(Photo: Industry Leaders Magazine) Samsung Electronics Co.
Despite the ongoing legal battle between the two tech giants Apple and Samsung in different parts of the world, the South Korean giant will remain the primary supplier to the Cupertino-based firm of chips used for Apple's iPad and iPhone until 2014.
However, beginning 2014, Taiwan Semiconductor Manufacturing Co (TSMC) will start to manufacture the chops following the inking in June of a supply agreement between Apple and TSMC. The deal will push through after years of technical delays since the initial chips made by TSMC failed to meet Apple's standards on speed and power, making it necessary to continue its supply arrangement with Samsung even if their business relations started 10 years ago had soured because of competition in the mobile phone and tablet market.
When Samsung started to foray into smartphones and threatened Apple's dominance of the market, the U.S. tech giant started to file patent infringement lawsuit against Samsung.
Even before the signing of the TSMC deal, Apple has been buying flash-memory chips from other manufacturers and had stopped purchasing iPhone screens from Samsung.
The situation places Apple in a bind because its South Korean rival is the biggest global maker of processors, memory and high-resolution screens, and Apple's component choice continues to be limited, forcing it to continue dealing with
Apple actually purchased a chip company in 2008 to start designing the chips, but continued to order the chips from Samsung. As the rivalry between the two tech giants worsened, Apple started to negotiate with TSMC and even offered to invest in the Taiwanese tech firm for TSMC to reserve some factory space dedicated to making Apple chips.
However, TSMC Chairman Morris Chang thumbed down both proposal to keep its independence and manufacturing flexibility, TSMC executives said.
TSMC will start to mass produce the chips in early 2014, using advanced 20-nanometer technology which would make the chips likely smaller and more energy efficient.
A complete Apple withdrawal from Samsung would hurt the South Korean firm's business, said Sanford Bernstein analyst Mark Newman, who placed the Cupertino firm's component orders at $10 billion in 2012. That was 17 per cent of the $59.13 billion sales in the component business of Samsung.
The business relationship between Apple and Samsung started with Apple signing a lock-in supply deal with Samsung which was tapped to provide the flash memory for the iPod, which hit the market in 2005.
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