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Apple Strikes a Deal to Buy 80-Percent Samsung AP Chips by 2016

November 17, 2014 - Written By Cory McNutt

Remember when Sean Connery’s wife told him “Never Say Never?”  Well, Apple finds it in the same position as poor Sean – they just stuck up a deal with Samsung to provide their Application Chips (AP) starting next year.  Samsung will slowly push their rival supplier from Taiwan, TSMC to second place, and by 2016, Samsung should be making 80-percent of Apple’s AP chips.  The dislike and feud between Apple and Samsung is one of the best known in the technology world and the courtrooms – the new deal, worth billions, comes only a month after Samsung and Apple agreed to drop all patent litigation outside the U.S.

What is great about this for Samsung is that unlike conventional memory chips, Application Chips are classified as logic chips and are subject to higher profit margins.  These are the Apple “A” chips that function as the brain in the iPhones and iPads – Samsung will work in partnership with GlobalFoundries, a semi-conductor plant headquartered in Santa Clara, CA.  A source familiar with the deal said, “Apple has designated Samsung as the primary supplier of its next A-series chips powering iOS devices from 2016 as the alliance with GlobalFoundries (GF) enabled Samsung to cut off capacity risk.”

Samsung will start production next year in their plant in Giheung, Gyeonggi Province, and as the volume grows, Samsung will first use its plants in Austin, Texas and then a GF-owned factory in New York.  Samsung’s technology is better than TSMC in terms of efficiency and energy consumption.  They have made a smoother transition to making customized chips with a 14-nanometer FinFET technology and they will start to mass producing the wafers for chips by the end of 2015 or early 2016.

Local investment firms expect Samsung to win more orders to fabricate chips for Qualcomm, Nvidia and Sony as Samsung focuses more on logic chips due to the rise of budget-priced smartphones.  This increase in the chip business will help off-set Samsung’s bottom line as their smartphone sales slowdown.  An industry official says that, “Samsung has so far proved its capability in memory chips.  Corporate clients were reluctant to depend on Samsung for logic chips.  But the partnership with GF will allow Samsung to win more orders to fabricate customized chips.” Apple needs high quality chips delivered in a dependable fashion and Samsung is the best one for the job – Apple gains a high quality chip in the quantities that they need and Samsung makes billions in the process based on their sales…a win-win situation for both rivals.  Hit us up on our Google+ Page and let us know if you think this is a good partnership for Apple and Samsung…as always, we would love to hear from you.