Apple Unsuccessfully Tried to Purchase Exclusive Access to TSMC Chip Production for iOS Devices

[clibinarius]

Samsung isn't stupid, despite all of the litigating going on, Apple is a HUGE customer of Samsungs. That would be suicide to separate from Apple.

Samsung can easily survive without Apple but would be less profitable. Not the other way around. Apple is 9% of Samsung's revenue. However, Samsung is integral to almost all Apple hardware.

That's why I'm surprised to see Apple playing with fire over the phone issue rather than trying to set license terms and nickel and diming over Samsung's patents while demanding all profits on Apple's. At some point Samsung will release a good selling phone that has far less in common with the iPhone and selling comparably (Think: Galaxy SIII) and then decide to just not renew contracts with Apple instead opting to sell those parts themselves rather than increase productivity. If Samsung gets another manufacturer or can sell the parts themselves, they might jump ship if Apple is trying to dump them. If Apple isn't trying to dump Samsung, then it makes no sense for Samsung to figure out how to lower the cost of its devices in such a way.

 

[pacalis]

You are really the fanboy, APPLE is dead wrong, They are the way to becoming hated, losing the rest of the fading aura of being a good company. These patent lawsuits are not only stupid in the long run but really anti American spirit, Rounded corners make me laugh.

I agree with this and clib above. Apple should have sorted this out before attacking the best supplier in the industry. It's like two titanics ramming in the night.

It's going to be very interesting to see what happens with Windows now.

Microsoft and Nokia are getting along famously. As are Microsoft and Samsung. And Microsoft and HTC.

 

[AppleFan1984]

Apple is 8.8% of Samsung's business. HP is next, at 3.2%.

http://www.bloomberg.com/news/2012-08-07/apple-ties-to-samsung-in-sharp-contrast-to-courtoom-clash.html

Good find - thanks for the update.

Looks like Apple just becomes more and more dependent on Samsung, and vice versa.

It'll be nice when they both get this court stuff behind them and just get back to making cool stuff.

 

[alent1234]

Samsung can easily survive without Apple but would be less profitable. Not the other way around. Apple is 9% of Samsung's revenue. However, Samsung is integral to almost all Apple hardware.

That's why I'm surprised to see Apple playing with fire over the phone issue rather than trying to set license terms and nickel and diming over Samsung's patents while demanding all profits on Apple's. At some point Samsung will release a good selling phone that has far less in common with the iPhone and selling comparably (Think: Galaxy SIII) and then decide to just not renew contracts with Apple instead opting to sell those parts themselves rather than increase productivity. If Samsung gets another manufacturer or can sell the parts themselves, they might jump ship if Apple is trying to dump them. If Apple isn't trying to dump Samsung, then it makes no sense for Samsung to figure out how to lower the cost of its devices in such a way.

apple went only after the old samsung phones so its not like they won anything

the S3 is selling very well. the galaxy note is selling ridiculously well and the Note 2 was just announced

 

[pacalis]

What?

You're asking the guy (Tim Cook) who got Apple out of the manufacturing racket -- possibly the greatest logistical decision Apple has made in the past fifteen years -- to get back into manufacturing?

Really?

Yes, a lot of people think that apple is losing its capabilities as a result of it's strategy.

It's a exploitation vs. exploration dilemma. Going full exploitation works very well for a while, but increases the likelihood of firm disruption as explorers catch up and competitive technology improves. Most management scholars think firms should do both.

 

[fertilized-egg]

Samsung can easily survive without Apple but would be less profitable. Not the other way around. Apple is 9% of Samsung's revenue.

"Samsung's revenue" includes everything, including the money coming in from selling phones and freezers. What are the percentages of Apple's order in terms of Samsung's component business. Is Samsung willing to basically kill off, or at least significantly downsize its component business? Some parts, for example the iPad displays, are supplied by a company that's been spun off from the main Samsung Electronics so it's not even the same Samsung anymore.

However, Samsung is integral to almost all Apple hardware.

Samsung is an excellent component maker and Apple definitely need them for the quantity but Samsung's components are not irreplaceable. In almost every component Samsung supplies to Apple, there are other companies that supplies the same components - for example. LG and Sharp for iPad displays, Hynix and Elpida for RAM, Toshiba for flash memory, etc. The only exclusive Samsung component is the processor and even that's not irreplaceable. I'd argue Qualcomm is more essential than Samsung in terms of how integral and exclusive its component is.

 

[hchung]

Umm Apple is only 5% of Samsung fab business. Pretty much everyone uses them.

Highly doubtful.

Samsung's entire fab business was just under $2b USD in 2011.
At 5%, you're trying to tell us that Apple's only paying them $100mil for NAND and Ax chips?

What's the other $3b for then?

