Apple-Samsung battle may spur supplier shakeup
An intensifying battle between Samsung and Apple is raising expectations that some of the pairs' $5 billion-plus relationship may be up for grabs.
With the electronics titans squaring off in an acrimonious battle over smartphones and tablets patents, any worsening in their supply relationship could mean more business for Toshiba Corp, Micron, Hynix Semiconductor, Intel and TSMC.
Apple's move to protect its smartphone and tablet business comes as Samsung is set to become the world's top smartphone vendor, ending Nokia's decade-plus reign. Samsung makes parts central to Apple's mobile devices, but Apple in April accused the South Korean company of "slavishly" copying the iPad and iPhone in its own Galaxy devices.
While it would be a challenge for Apple to sever or water down its long-standing relationship with the huge Korean company, Apple CEO Steve Jobs is known for abruptly spurning erstwhile partners. Its relationship with Google cooled rapidly after the Internet giant got into smartphones, for instance.
Supplying major parts for Apple's iPads and iPhones, the industry's gold standards, would be a coup for any company. Making the silicon brains for those gadgets would mean a boost in revenue for Taiwan Semiconductor Manufacturing Corp, the world's largest contract chip maker. And it would be a major victory for PC chipmaker Intel, which is scrambling to find traction in the fast-moving mobile market and has repeatedly expressed a desire for Apple business.
There is a lot of competition, especially for high-profile and leading-edge wins like Apple. Fubon Research estimates that manufacturing some of Apple's next-generation A6 chips could account for 3 per cent of TSMC's $18 billion of revenue next year.
And Citigroup estimates new business from Apple could account for around 1.4 percent of Intel's sales, expected to hit $56 billion in 2012, were they to snag the deal.
Samsung's Galaxy gadgets are seen as among the biggest challengers of Apple's mobile devices, but Samsung has so far been unable to approach the Silicon Valley company's roaring sales growth.
While Apple downplays the rivalry, with COO Tim Cook calling Samsung a "valuable component supplier" soon after the first lawsuit, its courtroom actions tell another story.
Apple has already started diversifying its supply chain away from Samsung, Sterne Agee analyst Shaw Wu said. For displays, Apple recently agreed to add Taiwan's Chimei Innolux as a third supplier, he said.
But it is not easy to get Apple business, or support its massive volume. For instance, not all semiconductor foundries are large enough or advanced enough to meet Apple's requirements.
No clean break
Separating itself from Samsung would take time, and nerve. It can take months to configure foundries to produce new chips and thoroughly test them in the devices for which they will be made.
Last year, Apple was Samsung's No. 2 customer, accounting for $5.7 billion of sales tied mainly to semiconductors, according to Samsung's annual report. It has since become Samsung's top client.