Apple may have no other choice but to start manufacturing its own chips.
If they move away from Samsung and then are f*cked over by their new partner... what then?!
I believe Apple would have a long hard fall from which it might never fully recover.
The devil you know.
I guess you've never taken any business class, have you?
Apple is a huge corporation and requires huge production volumes (with high quality standards). They can't simply say "ok, tomorrow we'll build a factory to produce our own chips"!
They simply can't do that, because they don't know how to do that. And they wouldn't have economies of scale nor economies of learning (hope they are the correct terms in English). Also, owning plants means having a more rigid cost structure, etc etc. There are thousands of reasons why it's not possible for a company like Apple to manufacture their own devices. Really!
The new partner (and not even Samsung) can't f**k (as you say) them, simply because they have a contract. And because a contract for millions of chips every year is too important.
Samsung will never f**k Apple either. If Apple wishes to change partner, it's just because they don't want Samsung to *learn* from them!
In fact, when Samsung produces a new CPU for Apple, they have to work (together, often) on many different things, to solve issues etc... This means that, even if Samsung can't copy Apple designs, they are still acquiring knowledges, which is fundamental in today's world. "Knowledge" here means "know-how", being able to solve issues, knowing how it's best to do something, acquiring experience (see economies of learning), etc: it's all tacit knowledge, but it's very valuable.
I guess you've never taken any business class, have you?
Apple is a huge corporation and requires huge production volumes (with high quality standards). They can't simply say "ok, tomorrow we'll build a factory to produce our own chips"!
They simply can't do that, because they don't know how to do that. And they wouldn't have economies of scale nor economies of learning (hope they are the correct terms in English). Also, owning plants means having a more rigid cost structure, etc etc. There are thousands of reasons why it's not possible for a company like Apple to manufacture their own devices. Really!
The new partner (and not even Samsung) can't f**k (as you say) them, simply because they have a contract. And because a contract for millions of chips every year is too important.
Samsung will never f**k Apple either. If Apple wishes to change partner, it's just because they don't want Samsung to *learn* from them!
In fact, when Samsung produces a new CPU for Apple, they have to work (together, often) on many different things, to solve issues etc... This means that, even if Samsung can't copy Apple designs, they are still acquiring knowledges, which is fundamental in today's world. "Knowledge" here means "know-how", being able to solve issues, knowing how it's best to do something, acquiring experience (see economies of learning), etc: it's all tacit knowledge, but it's very valuable.
Am I talking about next year? Obviously you assumed so. We all know about assuming. I'm talking at the very least 6 years down the road.
Apple didn't know how to do a lot of things, but it learned. You said it yourself, that Samsung "learns" from Apple. Maybe Apple should learn themselves right into the chip business. Apple could buy its way slowly into fabrication.
You say that Apple doesn't want Samsung to learn from them. What about the next guy? Will they not also be learning from Apple.
As far as contracts go... ha! Contracts aren't worth shit if your manufacturing partner f*cks up on the fab and has to pull a line to re-jig it. You said it yourself... Apple has huge demands and you can't learn how to cope with these demands overnight. Right now Apple knows Samsung's capabilities. Samsung learning from Apple might be the least of Apple's worries. You, being the business genius that you are, should know that.
Getting f*cked over by your suppliers can mean a lot more than just breaking contracts.
Apple's been ramping up so much and has so much capital that they can afford to-- and probably need to-- have multiple suppliers. I wouldn't be surprised to see TSMC, Global Foundries, and Samsung all producing chips in volume for Apple.
Intel used to own StrongARM but divested it a long time ago. It would be a pretty strategic decision for Intel to start manufacturing ARM again, and since I doubt they've made that decision and it would take a year or two to start once they do... don't hold your breath there.
It takes time to come up to speed in process technology. Apple has no recent experience in this. Intel has the best fabs. Everyone else has many more problems. If Apple began their own, it could take two years before the fab was complete. But they would have to hire a large number of people expert in this away from others. What is the guarantee they could get a talented and cohesive team together in that time? Then the fab would need to undergo testing. It could be more than two years down the road, possibly three.
