A published Bloomberg report citing sources with direct knowledge has disclosed that Samsung Electronics will produce the main processor chip related to Apple’s next iPhone model, replacing TSMC, the supplier of the iPhone 6 A8 processor chip.
According to the report, Samsung will start making the new processor chip at its Giheung South Korea plant, with additional orders going to Samsung’s production partner, Globalfoundaries Inc. Neither Apple nor Samsung were willing to confirm such news.
Make no mistake, the competition for being the prime source of Apple’s processor chips is a big deal with implications for billions in revenues. If this report turns out to be accurate, than the fact that Apple has returned to arch competitor Samsung for sourcing of its processor chips is a significant announcement. It is a further testimony of the high-stakes involved in being on the leader-edge of the latest chip fabrication technologies. The report quotes Gartner numbers indicating that Apple spent a whopping $25.8 billion on chip processors in 2014, accounting for nearly 8 percent of industry demand.
Further noted was that Samsung and TSMC both indicated intent to invest more in advanced production capabilities in order to attract Apple’s business. TSMC alone reportedly budgeted $12 billion for plant and equipment investments this year in order to compete with Samsung.
As we have noted in many of our high tech and consumer electronics focused supply chain commentaries, the purchasing influence of Apple looms very large for many industry suppliers. The scale and sheer volume scale can make a break a supplier’s business plan, and that influence alone causes continued information leaks across the high tech supply chain ecosystem. It can further motivate fierce competitors to put differences aside when manufacturing technology and functionality are at stake.