Apple Jilts Samsung for TSMC Mobile Chips

A well-chronicled oddity of the ever-boiling Apple (AAPL)-Samsung rivalry has been the iPhone maker’s continued single sourcing of mobile device chips from the Korean manufacturer’s semiconductor division.

Last year, Apple loosened Samsung’s grip on their chip arrangement, enlisting Taiwan Semiconductor Manufacturing Co. (TSMC) to produce advanced chipsets for its iPhone and iPad—even though it wasn’t certain the new supplier could deliver the goods.

But, according to a new Wall Street Journal report, it appears TSMC has done just that, shipping next-generation A8 chips to Apple this quarter in some volume. That’s good news for Apple inasmuch as the vendor was, and still is, intent upon distancing itself from relying on Samsung for chip production, even though it isn’t quite ready to kick the Korean company to the curb just yet.

The Journal’s report, relying on people familiar with TSMC’s and Apple’s doings (likely supply chain sources), said the chip maker last quarter began volume production for Apple using its advanced 20nm chip-manufacturing technology. At this point, there’s no word on how many processors TSMC has delivered to Apple nor how many it will produce.

Getting Apple A-series chip production right has become a high TSMC priority. Apple’s orders now account for as much as 10 percent of TSMC’s $19.8 billion in sales, the report said. And, the Taiwan chip maker is well-positioned to take even more business away from Samsung because it’s not a head-to-head competitor.

TSMC is said to have shuttled off hundreds of engineers to Apple headquarters last year to work on the project, the report said.

"Apple's order is a big deal to the company. TSMC has assigned a large team to support Apple, and, as you know, this client is very picky," one of the Journal’s sources said.

The agreement between the two companies is said to include a research and development collaboration to test next-generation microprocessors using the more advanced 16nm chip-manufacturing technology that TSMC plans to use in mass production next year, the report said.