But they would have to upgrade their fab with every process generation. It's estimated from Intel's numbers, that a new 22nm fab costs about $8 billion. Is this really the best way for Apple to be spending its money? Could they break even on this venture? I don't see it.
I think that Apple will have no other choice but to buy its way into the fab business. Production volume is getting too massive. Apple is at a f*cked if you do, f*cked if you don't crossroads. Chip fab is the weak link in Apple's chain. Will Apple ever get what it really needs from another manufacturer? I doubt it. At the very least Apple needs more control over the fab plant and its not going to get it unless it buys the plant.
I think that Apple will have no other choice but to buy its way into the fab business. Production volume is getting too massive. Apple is at a f*cked if you do, f*cked if you don't crossroads. Chip fab is the weak link in Apple's chain. Will Apple every get what it really needs from another manufacturer? I doubt it. At the very least Apple needs more control over the fab plant and its not going to get it unless it buys the plant.
This aint your Grandpa's Apple...
I tend to agree with you on all points here .. especially the last comment!
Re: "Such a transition away from Samsung is expected to have shockwaves through the industry."
Really? Headlines yes. Shockwaves only through Samsung's chip division.
And presumably, Samsung would continue to make older AX chips like the A5 / A5X / A6 / A6X for a few years. So the total transition away from Samsung for all AX manufacturing business would take 2 or 3 years after the TSMC chips (A7 / A7X ?) volume production begins.
I wouldn't be surprised if the A7 / A7X will be 64-bit dual / quad core designs. Dual core for iPhone, iPad, iPod touch, Apple TV. Quad core for MacBook Air running OS X 10.9.
One factor that will undoubtedly also play a role is that during the transition, the chips from Samsung could get significantly more expensive because of the loss of volume. It would surprise the hell out of me (and I DO know something about supply chain management) to find that the price is not linked to volume by some calculation that had been agreed in advance. That is normal practice.
Take an example: If you agree to a delivery target it would be insane to allow the client to vary the ordered volume at will. For example if a plant is running at capacity and the customer wants do double the order: No go. You have to build a new Fab. That takes major investment and time planning. In the other direction, if you build a Fab to meet a customer's projected demand, you won't want to reduce the guaranteed order volume before the Fab is amortized.
Companies just do not get themselves into that situation and survive, and as I said it would amage me if such a price-volume coupling isnt in the contracts. Getting out of a contract is also not as easy as you make believe. That certainly involves lawyers. You can't just say "I changed my mind". Forget it.
So if the fab is paid for then Samsung can probably absorb the production capacity by diverting to their own processors and letting the output flow into the internal vertical supply chain. That will reduce their costs at the same time as it makes Apple's costs rise. Samsung is probably not losing too much sleep about the apple theatricals at this point, particularly considering the amazing demand for Samsung's own products.
Life is mostly not as simple as one would like it to be.
There are thousands of reasons why it's not possible for a company like Apple to manufacture their own devices. Really!
And there are over $100 billion reasons they can.
The market cap of several of the pure-play foundries are in the single digit billion range. For example UMC is only $4.7B and is sometimes the rumored takeover target of Qualcomm. Of course they NEED about another $8B (if I recall correctly) in CAPEX to get to the 20nm process. TowerJazz is only 181M if all apple wants is to acqui-hire a company that is already in the foundry business (although not in the CPU one they are a ARM licensee) to manage new fabs. That's a longer road than buying UMC but UMC has a asston of 40nm stuff Apple probably can't use.
Qualcomm is in the same boat. They need more capacity than TSMC is willing to promise.
On the other hand, even AMD/ATI is fabless after spinning off Global Foundries.
Samsung is probably not losing too much sleep about the apple theatricals at this point, particularly considering the amazing demand for Samsung's own products.
Life is mostly not as simple as one would like it to be.
Not for the short term. But if Apple injects a few billion and technology into a competitor and it becomes a long term headache. For more likely for displays than CPUs.
The market cap of several of the pure-play foundries are in the single digit billion range. For example UMC is only $4.7B and is sometimes the rumored takeover target of Qualcomm. Of course they NEED about another $8B (if I recall correctly) in CAPEX to get to the 20nm process. TowerJazz is only 181M if all apple wants is to acqui-hire a company that is already in the foundry business (although not in the CPU one they are a ARM licensee) to manage new fabs. That's a longer road than buying UMC but UMC has a asston of 40nm stuff Apple probably can't use.