 

[alent1234]

Highly doubtful.

Samsung's entire fab business was just under $2b USD in 2011.
At 5%, you're trying to tell us that Apple's only paying them $100mil for NAND and Ax chips?

What's the other $3b for then?

TV chips?

 

[theBB]

for logic/foundry: Intel, TSMC and Samsung are the leaders.

I don't know of any fabless semiconductor company using Samsung as its foundry, well except for Apple apparently. Maybe, it is more appealing for non-US companies, but I'd be surprised if serving as a foundry is a big business for Samsung, as opposed to memory or production for its own chips. As Intel is not in the foundry business, the default choice is TSMC is you want to be at the cutting edge. If the business allows to be a late adopter, TSMC is still the favorite, but the other fabs such as UMC or CSM etc. get into the picture for better pricing. This is a fast changing business though, so anything is possible.

 

[e-coli]

Why didn't they just purchase TSMC?

 

[farmboy]

Haha the iPhone is "assembled" in China.
Dont you just love that word.

It's the word required by export and import regulations.

 

[Lark.Landon]

sounds like Apple and Qualcomm tried to lowball TSMC.

My thoughts exactly. Though it is impossible to know for sure.

----------

I agree with this and clib above. Apple should have sorted this out before attacking the best supplier in the industry. It's like two titanics ramming in the night.

It's going to be very interesting to see what happens with Windows now.

Microsoft and Nokia are getting along famously. As are Microsoft and Samsung. And Microsoft and HTC.

Apple has nothing to worry about. Samsung might decide to not renew the next contract, but that would hurt Samsung as much as it would hurt Apple.

On a side note, Apple is not attacking Samsung, Apple is defending it's patents. Even if Samsung wanted to term the contracts, it would hurt Samsung more than it would hurt Apple. Samsung would be paying out 1B+ dollars and would lose a large contract. IMHO if this happened, the stockholders would be in an uproar, which would mean all the top paid execs would lose their jobs. My opinion, nothing more. I could def be wrong.

 

[G51989]

Why didn't they just purchase TSMC?

It would require about 90 billion dollars to buy that company, assuming it was for sale. Which it isn't.

 

[McEngineer]

TSMC logo

A bit off-topic, forgive me:

The TSMC logo strikes me as odd. Given that they've wrestled with yield issues more than once (to the level of impacting business), the darker squares immediately make me think of bad chips on the wafer - not something they'd want to emphasize.

Does someone who's actually in the fab business know what those are really intended to represent? Fiducials? A mix of designs?

 

[linkgx1]

The problem with Apple switching providrs is like...


Getting mad with AT&T because of their pricing and going to Sprint for cheaper. But....with Sprint you have a crappier network and can barely connect to the internet. You end up canceling the contract with Sprint...and running back to ATT.


Since these are ARM processors we're talking about..I don't think any other company can CREATE TEH VOLUME with QUALITY in a short amount of time than Samsung. That's the issue. Apple can switch peeps and have overheating problems or something worse. THAT WOULD BE BAD.


These companies need to keep their divi
sions separate or there's gonna be hell in the long run.

Sometimes it's just better to separate for a bit than to get a divorce.

----------

Also, I wonder why Apple hasn't tried Texas Instruments?

Maybe because they aren't the cheapest. Their damned calculators (TI-84 *****) haven't gone down in price and have virtually unchanged.

 

[clibinarius]

"Samsung's revenue" includes everything, including the money coming in from selling phones and freezers. What are the percentages of Apple's order in terms of Samsung's component business. Is Samsung willing to basically kill off, or at least significantly downsize its component business? Some parts, for example the iPad displays, are supplied by a company that's been spun off from the main Samsung Electronics so it's not even the same Samsung anymore.



Samsung is an excellent component maker and Apple definitely need them for the quantity but Samsung's components are not irreplaceable. In almost every component Samsung supplies to Apple, there are other companies that supplies the same components - for example. LG and Sharp for iPad displays, Hynix and Elpida for RAM, Toshiba for flash memory, etc. The only exclusive Samsung component is the processor and even that's not irreplaceable. I'd argue Qualcomm is more essential than Samsung in terms of how integral and exclusive its component is.

The reality is, if Samsung takes that hit, they downsize their components until their phones start selling comparably to iOS...which has happened...

Now, on that note via Apple not need them, replacing Samsung means, in very simple terms:

1. Getting the same pricing (not outrageously likely at the quality) or taking a hit on margins
2. Letting a supply source dry up and then taking shots on opportunity costs...

