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Apple Renews Contract With Samsung Over A-Series Processors 101

Posted by samzenpus
from the still-partners dept.
tlhIngan writes "In an interesting move since Apple decided to partner with TSMC a few weeks ago, the Korea Economic Daily is reporting that Apple has re-signed a contract with Samsung to produce the A-series chips Apple uses to power its iPads, iPhones and iPods. TSMC is still to produce chips for Apple, though Samsung is poised to take over from 2015."
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Apple Renews Contract With Samsung Over A-Series Processors

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  • by ackthpt (218170) on Monday July 15, 2013 @04:01PM (#44289127) Homepage Journal

    Apple knows which side of the iPad the butter goes.

    • More like Apple learned the danger of having single-sourced components a long time ago.
      • Re: (Score:2, Interesting)

        by Anonymous Coward

        It's not like Samsung is going to turn down a contract with one of the world's largest device makers either. It's guaranteed business.

        Apple makes a lot of devices. Some will continue with Samsung designs. (No brainer. Refine, upgrade, sell next version. No reason to shake up a product line that's selling well) And some will use Apple's new chips fapped at TSMC.

        That said, it would suck if your main competitor in the high end smartphone biz decided to squeeze your supplies because they felt it convenient to d

        • Seems like Apple in US...
          • by ShanghaiBill (739463) on Monday July 15, 2013 @04:57PM (#44289609)

            Seems like Apple in US...

            Not even close. Samsung accounts for nearly 20% of the Korean economy. Much of the rest of the economy is controlled by one of the other four big chaebol (conglomerates). Samsung has their tentacles into every part of the economy and government. Many politicians have close links to company, and many are open about being in their pocket because "what's good for Samsung is good for Korea!" In the past, whenever Samsung wanted to enter a new line of business, the government would inform their incumbent competitors to either sell out, shut down, or face the consequences (audits, arson, arrest, etc.). Today it is just a bit more subtle.

            • Apple certainly do't represent anywhere close 20% of Us economy but after some point this is irrelevant. Apple can get away with whatever it does in US, at least as much as Samsung can in Korea.
              • by ShanghaiBill (739463) on Monday July 15, 2013 @05:32PM (#44289949)

                Apple can get away with whatever it does in US, at least as much as Samsung can in Korea.

                You should read up on the history of Samsung, the history of Korea, the intertwined political/economic dynasties, and the current state of politics in Korea before you make such a ridiculous statement.

              • Which is why they were so successful fighting the DOJ.

    • by binarylarry (1338699) on Monday July 15, 2013 @04:03PM (#44289147)

      It must be really hard to be the Apple guy in this situation.

      You have to sit across from these people that have totally stolen your lunch and smile as you give them more business. Because you know if they decide to stop doing business with you, your other options are far, far worse.

      • by mbkennel (97636)

        "Your other options are far, far worse"

        Apple could build a fabrication plant. Is that a really bad option?

        • In the long term maybe not. In the short term it is certainly worse, though, and everybody only thinks about the next Quarter these days...
          • by jittles (1613415)

            In the long term maybe not. In the short term it is certainly worse, though, and everybody only thinks about the next Quarter these days...

            Well Apple could very well go out of business if it has no products to sell while they spend 8-10 years opening up their own fab facility. Unless they want to fab in some country where permits are easier to get. Then it might be half that time where they have no processors to put in their products. Of course, I am sure they could find other vendors, but how many independent fabs are out there that can handle that kind of volume reliably?

            • Nobody is suggesting that they, all of a sudden, just stop buying components and wait for their plants to become operational.
        • Duh, yeah

          Since you need people to run it.

          Intel and others spend years working out the kinks in manufacturing. How many times has amd and nvidia missed launches due to poor yields?

        • Apple could do it, but it's a very expensive bet.

          TSMC spent $9.4 billion [reuters.com] on their latest 300mm fab, and it will be running pretty much 24/7/365 for many, many years. And if Apple broke ground tomorrow, it's still likely to be 3 years before the fab is fully built, equipped, staffed, qualified, and running at full speed. Unless Apple is sure it can get chip volume high enough to achieve real cost savings, it's probably not worth doing.

          And by then the industry might have started transitioning to 450mm.

          Apple is one of the few companies in the world who could drop that much out of actual cash-on-hand without blinking, but it's a very risky bet with potentially a lot more risk than reward.

