Rumors: Samsung May Become Apple’s Exclusive Chip Supplier

According to anonymous sources, Apple Inc. would turn to Samsung Electronics for the manufacturing of central chips on its next iPhones. Currently, the chips are being built by Taiwan Semiconductor Manufacturing Co (TSMC).

Samsung will soon start to mass produce Apple A9 processor chips in its Giheung-based plant in South Korean, sources also claim, although the deal is still under negotiation. Moreover, Globalfoundries Inc., a Samsung business partner, will take care of additional orders according to the new agreement.

Last year, Samsung lost its exclusivity deal with Apple to produce chips for its iPhones and iPads to TSMC, after significantly boosting expenditures to gain the contract in a more than $300 billion semiconductor business.

Analysts believe that the upcoming deal with Apple may open the gates to more business. If Globalfoundries is able to quickly implement Samsung’s technology and increase its yield, the second-largest chip maker could also win a deal with Qualcomm.

Yet, Samsung representatives declined to comment, while Globalfoundaries spokespersons stated that their company wouldn’t disclose any details related to any customer relationships. Apple was also secretive, and so was TSMC.

TSMC supplied Apple with A8 processors that currently power iPhone 6 and iPhone 6 Plus smartphones. Apple chose TSMC after having serious legal problems with Samsung dating back to 2011.

But Apple’s willingness to work again with Samsung may help the chip maker recover the major investments it had made to gain monopoly in the chip making industry.

According to its financial papers, Apple spent more than $25.8 billion on chips alone last year, which represents about 7.6 percent of the total purchases in the industry.

Yet, the California-based tech company failed to disclose any tech specifications or details related to the design of its new iPhones. As we are already accustomed to, Apple will likely launch some preview versions marked with a final S. So, this year’s iPhone may be called the iPhone 6s.

Still, the new Apple deal will prove very beneficial for Samsung which lost more than $900 million last year when running its semiconductor business. Experts hope that the company will soon start to supply chips for its former rival Apple’s devices, as well as for its new Galaxy S6 and S6 Edge devices and make up for the loss.

Samsung and TSCM already announced their plans to invest heavily in the chip making industry which may be a hint that the two companies make preparations to get Apple orders.

TSMC, which is the largest chip maker in the world, announced a $12 billion investment in its equipment and plants for this year. In October, the company expressed its concerns that without heavy investments it would lose ground to Samsung by 2016.

Samsung also plans to invest in its processor business nearly $5 billion this year. Last year, the capital expenditures involving chip manufacturing were about $3.7 billion worth. However, Samsung didn’t directly disclose these figures, but its executives told shareholders in January that the company would spend more this year.

Yet, an exclusivity deal with Samsung may prove beneficial to Apple too since having a single supplier would result in cost savings in designing chips to match all the chip makers manufacturing techniques.

Image Source: iCreate