Qualcomm is in the same boat. They need more capacity than TSMC is willing to promise.
On the other hand, even AMD/ATI is fabless after spinning off Global Foundries.
As margins get tighter the number of chip fabs that can keep up will get smaller. Even five years years from now Apple could be in serious trouble. Apple's biggest competitor, Samsung, is one of the few mobile players, if not the only one, that can manufacture chips in house. Can Apple continue business as usual or is a serious shift needed at this time. I believe that Apple is right on the cusp of serious change. These are the sort of decision points in a company's history that can either make it or break it.
Over the next few years Apple needs to get right up Samsung's ass.
If Apple began their own, it could take two years before the fab was complete. But they would have to hire a large number of people expert in this away from others. What is the guarantee they could get a talented and cohesive team together in that time? Then the fab would need to undergo testing. It could be more than two years down the road, possibly three.
If Apple needs to go down this road the sooner started the better. TI is going to cut 1700 jobs as they move away from OMAP. If they aquihire a functioning fab management team to build a new fab in texas it could work.
The market cap of several of the pure-play foundries are in the single digit billion range. For example UMC is only $4.7B and is sometimes the rumored takeover target of Qualcomm. Of course they NEED about another $8B (if I recall correctly) in CAPEX to get to the 20nm process. TowerJazz is only 181M if all apple wants is to acqui-hire a company that is already in the foundry business (although not in the CPU one they are a ARM licensee) to manage new fabs. That's a longer road than buying UMC but UMC has a asston of 40nm stuff Apple probably can't use.
Qualcomm is in the same boat. They need more capacity than TSMC is willing to promise.
On the other hand, even AMD/ATI is fabless after spinning off Global Foundries.
As margins get tighter the number of chip fabs that can keep up will get smaller. Even five years years from now Apple could be in serious trouble. Apple's biggest competitor, Samsung, is one of the few mobile players, if not the only one, that can manufacture chips in house. Can Apple continue business as usual or is a serious shift needed at this time. I believe that Apple is right on the cusp of serious change. These are the sort of decision points in a company's history that can either make it or break it.
Over the next few years Apple needs to get right up Samsung's ass.
Yes, but that's why I think when the theatrics are over, business sense will prevail.
I don't think Apple can survive long-term with ANY single-source supplier. Whether Samsung is or is not one of the multi-source suppliers is more of a risk-factor for Apple than for Samsung. We shouldn't forget that Samsung is the #1 Chip Fab worldwide and try as they might, the Taiwanese cannot compete.
As I suggested elsewhere, I think the Apple-Samsung scrap is actually a side-show. The REAL threat to Samsung but also to Apple are in fact the mainland chinese, not the Taiwanese.
The market cap of several of the pure-play foundries are in the single digit billion range. For example UMC is only $4.7B and is sometimes the rumored takeover target of Qualcomm. Of course they NEED about another $8B (if I recall correctly) in CAPEX to get to the 20nm process. TowerJazz is only 181M if all apple wants is to acqui-hire a company that is already in the foundry business (although not in the CPU one they are a ARM licensee) to manage new fabs. That's a longer road than buying UMC but UMC has a asston of 40nm stuff Apple probably can't use.
Qualcomm is in the same boat. They need more capacity than TSMC is willing to promise.
On the other hand, even AMD/ATI is fabless after spinning off Global Foundries.
So many things wrong with this comment.
One of the reasons Apple have $100bn is because they are sensible. Yes, if they wanted to get into manufacturing quickly, they could, but it would cost them massively. They could buy the talent they need to have it happen, but every person they needed would over charge them relative to what everyone else pays, and paying over the odds isn't how Apple came to have so much cash.
UMC would need to do much more than just build a mega-fab (which is the $8bn figure you quote) to be able to run 20nm. Sure, they could buy the latest ASML steppers, and the latest LAM etch chambers, but they still wouldn't have the process capability to make it all work. That takes time to develop.