Until Apple stops selling products as quick as they can make them, they need all the suppliers they can get. Diversifying from Samsung, contrary to the belief on these blogs, has nothing to do with Samsung, but everything to do with acquiring as many components as possible. Similarly, if Samsung felt Apple was trying to do away with Samsung's business, it would make sense to eat the loss now by not renewing contracts and pour all the components into their own products, which would give them a painful edge on costs. If Apple's costs per phone go up, it should be of note that this would probably crush their stock prices which are based on growth and huge margins.

So for neither company a divorce makes sense. Apple is trying to get Samsung to be a supplier and prevent them from being a competitor. Samsung is trying to compete. Whether or not the means used by any side is moral and just is not an interest of mine today.

 

[Azathoth]

Huh?

Patents exemplify the America spirit.
Something that is lost on the entitlement generations.

Not only to patents reward those who invest their time and money into the development of ideas but it also FORCES competitors to innovate to get around patents.
Really don't know why this is lost on your people.
Then again these are the same people who want everything handed to them and think that they are entitled to the hard work of others (in many forms) so I really shouldn't be surprised.

If you were to invest 5 years of your life and your life savings into something you thought would change the world would you patent it? You bet.

Would you simply let other people use the IP you worked so hard to create? Nope.

After all, what is the reward for the risk you took with your time and money if there was no way to recoup your initial investment of time and money.

I bet you thought the guy who invested and patented the windshield wiper should have never sued car manufacturers. Pretty "obvious" invention, right?

And the fact of the matter is that the tech blogger nerds fandroids have done a great job at vilifying Apple why ignoring the exact same lawsuits brought by Google, Motorola, Samsung, ect.

YOU are DEAD WRONG.

Blah, blah blah. Yeah, it took years and countless millions to come up with 'pinch-to-zoom' or 'slide-to-unlock'.

Imagine if car companies had each patented their own control layout. "Sorry, Ford's got that patent on the gas pedal to the right of the clutch, you'll have to *innovate* and place the brake in front of the gas" - I think that many of the software patents disputed today do not benefit the public at all, nor do they really foster competition - just difference for the sake of getting round a broken system. For efficiency in our daily lives it's necessary that there is a familiarity between different manufacturer's products - CD player controls (and their little icons), car controls etc - and there seems to be plenty of competition in those markets.

FWIW I'm an RF engineer, so I know about *real* patents.

As to the original point of this thread - interesting - means that TSMC have more than enough work available. I guess it must be one of the 28 or 22nm lines that Apple wanted...

 

[hchung]

A bit off-topic, forgive me:

The TSMC logo strikes me as odd. Given that they've wrestled with yield issues more than once (to the level of impacting business), the darker squares immediately make me think of bad chips on the wafer - not something they'd want to emphasize.

Does someone who's actually in the fab business know what those are really intended to represent? Fiducials? A mix of designs?

Well, they do mark bad dies in black on real wafers, so I guess it's a realistic logo. It's rare that an entire wafer is good.

From what I hear, TSMC's yields are also design specific. Examples would be like Xilinx's designs get great yields there, but nVidia's, not so much.

----------

Since these are ARM processors we're talking about..I don't think any other company can CREATE TEH VOLUME with QUALITY in a short amount of time than Samsung. That's the issue. Apple can switch peeps and have overheating problems or something worse. THAT WOULD BE BAD.

----------

[/COLOR]Also, I wonder why Apple hasn't tried Texas Instruments?

Maybe because they aren't the cheapest. Their damned calculators (TI-84 *****) haven't gone down in price and have virtually unchanged.

Actually, quite the opposite. Plenty of other options other than Samsung. It seems TI thinks Samsung's foundry efforts for ARM processors is subpar. (TI uses TSMC, GF, and UMC as well.)

http://www.eetimes.com/electronics-news/4214774/Upset-TI-slams-Samsung-s-foundry-efforts

With regards to SoCs TI does designs, like Apple. Partnering with TI would just mean that Apple would be discarding their own design teams. TI does have fabs of its own, but I believe they're all optimized for their analog chips, hence their partnership with the other fabs for OMAP.

 

[chrmjenkins]

Umm Apple is only 5% of Samsung fab business. Pretty much everyone uses them.

Most mobile players don't use them. That's the big growth market right now.

TI no longer does: http://www.eetimes.com/electronics-news/4214774/Upset-TI-slams-Samsung-s-foundry-efforts

It's well known Qualcomm uses TSMC. Same for Nvidia.

Those are the big three other than Apple and Samsung. ST, Marvell etc are small fries.

Assuming that 5% is correct, its across their fab business which includes RAM, NAND, etc. Samsung doesn't want to be their own only customer for large ASICs, especially when they're dedicating fabs to a customer.

