Report: Apple Testing TSMC Chips As Potential Samsung Alternative


Taiwan Semiconductor Manufacturing Co. (TSMC) has started a manufacturing trial for processors in Apple mobile devices, components that are currently manufactured by Samsung, Reuters reported on Friday.

Samsung produces Apple's A4 processor for the original iPad as well as the A5 processor for the iPad 2. Those chips are based on ARM's Cortex mobile semiconductor architecture.

The two companies are waging a legal battle that reportedly has Apple exploring alternatives, but industry analysts don't believe Apple will completely distance itself from Samsung.

"Apple is trying to diversify its orders but it will still maintain some kind of relationship with Samsung," said Fubon Securities analyst William Wang, as reported by Reuters. "I think TSMC will get the new chip orders, the issue however is allocation. Apple won't give the whole 100 percent to TSMC. Maybe it'll allocate only 20-30 percent."

The shift away from Samsung chips was leaked in June, as a series of lawsuits were filed between Apple and Samsung.

Apple sued Samsung in April on the grounds that the Samsung Galaxy smartphones and tablets bear too close a resemblance to the iPhone and iPad. In addition to seeking injunctions, actual damages and punitive damages, Apple claimed that Samsung willfully infringed on its patents.

That same month, Samsung filed a lawsuit of its own in Seoul, claiming five patent infringements by Apple. Samsung also filed actions separate actions in Tokyo and Germany.

Not to be outdone, Apple responded in June with a lawsuit in Seoul, prompting Samsung to file a complaint with the U.S. International Trade Commission that included, in addition to accusations of patent violations, a request to ban Apple from selling iPads, iPhones and iPod Touches in the U.S.

Since hitting the market last November, Samsung's Galaxy Tab has taken a bite out of the iPad's market share, which dropped from 93 percent in Q3 of 2010 to 73 percent in the fourth quarter, according to research firm IDC. Samsung's Galaxy Tab accounted for 17 percent of the tablet market in Q4, IDC said.

A successful manufacturing trial with TSMC would have to go beyond replicating Apple's current mobile chips due to intellectual property issues, according to Seo Won-seok, an analyst at NH Investment and Securities in Seoul.

"It won't be easy for Apple to dramatically change its chip provider from Samsung," said Seo, as reported by Reuters.

"It has to redesign the chipset, which Samsung has been deeply involved in from the beginning and has some intellectual property. Apple could try various suppliers but they (Samsung and Apple) need each other and the relationship will continue," he said.