Your idea about Tower is even more ridiculous. They specialize in MEMS, mixed signal and RF. They know more about GaAs manufacturing than any other foundry companies, but Apple don't need that. Like with UMC, you could buy Tower for $181m, drop $8bn on a mega-fab, but you still wouldn't know how to do 20nm processing. On the plus side, your $181m would get you a CEO called Russell Ellwanger, who's name always amused me. Aside from his comedy name, if you ever get chance to hear him speak, take it - he's really excellent.
Yes, but that's why I think when the theatrics are over, business sense will prevail.
I don't think Apple can survive long-term with ANY single-source supplier. Whether Samsung is or is not one of the multi-source suppliers is more of a risk-factor for Apple than for Samsung. We shouldn't forget that Samsung is the #1 Chip Fab worldwide and try as they might, the Taiwanese cannot compete.
As I suggested elsewhere, I think the Apple-Samsung scrap is actually a side-show. The REAL threat to Samsung but also to Apple are in fact the mainland chinese, not the Taiwanese.
I've no idea how mainland China is going to be a threat in the chipmaking space, at least in the medium term. There is very little 300mm manufacturing there, let alone advanced geometries.
While China continues to have low-tech 200mm fabs, everyone else is about to start the arduous shift to 450mm. Korea, Japan, Taiwan and the US are still miles ahead of China in chip manufacture.
Yes, but that's why I think when the theatrics are over, business sense will prevail.
I don't think Apple can survive long-term with ANY single-source supplier. Whether Samsung is or is not one of the multi-source suppliers is more of a risk-factor for Apple than for Samsung. We shouldn't forget that Samsung is the #1 Chip Fab worldwide and try as they might, the Taiwanese cannot compete.
As I suggested elsewhere, I think the Apple-Samsung scrap is actually a side-show. The REAL threat to Samsung but also to Apple are in fact the mainland chinese, not the Taiwanese.
ln my opinion, business sense is prevailing right now. I don't think this is theatrics. Samsung intends, if not to bury Apple, to bring Apple to its knees. For all of Apple's volume and for all of Apple's profit, I believe that Apple is in a very precarious position. Samsung, because of its diversification is much better positioned for life without Apple than Apple is for life without Samsung. That is why I think Apple has to boldly go where Apple has never gone before.
I take a look at Google. $12.5 billion seems like a waste of money to some but without that move, and especially had Apple been allowed to buy MotoMobile, I really think we'd be shoveling the dirt on Android right now. As it is, those patents are helping to prop up Android quite well. (Why Google wants an OS is a mystery to me, being that, without Android today, Google would be doing better with Apple mobile alone (in the sense that they wouldn't have had to spend billions)... but maybe their reason is the same scenario that I'm talking about with Apple above... things change and Google might not be able to depend on Apple in the future).
As far as China... read PaulMJohnson above... but that too can change quickly. Regardless, Chinese manufacturing costs to get the same reliability rate are almost the same as anywhere else in the world... but China was there first.
Yes, but that's why I think when the theatrics are over, business sense will prevail.
I don't think Apple can survive long-term with ANY single-source supplier. Whether Samsung is or is not one of the multi-source suppliers is more of a risk-factor for Apple than for Samsung. We shouldn't forget that Samsung is the #1 Chip Fab worldwide and try as they might, the Taiwanese cannot compete.
As I suggested elsewhere, I think the Apple-Samsung scrap is actually a side-show. The REAL threat to Samsung but also to Apple are in fact the mainland chinese, not the Taiwanese.
I've no idea how mainland China is going to be a threat in the chipmaking space, at least in the medium term. There is very little 300mm manufacturing there, let alone advanced geometries.
While China continues to have low-tech 200mm fabs, everyone else is about to start the arduous shift to 450mm. Korea, Japan, Taiwan and the US are still miles ahead of China in chip manufacture.
I will not dispute your comments relating to the state of Chipmaking in mainland China as of NOW. However I think that it would be a major mistake to underestimate what China can achieve if they decide a particular technology is a national priority. That is the advantage of the semi-capitalistic semi-state-controlled economy. As elsewhere in the world it is largely a matter of how much and by which channels the country is prepared to invest. The resources, including the human resources, are available. Buying the necessary skills or entering into certain kinds of bilateral agreements is an option for example, that may well allow them to jump generations in Chipmaking if they decide its a strategic issue. A few hundred billion dollars is pocket money to china. They may also come to some deals with France or Germany in chipmaking (in return, for example, for low-interest loans and support in the Euro-crisis ... and that's going to be on the European agenda for a generation or more into the future.