          • by Anonymous Coward

            TSMC spent $9.4 billion [reuters.com] on their latest 300mm fab, and it will be running pretty much 24/7/365 for many, many years. And if Apple broke ground tomorrow, it's still likely to be 3 years before the fab is fully built, equipped, staffed, qualified, and running at full speed.

            Apple makes more than $9.4 billion every quarter, for their lowest quarter. That spread that over 3 years assuming that 9.4 billion stays constant every quarter an note that ~$9.4 is about their lowest quarter profit in a year. This $9.4 billion dollar expenditure represents only ~8% of their total profit earned in that three year period.

            Bottom line, it's a bet that Apple can afford to lose.

            • by Rockoon (1252108)
              Its a bet that is practically guaranteed to lose, so just like the lottery.

              The issue isnt if they can they afford it. The issue is if it will save them money. It wont.

              Apple would not just have to build the FAB, but they would also have to sell its service to others in order to make it worthwhile. Then they are in the full FAB business and then its not just $9.4 billion.. its $100 billion in R&D over the next 10 years, not to mention landing CxO's thats in-the-know about being a supplier and can make
              • The issue is if it will save them money. It wont.

                That is quite frankly utterly irrelevant, even if it cost them 1.5x as much to make each part.

                The reason to have your own fab is that then you have a chance at controlling leaks - and you don't give a competitor a chance to copy what you are doing right off the assembly line from original design documents, you have to reverse engineer it like everyone else.

                It gives Apple a year +buffer on industrial espionage. That is priceless.

                Apple would not just have to b

                • by Anonymous Coward

                  And what does Apple do about all the patented tech that they would need to either reverse engineer or license just to get started? 9.4B is a very, very low number. Apple has a lot of cash, but not enough to pay those. The fab business is entrenched in a way that very few other businesses are.

                • by Rockoon (1252108)
                  You seem to think that FAB's upgrade themselves.

                  Lets suppose that Apple builds of 65nm FAB for pushing out their custom ARM chips.. if they keep using it for 10 years, they will be 10 years behind the curve at the end of it.

                  That first year or two they might be able to use and sell 100% of the FAB's capacity inside their own products if they were bang on in sizing it (how do they know how much product they are going to sell next year?), but after that their products would be crap if they kept using it fo
                  • You seem to have utterly missed my point that money does not matter, this is about control.

                    You seem to be ignorant as to what Apple would do with chips produced (as in potentially every product, not just AppleTV's).

                    You seem to be dumb enough to think that Apple wouldn't upgrade the FAB over time...

                    Basically, you just aren't thinking.

    • Re: (Score:2, Funny)

      by tooslickvan (1061814)
      The glass side is the butter side since the iPad always lands glass-side down.
    • by icebike (68054)

      Apple knows which side of the iPad the butter goes.

      And Apple found out its not a simple as they thought to produce in quantity. I hope Samsung dictated a price increase sufficient to cover any Apple law suits.

      • Re: (Score:3, Insightful)

        by ygtai (1330807)
        The reality may simply be Samsung offered a very low price that Apple cannot refuse. TSMC, while maintaining a 40%+ profit margin, doesn't have to lower its price; customers are well queued in line. However Samsung wants to expand their foundry business badly.
        • by icebike (68054)

          However Samsung wants to expand their foundry business badly.

          What is your source for this?
          The only reason they would want to expand their foundry business would be if it was hugely profitable, and offering Apple even bigger discounts than they already were getting would make it LESS profitable. Further, Samsung already can handle Apple's total chip requirements, so this wouldn't involve an expansion at all.

          Samsung might not want to IDLE any of their foundries by losing Apple business, but with Android sales surging to 70% market share [techcrunch.com] world wide, there is little ris

          • by ArsonSmith (13997)

            It can be less profitable if they plan to make up for it in volume. Opening more fabs/foundries would make this the case.

            Sometimes the anti free market stance on Slashdot is amazing. Few fortunes have ever been made by trying to find a way to sell things for more. (not zero, but still few) They have always been find a way to make things of the same or acceptably less quality but be significantly cheaper so has to sell higher volumes.

            • by icebike (68054)

              Few fortunes have ever been made by trying to find a way to sell things for more.

