Samsung expects sales boost from Apple chip deal

Samsung expects sales boost from Apple chip deal

Summary: Samsung's chip boss said supplying its 14-nanometre FinFet chips to Apple will boost its financials greatly, reports ZDNet Korea's Cho Mu-hyun.

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Kim Ki-nam, president of the Korean electronic giant's semiconductor business and head of System LSI business, told reporters at Samsung's headquarters in Seoul that once the company begins to supply Apple with chips using its latest technology, profits "will improve positively".

Samsung is expected to start producing application processors (APs) for clients such as Apple, Qualcomm, and AMD, using its 14-nanometre process around the end of the year.

Kim declined to comment on when Samsung will start mass producing said chips for clients.

The Suwon, Korea-based tech giant is one of the two contract makers, the other being Taiwan's TSMC, for Apple's A8 processor that goes into the iPhone 6 and iPhone 6 Plus. The A8 is currently being made using 20-nanometre processes.

Out of the total volume of A8 chips, Samsung is producing around 30 percent, while TSMC is making 70 percent, sources familiar with the matter said.

Sources told ZDNet Korea that Samsung already has a contract in place with Apple to produce the A8's successor, tentatively named the A9, which will be made using the 14-nanometre process.

Though Samsung remains the global leader in memory chips, its contract-making division, named System LSI Business, has reported huge losses this year due to lowered volume supplied to Apple.

Apple has been steadily cutting ties with Samsung, one of its biggest suppliers of components in recent years. It cut off display supplies from Samsung back in 2012, and has turned to LG for the main batches.

Meanwhile, Samsung's declining popularity of its own brand of APs, the Exynos series, is also losing in competition against Qualcomm's Snapdragon, further aggravating the margins of its chip business.

Samsung claims that chips made using the 14-nanometre FinFet process spend 35 percent less electricity, have 20 percent more processing power, and take up 15 percent less space than their 20-nanometre counterparts. The company's 14-nanometre FinFet is manufactured in three dimensions, unlike conventional chips, which are flat. It is called "FinFet" because the gates on the chips resemble the shape of a fish's fin.

Meanwhile, TSMC, the world's largest contract chip maker, is expected to produce its next-generation chip using a 16-nanometre process.

Source: ZDNet.co.kr

Topics: Mobility, Apple, Samsung, Korea

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8 comments
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  • Hmm.

    Would Apple really go back to Samsung for 14 nm, when apparently TSMC and ARM are planning 10 nm chips, possibly as early as later next year?

    http://www.zdnet.com/arm-tmrc-announce-plans-for-64-bit-arm-based-processors-on-10finfet-tech-7000034279/#ftag=RSSf468ffe

    Maybe they're giving the Samsung chip division one more chance, while simultaneously filling the gap between the current 20 nm and 10 nm?
    pdq
    • Hedging Bets

      Most definitely a fill-gap since late 2015 means it won't be ready for volume production in time for the next iPhone model. Maybe for the iPhone 7?
      eyhk
  • Did Intel just lose its process leadership?

    Intel will definitely ship Broadwell 14nm chips this quarter for Core M. Based on this story, Samsung will be there "around the end of the year". Intel has had a 1-2 year lead in process node, to its great advantage. If we enter 2015 with both Intel and Samsung shipping 14nm FinFET, then Intel's lead is lost.
    Catalina588
  • It's all about negotiation...

    Apple's move to TSMC was a necessary negotiation tactic. For Apple's part, they don't to put all of their eggs in one basket. For Samsung, it's a lesson that there are alternatives and that they need to offer competitive pricing and leading edge process design if they wish to win the contract for the next chip. Cook's Apple is a master at supply chain management.
    techconc
    • Hmmm

      Negotiation tactic or TSMC can't handle the demand or Apple doesn't want to take chances that one company has production or labor problems.
      About 10 years ago, I think Purolator use to do all the shipping for Dell Canada. When they went on strike, they couldn't ship any orders for days. Eventually they came to an agreement with [I think] FedEx. Now they use both, one going to customers and one from customers [unless things have changed]. One goes on strike, they use the other.
      Gisabun
      • Multiple sources does provide negotiation leverage

        Sure, it's not in Apple's best interest to sole source any component. Apple used to sole source all displays through Samsung. They eventually moved that to both LG and Sharp. I'm not sure if Samsung is still providing any displays. Similarly, Samsung was the sole manufacturer of Apple's SoC designs. Now TSMC produces the majority of them. The point being, Apple has managed to hurt Samsung's business and create a multiple provider environment where all players are forced to compete on both price and process for Apple's business. In the end, this gives Apple great leverage at contract negotiation time.
        techconc
  • Poor Apple

    They want to get away from rival Samsung but they can't.
    Gisabun
    • Poor Samsung

      Actually, they have to a large extent.

      Samsung's hurting due to Apple going to other sources for components, and having their Smartphone business squeezed between Chinese manufacturers on the low end and Apple on the high end.

      The removal of Samsung from Apple's supply chain is simply good strategy - as long as Samsung is a competitor, it makes sense to get your components from someone who ISN'T a competitor, so as not to expose your technology to a competitor and to increase your competitor's fabrication costs by eliminating the economies-of-scale that adding a gazillion iPhones to the mix help create.
      varase