Tuesday, October 16, 2012

Samsung official cites deepening supply chain rift between Apple and Samsung

We've wondered for quite some time if, given their legal issues outside of components supplied for the iPhone, if Apple would curtail its use of Samsung as a supplier, and it seems that is coming to fruition. According to a South Korea-based report, which quotes a Samsung official, that relationship is beginning its downward spiral.

Samsung makes Apple's latest processor chip, the A6, which is used in the iPhone 5, but the relationship between the two companies is unraveling, according to a report in Korea Times.

The report cited an unnamed Samsung executive and said, "Apple is still relying on the Korean firm to manufacture its chips but has made it clear it will no longer use its rival’s technology, according to a senior Samsung official."

The official, speaking at a technology fair at KINTEX in Goyang, Gyeonggi Province, said "Samsung’s agreement with Apple is limited to manufacturing the A6 processors. Apple did all the design and we are just producing the chips on a foundry basis.

"There are three kinds of chip clients. Some want us to handle everything from chip design, architecture and manufacturing. Some want us to just design and manufacture. Some want us to just make the chips. Apple is now the third type."

That's interesting, as original reports said the A6 would be based on Samsung's quad-core Exynos processor. In addition, Apple has previously worked with Samsung to design its iDevice processors.

While a different Samsung official was quoted as saying Apple is asking Samsung to produce more flash memory chips, Apple has already reduced its memory chip orders from Samsung for the iPhone 5 as it tries to widen its supply chain. In addition, application processors are far more profitable than flash RAM.

The report goes further, citing a Barclay's report, stating that Apple will consign future A7 chip production to Taiwan Semiconductor Manufacturing Company (TSMC), which is the world's largest foundry. It adds that A7 production will begin in Q1 2014, which is interesting, as it implies that the A7 will not appear in 2013.

That said, Samsung's association with Apple has always been kind to Samsung's bottom line, so this will definitely hurt the company going forward, although if its hold on the top spot of cell phone global market share continues, the Korean giant could make up at least some of the difference with its own line of products.

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