If one goes by a recent Bloomberg article, it reads Samsung is soon going to provide the main chip for next iPhone. This new development can transform the old rivalries into long term commitment and growth for both the tech giants. During Steve Jobs regime, Apple filed couple of patent suits on Samsung and the supply contracts were terminated. However, in August last year current Apple CEO Tim Cook decided to gradually wind up patent suits with Samsung.
As per Bloomberg, Samsung will soon start making Apple A9 processor chips at its Giheung plant in South Korea. However, the two companies haven’t discussed this new contract in public. This report from Bloomberg also claims that additional orders will be passed on to Samsung’s partner Globalfoundries Inc.
This new order from Apple Inc. will give Samsung an upper hand over its arch rival Taiwan Semiconductor Manufacturing Company (TSMC), which last year ended Samsung’s monopoly over contracts to make iPhone and iPad chips. The semiconductor industry is valued as $300 billion and both Samsung and TSMC have committed large scale capital expenditure to bag lucrative contracts from Apple Inc. and Qualcomm.
Samsung will also produce displays for Apple’s other product and is reportedly spending around $14 billion in setting up the new plant for the same. This chip and other component business can help it tide over the stagnating income from the mobile business.
Other companies in the semiconductor industry like TSMC and SanDisk will suffer because of Samsung’s monopoly over Apple’s A9 chip manufacturing. Samsung’s first quarter report showed improvements in each of its component business, while TSMC which manufactured chips for Apple previously, has slashed its planned expenditure.
SanDisk is another company which will suffer because of new found love between Apple and Samsung. It released its product forecast last month and it fell short on analyst estimates. SanDisk’s memory chip contract for iPhone, iPad and Mac has been gobbled up by Samsung. “Playing against Samsung is never easy, they took away SanDisk’s business at Apple” says Daniel Amir, an analyst at Ladenburg Thalmann.
Barely an year ago, smartphone business contributed 60% to overall income of Samsung. But now it has gone down to contributing just 37% to Samsung’s aggregate income. However, Samsung can still surprise us with dazzling performance with recently launched Galaxy S6 and Galaxy S6 Edge. A decent smartphone business coupled with robust component business will definitely help Samsung maintain its edge over competitors.