Apple hurts Samsung with exclusive choice of TSMC to stamp A-series chips

“According to Economic Daily News (via DIGITIMES), Apple has chosen Taiwan-based contract chip manufacturer Taiwan Semiconductor Manufacturing Co. to produce its next-generation iPhone applications processor dubbed the A11,” Ashraf Eassa reports for The Motley Fool. “More to the point, Taiwan Semiconductor is said to be the exclusive manufacturer of the A11, meaning that Samsung is out of the loop yet again.”

“If TSMC has won the A11 in its entirety, then the chip manufacturer won’t have to worry about tough year-over-year comparisons from late 2017 through late 2018,” Eassa reports. “In fact, since both A10 and A11 are said to be TSMC-exclusive, TSMC should actually benefit during the iPhone 8 cycle as it will have the orders for the chips that go into both the flagship iPhone as well as the discounted prior-generation model.”

Eassa reports, “Although I expect Samsung’s foundry to have a fairly large captive customer in the form of Samsung’s own chip design teams, I’m not all that optimistic about its chances as a third-party contract logic chip manufacturer going forward.”

Read more in the full article here.

MacDailyNews Take: Good news all around, but Apple should definitely allow others (Samsung, GlobalFoundries, etc.) to compete (or look like they’re competing) for future chip fab orders (A12 and beyond) in order to keep some negotiating strength for dealing with TSMC. You never want all of your eggs in one basket.

TSMC reportedly nabs exclusive orders for Apple’s A10 and A11 chips – July 18, 2016


  1. MDN take – Of course they did that and will continue to do that. The company with the highest quality, yield, and lowest cost based on those criterion is going to win every time – even if it’s Samsung.

    1. Never mind that Samsung will still be supplying Apple with memory chips (in iOS, tvOS, watchOS and macOS devices) and OLED displays (in iOS, macOS, and watchOS devices). Samsung will remain an important part of Apple’s supply chain to the tune of billions annually.

      Also, TSMC’s “win” was very costly. TSMC had the volume to chase after Apple’s business because they lost Qualcomm’s.

      Where Apple will be TSMC’s only customer for the AX chips, Qualcomm supplies everyone: Samsung, LG, HTC, Motorola, Lenovo, Asus, Sony and some – though not all – of the Chinese brands. Also, Apple is notorious for squeezing suppliers to get components as cheaply as possible. (Some suppliers have actually gone broke after filling Apple orders because market condition changes caused them to lose far more on the Apple contracts than they were making.) Now of the major chip companies that do not have their own foundries – Apple, MediaTek, Nvidia, Qualcomm – it is true that only Qualcomm is with Samsung and now Apple, MediaTek and Nvidia are with TSMC. BUT … MediaTek is a high volume, low margin budget SOC maker. Nvidia is a fraction of the size of the others. Which means that Samsung has the best customer: one who is far bigger than Nvidia and who will pay them far better than MediaTek and Apple will. After losing Qualcomm, TSMC almost certainly ran to Apple with a very low bid out of desperation, which Apple was more than glad to benefit from.

      Another cool thing: Samsung uses only Qualcomm and their own Exynos chips in their products. So whether they choose to ship Qualcomm or Exynos chips in a particular phone or tablet or watch, they make money either way, because their foundry makes them both. And one last thing: TSMC is only able to make Apple’s chips because they are licensing the patent for the process to make high performance, low power chip from Samsung! So between Apple’s not paying TSMC a whole lot and TSMC having to pay Samsung a licensing fee for each Ax chip that they actually make, how much is TSMC going to get out of this deal? Answer: not a whole lot.

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