Report: Apple to replace TSMC with Samsung to produce A9 chipset for next iPhone

Apple (NASDAQ: AAPL) is going to rely on rival Samsung Electronics to produce the processor for its next iPhone models, according to a Re/code report, which would be a major coup for Samsung's semiconductor unit.

While Apple has worked mainly with Taiwan Semiconductor Manufacturing Co. to fabricate the family of chips it has designed for its popular smartphones, Apple will turn to Samsung for its next-generation A9 chip, according to the report, which cited unnamed sources with knowledge of the situation.

Apple and Samsung declined to comment. The deal was earlier reported by South Korea's Maeil Business Newspaper.

If the deal comes to fruition, it would be a significant design win for Samsung's chipset business, which is taking on growing importance as Samsung's smartphone sales wane. Indeed, Samsung is investing $15 billion to build a new silicon factory outside of Seoul in South Korea.

Apple has now drawn neck-and-neck with Samsung in smartphone sales, thanks to a record iPhone sales quarter during the holiday sales period. If Samsung can get a coveted piece of hardware inside the next iPhone, that could take some of the financial sting out of rising iPhone sales; for every iPhone sold, Samsung would also benefit.

According to Re/code, Apple chose Samsung over TSMC for the A9 chip because of Samsung's advances in shrinking the size of the transistors on its chips down to 14 nanometers. The move could let Apple cram more processing capabilities into a smaller space. Meanwhile, TSMC is still at 20 nanometers.

There is precedent for an Apple teaming with Samsung--Samsung has been a supplier of silicon to Apple iPhones in the past, but in recent years Apple has been relying more heavily on TSMC.

Interestingly, Samsung's newfound chipset prowess is putting more pressure on other mobile companies. Qualcomm (NASDAQ:QCOM) recently cut its outlook for the second half of its fiscal year in part because it disclosed that its Snapdragon 810 processor "will not be in the upcoming design cycle of a large customer's flagship device," widely expected to be the forthcoming Samsung Galaxy S6. Samsung is expected to use its own Exynos application process for that phone. Qualcomm has said there is no problem with its chip and has touted more than 60 design wins for the Snapdragon 810.

For more:
- see this Re/code article

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