Could Samsung, reportedly the ousted manufacturer of processors for Apple, be able to control the Silicon Valley company by putting it on a rationed supply of NAND flash memory? How should Apple respond to the danger?
Observers of the electronics and computer industries are reporting again and again that Apple has thrown over its microprocessor manufacturing arrangement with Samsung Electronics Co. Ltd. in favor of pure-play foundry supplier Taiwan Semiconductor Manufacturing Co. Ltd.
There are few reliable sources for this, a comment in the Korea Times here, an unnamed supply chain source there, but the general opinion is that this move has been coming for a while and that TSMC has completed the tape out of Apple's A7 processor in 20-nm CMOS in time for volume production in early 2014 – or even in 2013.
This is not sudden. Back in 2011 Apple was reported to be trying to get on to TSMC's 28-nm CMOS manufacturing process but that move apparently hit problems that persuaded Apple and TSMC to aim at the next process generation. One rumor I heard at the time was that the problem may have been related to Samsung peripheral IP used within the A5 and A6 processors that Samsung was not about to hand over to TSMC for the sake of a departing customer's convenience.
It is the case that TSMC with its gate-last bulk CMOS logic process seems to be pulling out a technology lead over Samsung which has a gate-first 28-nm CMOS logic process that has origins in the IBM-inspired Common Platform Alliance. And the logic of Apple moving makes even more sense when one considers Apple and Samsung spent a couple of years in the world's law courts arguing about patents pertaining to tablet computers and smartphones.
However, Apple and Samsung are linked not just by competition in smartphones and
tablets and by a supply arrangement in processors. They are linked by a
common interest in non-volatile memory. So if Apple does go sole-source with TSMC for A7 processors, what would be the consequences for its memory supply, if any?
Apple goes to TSMC. Samsung says "Oh no you didn't!. Girl! find yo flash 'some place else!"
That would be too simplistic. Samsung and Apple have been very successful partners and not-withstanding lawsuits around curved edges and I doubt they would jeopardize their existing business. Apple most likely has contractual guarantees on flash supplies from Samsung.
I think that shortages of NAND flash are almost guaranteed later this year unless the entire world economy goes into recession. It's time for NAND producers to make a little money for a change. Another fast growing source of demand for NAND chips is the solid state drive market.
Apple is not vertically integrated because it chooses not to be. It's a business decision. The US government really has very little role in this strategic decision. US based Micron/Intel fabs produce NAND flash chips and we do have NAND flash being manufactured in the US.
Duane, that's an excellent point. But there are a whole bunch of human decisions that put companies behind the eight ball. Management execs aren't going to turn down huge business from Apple or IBM if it throws their model over into an 80/20 situation.
On the other hand, how many companies are there like ADI which I boasts its largest customer is 5 % of the business?
Tough calls... and I'd hate to be in their shoes!