Apple inks multi-billion dollar chip fabrication deal with Samsung, sources say

“Samsung Electronics agreed with Apple to produce application processors (APs) from next year for iPhones and iPads, sources said Monday,” Kim Yoo-chul reports for The Korea Times.

“The agreement means Samsung will become a primary supplier of APs to Apple, pushing its chief Taiwanese rival TSMC back to second place,” Kim reports. “From 2016, the company will supply 80 percent of APs used in Apple devices, and TSMC the remainder.”

“AP chips function as the brain in computing devices. Apple will design its A-series APs, and Samsung will fabricate them in partnership with GlobalFoundries (GF), a semiconductor manufacturer headquartered in Santa Clara, California,” Kim reports. “‘Apple has designated Samsung as the primary supplier of its next A-series chips powering iOS devices from 2016 as the alliance with GlobalFoundries (GF) enabled Samsung to cut off capacity risk,” a source familiar with the deal said. The value of the deal is said to be worth ‘billions of dollars,’ according to the sources.”

Read more in the full article here.

MacDailyNews Take: Tim Cook to the Samsung thieves: “I wish I knew how to quit you.”

Related article:
Bernstein: Why Apple Will Leave TSMC Next Year – August 4, 2014

26 Comments

    1. +1 Agreed.

      Here is the thing: Apple’s chip requirements are so huge that there are only a few companies in the world who can meet them. Intel could, but refuses to provide foundry services to Apple (and everyone else). Samsung – regrettably – is the only other chip maker (and even they needed to partner with Global Foundries on this deal) with the ability to meet both the quality and quantity requirements.

      1. Not only that…I’m sure Apple now sees Samsung phones as vanquished foe…so they can keep them close.
        Principles be damned! It’s just business.
        The lawsuits served a purpose and Samsung blinked, but I’m glad it’s over. Let the products talk instead.

  1. Without knowing the details of the deal, I would imagine that Apple’s leadership did not waste any opportunities to pad their bottom line. With all the hits to Samsung’s business resulting from iDevice proliferation, they’re hemorrhaging dollars and NEED Apple’s business to maintain some semblance of profitability. I can only assume that Apple swept in like a righteous vulture and dictated terms that favor Apple. I wouldn’t be surprised if Apple negotiated rock bottom pricing that Samsung would have been averse to this time last year. This is a victory for Apple: maintain relationships with the best chip fabricator rather than having to source new manufacturers, with the best possible pricing for Apple. Double whammy for Samsung, they take a hit on manufacturing for their chief rival, who uses their own chips to kick Samsung’s ass even further down the rabbit hole.

    1. I agree. If true, this has to be only reason for a supposed long term deal. Otherwise they’d just keep playing Samsung and TSMC off each other year by year.

      At this point, Samsung is hardly even a competitor. Apple has won the high margin smartphone war. Might as well lock in some cheap chips to keep those margins high.

    2. I’m not sure that Samdung hasn’t blinked. Seems they are acting a lot less cocky than they were. They have taken big spoon fulls of humility over the last 4 months as their financial forecasts continue to get weaker and weaker, and their new product offerings have to be discounted almost immediately to garner any attention at all.

      It’s important to all Asians to ‘save face’ and I’m would not be at all surprised in Samdung didn’t come to Apple with an olive branch in each hand.

    1. Really? Struggled for years to try to match the Arm designs and failed abysmally, I really don’t think anyone should help them do so or it just might give the PC brigade that leg up which might keep them relavent in the tablet and lightweight laptop market. Would be the only way back for Microsoft too riding on any available coat tails.

      1. Apple does the designing, Intel would just manufacture the chips, same as Samsung.

        The PC brigade doesn’t need that leg up, they already have access to same chips Apple does. They can easily make light weight laptops if they’re willing to spend the same amount of money on high quality components that Apple does. The reason they don’t is that they’re too busy trying to undercut each other’s prices to spend money on high quality components. On the rare occasion they do, Windows users rarely pay for that kind of quality, they’re conditioned to buy on price.

        Apple users don’t mind paying for quality, it’s part of the Apple users mindset, conversely Windows users do mind paying for quality and that’s part of their mindset. Either way you get what you pay for.

  2. even Vanna White knew how to quit Samsung:

    Vanna White sued the Samsung Electronics corporation over its use of a humorous ad featuring a robot turning letters on a game show. The lower court decision in Samsung’s favor was reversed by the United States Court of Appeals for the Ninth Circuit, White v. Samsung Electronics America, Inc., 971 F.2d 1395 (1992), and the Ninth Circuit denied a rehearing over a colorful dissent by Judge Kozinski. White v. Samsung Electronics America, Inc. 989 F.2d 1512 (9th Cir. 1993). The U.S. Supreme Court denied certiorari. Samsung Electronics America, Inc. v. White, 508 U.S. 951 (1993). White ultimately was awarded $403,000 in damages.

    1. Thank god you don’t run Apple. To produce its iOS devices, Apple uses hundreds of millions of A-series chips each year. The number of companies that can do 14nm fab and produce anywhere near that number of chips is VERY SMALL: Basically, it is Samsung (with help from Global Foundries) and Intel. Since Intel won’t do contract fab, that leaves Apple with Samsung. But of course, lovekamp, you are clueless about these realities (and a zillion others) in global chip sourcing, so I guess you would prefer that Apple simply not make so many iPhones and iPads.

      1. Yes, I am clueless: I have no understanding of corporate agreements and intellectual property theft by a company convicted of doing so (with no penalties, and apparently vast rewards). I will defer to your vast wealth of such information.

        I am not a billionaire (perhaps you are or want to be). I prefer to be a human with principles and scruples which I will always put above money. I do not deal with vermin, regardless of whether I would make a higher profit. I leave those who are worthless to barter with others who are worthless. As such, I suspect I will not be dealing anytime soon with you, Ralph.

        1. So, for the sake of pride, you would go exclusively with TMC and take an 80% cut in your sales volume and revenue? Glad you’re not running any company I have stock in.

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