Samsung braces itself for loss of Apple's foundry deal
Says it is diversifying its customer base and has signed Chinese clients, though likely to keep some Apple chips until 2017 at least
Published: 10 January, 2013
Samsung is getting more public about the risks of losing some of Apple's business in key areas like mobile processors and displays, and is looking for new customers itself.
Although the Korean giant's own handset company is a large, and growing customer for its various components, the success of that division may also deter other potential clients, where they compete directly. However, Samsung has added new customers, according to Stephen Woo, president of its Systems LSI processor business, notably in China.
The firm is particularly looking for new foundry clients among the growing band of Chinese silicon designers, amid reports that Apple will transfer some of the production of its A6 processors to rival manufacturer TSMC this year. Woo admitted in an interview with Reuters that the strengthened drive for new partners was a response to Apple's decisions. Samsung is investing huge sums in new capacity for its processors and other components, notably with a planned new facility in Texas, where the latest technologies will hope to attract new customers.
Apple pays Samsung about $8.8bn for mobile chip production, or about 80% of LSI's revenue, according to estimates from Goldman Sachs, which expects the iPhone maker to reduce its orders to its rival's foundry unit by 80% by 2017. A key contract between the two firms is reported to be up for review this year and Apple was recently reported to have initiated trial production of the A6X with TSMC.
Of course, it will be a long and complex process to transfer the whole activity to another foundry, and Apple will have to be sure its new supplier is fully equipped for the task. Last year Qualcomm suffered when TSMC was unable to meet all its demands for chips built with the new 28nm process, while Apple and Qualcomm reportedly failed to get the Taiwanese company to agree to dedicate capacity just to them, to help ensure volumes.