 

[nombei]

I don't know of any fabless semiconductor company using Samsung as its foundry, well except for Apple apparently. Maybe, it is more appealing for non-US companies, but I'd be surprised if serving as a foundry is a big business for Samsung, as opposed to memory or production for its own chips. As Intel is not in the foundry business, the default choice is TSMC is you want to be at the cutting edge. If the business allows to be a late adopter, TSMC is still the favorite, but the other fabs such as UMC or CSM etc. get into the picture for better pricing. This is a fast changing business though, so anything is possible.

Apple, Ixys, Qualcomm, TI, Xilinx and I'm sure other smaller companies have used Samsung foundry services, but overall they are still just getting the ball rolling there.

Technology and manufacturing skill wise, though, I would put them as a leader and they are definitely willing to throw a lot of money into the fight.

Looks like Nvidia and Samsung may be getting cozy too...
http://www.extremetech.com/computin...amsung-invests-4-billion-in-foundry-expansion

 

[nnp519]

If Apple's so wanting to move away from Samsung, wouldn't it make business sense to not extend contracts to Apple, driving up the cost of iOS devices while keeping production capacity for the Samsung phones? Wouldn't that mean Samsung gets the money in the end? Wouldn't Apple be aware of this?

I don't think Apple wants to be less reliant on Samsung as much as be able to survive natural disasters-Hello Brazil! Same with Samsung, I think they'd prefer to diversify their production (welcome to Texas).

Um I think Samsung is being very strategic with their sudden interest in opening a factory in the US. I think they know that Apple will not back down from these lawsuits and Apple, in the recent years, have become an iconic american company, though most of their products are made in china or other parts of the world, it's become an americana. You can go anywhere around the world, even in third world countries and they know about iPhones and Apple and immediately associate that with USA. So to say that Samsung just wanted to diversify their production is a bit weird.They know that investing in this factory, it gives them a bit of a leverage to try and fight apple maybe evenly here in the US. I won't be surprised if they bring that up to court soon, and say that if Samsung's products are banned and punished to pay apple…many americans in their american factory will have to be laid off and I think that could be very strategic on their end. Really, it'll be a win win for them, unfortunately but lets hope that they won't try and use that, if they haven't already tried, as a scapegoat.

 

[clibinarius]

Um I think Samsung is being very strategic with their sudden interest in opening a factory in the US. I think they know that Apple will not back down from these lawsuits and Apple, in the recent years, have become an iconic american company, though most of their products are made in china or other parts of the world, it's become an americana. You can go anywhere around the world, even in third world countries and they know about iPhones and Apple and immediately associate that with USA. So to say that Samsung just wanted to diversify their production is a bit weird.They know that investing in this factory, it gives them a bit of a leverage to try and fight apple maybe evenly here in the US. I won't be surprised if they bring that up to court soon, and say that if Samsung's products are banned and punished to pay apple…many americans in their american factory will have to be laid off and I think that could be very strategic on their end. Really, it'll be a win win for them, unfortunately but lets hope that they won't try and use that, if they haven't already tried, as a scapegoat.

That's pretty paranoid. It has nothing to do with political conditions or natural disaster?

I find it unlikely that a company like that would blackmail the US courts in such a fashion. That makes no sense especially compared to preparing for a hurricane or something. Does Apple open factories in Brazil to sue Samsung? No? Then what's the point? Oh, sales and supply lines.

 

[linkgx1]

That's pretty paranoid. It has nothing to do with political conditions or natural disaster?

I find it unlikely that a company like that would blackmail the US courts in such a fashion. That makes no sense especially compared to preparing for a hurricane or something. Does Apple open factories in Brazil to sue Samsung? No? Then what's the point? Oh, sales and supply lines.

Wait....Apple plans to blackmail the US by sending hurricanes to us?

 

[cvaldes]

Yes, a lot of people think that apple is losing its capabilities as a result of it's strategy.

A perfectly acceptable devil's advocate position. And yet, the street's consensus is AAPL going up.

One I'm very willing to agree with the shorters when I see it in person. And I am willing to bet my cold, hard cash on it. As a matter of fact, I already have money in the market and I'm still long on AAPL.

I guess it's worth pointing out that AAPL has outperformed the Dow, S&P 500, and Nasdaq over the past five years. You must realize that people like me have been laughing at naysayers.

Even if AAPL gets hammered, I could sell and still walk away with a pile of cash.

 

[sha4000]

A perfectly acceptable devil's advocate position. And yet, the street's consensus is AAPL going up.

One I'm very willing to agree with the shorters when I see it in person. And I am willing to bet my cold, hard cash on it. As a matter of fact, I already have money in the market and I'm still long on AAPL.

I guess it's worth pointing out that AAPL has outperformed the Dow, S&P 500, and Nasdaq over the past five years. You must realize that people like me have been laughing at naysayers.

Even if AAPL gets hammered, I could sell and still walk away with a pile of cash.

Ok now we all know you have shares so now what?