              Nonsense. Fortunes are made by trying to exact the maximum profit possible. Sometimes that means a lower price, in the hopes of making it up on volume, but more often than not, the process involves seeking a higher price via any means possible. Better product, buying up the competition, what ever.

              It is a sorry study of history that suggests the road to riches is to offer the lowest price possible until forced to do so.

              • by ArsonSmith (13997)

                Complete and utter horse shit. Ford, Walmart, Intel, Microsoft,sears, all companies that made their fortunes by finding a way to sell things cheaper.

            • by oxdas (2447598)

              Samsung just increased the prices 30% in November of last year for the chips they were already making. There aren't many companies with the capabilities to manufacture these chips in Apple's volumes. I suspect Samsung is make quite a profit on these chips and this is more an issue with Apple unable to find other sources for these chips (it is rumored that Apple had put a chunk into GlobalFoundries in the hopes of turning them into a viable source).

          • by ygtai (1330807)
            What I said about "expand" might not be very accurate. What I meant was they want to expand into the pure-play foundry business. While Samsung's smartphone business is earning a lot, it's semiconductor wing's profit is very thin or at the brink of losing money with its huge capacity. In the meantime, the pure-play market is still in the state of greater demand than supply. Samsung Semiconductor wants that market. They stated that in their own brochure. And that's why they poached TSMC's former R&D chief
          • by mjwx (966435)

            However Samsung wants to expand their foundry business badly.

            What is your source for this?
            The only reason they would want to expand their foundry business would be if it was hugely profitable, and offering Apple even bigger discounts than they already were getting would make it LESS profitable. Further, Samsung already can handle Apple's total chip requirements, so this wouldn't involve an expansion at all.

            Samsung might not want to IDLE any of their foundries by losing Apple business, but with Android sales surging to 70% market share [techcrunch.com] world wide, there is little risk of that having any long term effect.

            This.

            It's a case of Apple needing Samsung because Samsung can deliver the volume and quality Apple want.

            Samsung is simply not vindictive, so they're not turning down the contract.

          • by tlhIngan (30335)

            The only reason they would want to expand their foundry business would be if it was hugely profitable, and offering Apple even bigger discounts than they already were getting would make it LESS profitable. Further, Samsung already can handle Apple's total chip requirements, so this wouldn't involve an expansion at all.

            Samsung might not want to IDLE any of their foundries by losing Apple business, but with Android sales surging to 70% market share world wide, there is little risk of that having any long term

        • by AmiMoJo (196126) *

          More likely TSMC couldn't guarantee yields at the sizes Apple wanted. It would be a disaster if Apple couldn't compete on performance/watt and TSMC are both unproven at this level and have had problems moving to smaller processes in the past.

          Samsung won't be giving them any discounts. Apple has little choice but to use them because as they have discovered the only other company in the world that might be able to help them out, TSMC, is struggling to. There are other companies with fabs that can do the job,

  • Eventually will have Apple right where they want them.. Out of the way..
  • by edxwelch (600979) on Monday July 15, 2013 @04:23PM (#44289339)

    so far:
    TSMC to make Apple chips
    GlobalFoundries to make Apple chips
    Apple to buy it's own foundry
    and now Samsung to make Apple chips

    • Yup, my opinion is that these analysts are fishing for clicks and have no idea what is going on. At least that's what sources familiar with the matter tell me.
    • by BLToday (1777712) on Monday July 15, 2013 @05:56PM (#44290139)

      They may all be true.
      TSMC: Apple is feeling them out with older Apple A-series designs for Apple TV.
      GF: Maybe Apple is going to use the AMD's A-series APU (Xbox ONE and PS4) in some unknown device (console?) or iMac Retina. Apple needs fast graphic performance more than CPU performance on their Retina series of devices.
      Samsung: A proven and reliable source, so Apple would have a lot of reasons to continue to use them.
      Own fab: why not control your own destiny

  • by Groo Wanderer (180806) <charlieNO@SPAMsemiaccurate.com> on Monday July 15, 2013 @05:10PM (#44289745) Homepage

    Stop and think about this.

