and Apple had, dated back to 2011. Therefore, this is one of the main factors we see as to why Apple chose TSMC for its A8 main chip manufacturer for iPhone 6 and iPhone 6 Plus devices.
Apple’s decision to seek rival Samsung for its crucial component supply suggested the massive investments Samsung has made to grab the line and hold the lead in manufacturing technology. This point has been reinforced with researcher Gartner Inc whom highlighted Apple’s record spending of $25.8 Billion on chips last year has accounted for 7.6 percentages of industry purchases.
The positive economic gain for Samsung with supplying chips for iPhone and its own flagship S6 smartphone will help itself turn its non-memory semiconductor business from a 1 trillion won ($914 million) loss last year to a 1 trillion won gain, quoted from Song of HI Investment
The strategies adopted by the top Semiconductor Giants, Samsung and TSMC, whom highlighted their intention to invest heavily this year to put advanced production capabilities in their plants, moves that has strongly suggested their desire to take on the gamble that investment will allow them to secure the orders from Apple.
TSMC, the world largest semiconductor manufacturer, had set aside a record budget of $12 Billion for its plants and capital equipment.
Looking forward, its will be an intensive battle and perpetual war between Samsung and TSMC, as whether Samsung can hold onto the contract as exclusive partners strongly depends on how quickly TSMC can bring to the table more advanced production and pricing that both companies are willing to offer to Apple. The benefits of using Samsung, in this case, whom benefitted from collaboration with Global Foundries, means cost savings to Apple in the chip design to fit the chipmaker’s physical specific specifics and manufacturing technique which Samsung will take care of the contingency plan to accommodate the massive demand volume thus Apple eliminating the possibility of additional time wasted by its sourcing department in looking for another vendor to meet its demands.
Source: Bloomberg Business