    1) When was the last time Apple leaked plans like this?
    2) The level of detail is too high for a 2015 part
    3) Apple never gives the foundry product names
    4) They also never specify time frames even to their foundry that far out.
    5) Apple and Samsung are not on good terms.
    6-17) See 5)
    18) Apple is trying to get away from Samsung, cost is not an issue
    19) Samsung is not any better than the other two common platform partners for tech.
    20) Apple has signed with TSMC for 20nm
    21) Losing Apple is a big deal for Samsung Semi, and enough of a big deal to be unpleasant for their stock
    22) The source for the story is a Korean newspaper that is likely quite beholden to Samsung

    You can draw your own conclusions from the above, mine is damage control on Samsung's part.

                    -Charlie

    • by Anonymous Coward

      So let's think.

      1) When was the last time Apple leaked plans like this?

      Irrelevant. If it's a leak, it's not by Apple, but by Samsung. And leaks have been far more frequent since Jobs no longer had the power to unleash vengeance upon the leakers.

      2) The level of detail is too high for a 2015 part

      This is a good point. And 14nm finfet is quite speculative from Samsung. Still, it could be something like 'if you can pull it off we'll buy it' - not very likely in itself, but seeing the past performance of TMSC moving to new nodes, not completely impossible.

      3) Apple never gives the foundry product names

      Probably speculation in this one anyway.

      4) They also never specify time frames even to their foundry that far out.

      Seeing as 14nm is stil

    • by Cassini2 (956052) on Monday July 15, 2013 @06:56PM (#44290569)

      Apple is shipping 5.4 million iPhones and iPads per week. PC sales are at 5.9 million units per week. These numbers were pieced together from macworld [macworld.com] and reuters. [reuters.com] Assuming all of Apple's dreams come true, in 2015 Apple must plan for the case it is selling more processors than Intel, which will mean that Apple needs all the fab capacity it can get. Additionally, given the recent track record on new product launches at TSMC and GloFo, Apple needs a backup plan if one or more fab suppliers have problems.

      Even if Apple purchased a new fab, additional reserve capacity might be needed. That may be enough to ink a deal with Samsung. Samsung is the only company with the proven ability to make enough cell phone and tablet processors to cover the majority of the world wide market, including Apple.

  • by sl4shd0rk (755837) on Monday July 15, 2013 @06:29PM (#44290365)

    Apple: Rounded corners, square design! You loose sucka! Pay!
    Samsung: *m-ok* here, have $450M.
    Apple: Muahahaha!! *twirling mustache*

                (1 year later in Apple board room....)

    Engineer: It's a new design. More cores, cache and video on die.
    Exec: Great! Send those plans to TI!
    Engineer: Uh... it's not something they can do
    Exec: But we are investing in America! Get TI on the phone!
    TI: The design is outside the capabilities of our manufacturing limits.
    Exec: *m-ok* get Samsung on the phone...

    Samsung: Muahahahaha! *twirling mustache*

    • by AmiMoJo (196126) *

      Except that Samsung hasn't actually paid them, they are still appealing. Cool story though.

  • I think Apple and Samsung are putting on a bullshit show while colluding behind the scene.

    FTC should look into it.

  • by Anonymous Coward

    This just in! Latest Apple rumor reported as fact, and it appears to contradict previous Apple rumor!

  • yeah right (Score:3, Funny)

    by slashmydots (2189826) on Monday July 15, 2013 @09:54PM (#44292247)
    I think they're going to pull a "Parks and Recs" on them and they'll open up the box of first chips and every one will have "go fuck yourself" etched into it and basically be solid ceramics.
  • by RubberDogBone (851604) on Monday July 15, 2013 @11:02PM (#44292669)

    Comic books don't interest me but I would not mind seeing some sort of hero team-up where companies like Samsung, Apple, Google, Nokia, even Microsoft, all used their powers together to make the world a better place instead of spending a lot of their time in communal battle, either actual, in courts, or in the minds of the rabid customer base.

    It will never happen because shareholders would freak, and because competition spurs innovation. But it should not be inherently wrong for Apple to source parts from Samsung and allow the best apps Google can offer for iOs. The people who lose out when the territorial walls go up are in fact the customers.

    On a broader level, the future of the human race may eventually depend upon companies and even countries putting aside differences to work together toward common goals, and it seems to me that we are generally unaccustomed to and perhaps incapable of that sort of cooperative effort, and as such, we may never inherit the stars because we're too busy suing each other about the patents on the latest space toilet seat.

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