I really don't believe that China will let itself be held to ransom by foreign chipmakers for an indefinite period. That's really all I am saying. They do have some incredible advantages ... patriotism in the consumer market, an almost unlimited supply of top-rate academics and technology graduates ... and so on. For most of Asia (including Japan and South Korea) the countries close to China have a lot of reasons for wanting closer, better, friendlier ties with China, which is an increasingly formidable world economic force. They will eclipse the US in the next few years as the US economy continues to be hamstrung by failed economic policies, staggering debt (that has to be serviced) and internal dissent and unsustainable military expenditure.
Let's face it, if you're in the neighborhood of a tiger, you don't want him to be aggressive towards you, and all asian countries are sick and tired of US hegemony and their "**** the rest of the world" mentality. They don't "Like" the US. They "need" the us ... but only as long as it is a credible counterbalance to the chinese. If the balance continues to swing towards China and against the US, then the endgame is clear.
One of the reasons Apple have $100bn is because they are sensible. Yes, if they wanted to get into manufacturing quickly, they could, but it would cost them massively. They could buy the talent they need to have it happen, but every person they needed would over charge them relative to what everyone else pays, and paying over the odds isn't how Apple came to have so much cash.
UMC would need to do much more than just build a mega-fab (which is the $8bn figure you quote) to be able to run 20nm. Sure, they could buy the latest ASML steppers, and the latest LAM etch chambers, but they still wouldn't have the process capability to make it all work. That takes time to develop.
Your idea about Tower is even more ridiculous. They specialize in MEMS, mixed signal and RF. They know more about GaAs manufacturing than any other foundry companies, but Apple don't need that. Like with UMC, you could buy Tower for $181m, drop $8bn on a mega-fab, but you still wouldn't know how to do 20nm processing. On the plus side, your $181m would get you a CEO called Russell Ellwanger, who's name always amused me. Aside from his comedy name, if you ever get chance to hear him speak, take it - he's really excellent.
UMC is in the process of building out their sub 28nm capabilities so I have no clue what the hell you are smoking. Are you stating that UMC is licensing IBM's 14nm and 20nm FinFET tech only to sit on it? The reason they are offering 10% equity stakes is because the need the capital injection to build out their capacity...although I think they are claiming they are skipping 20nm planar to jump to 14nm FinFET. Certainly Apple can use their 28nm planar capacity and UMC has stated it has developed 20nm planar capabilities but aren't going to offer them due to lack of interest.
The question is also whether Apple is also ready to go 3D with the A7 or if 20nm planar is a better fit for where they are at. Because I guarandamntee you that if Apple went to UMC and asked for billions worth of 20nm planar capacity UMC and offered billions of aid to build the fabs that they would reconsider the direct jump to 14nm FinFET.
ASML also offered equity stake which Apple could also buy into (Intel bought 15% for $3B) earlier this year to get a starting push.
Yes, I know Tower does mostly CMOS and they specialize in SiGe not GaAs. However they do have the operational knowledge of running fabs although how well that translates into the volume Apple needs is debatable. Maybe it's not as good a fit as UMC but I think it's kinda like buying the very small PA Semi, not for the product they made at the time but because of other knowledge. In this case operational rather than technical...although the RF CMOS expertise is likely useful the Apple as well. That they have some SGOI experience helps too.
UMC is the better fit but as I said, Qualcomm is the most rumored partner for equity and a lock on UMC capacity. Apple wont likely want to get into a bidding war with Qualcomm to buy UMC or even UMC capacity unless it has no choice in the matter. Pursuing a smaller company and building out their own capabilities seem more in line with what they do.
Being an IDM is risky. Being fabless is risky. Between the two Apple has more supply constraint issues than worries about how to fill capacity.
Comments
Quote:
Originally Posted by island hermit
Apple may have no other choice but to start manufacturing its own chips.
If they move away from Samsung and then are f*cked over by their new partner... what then?!
I believe Apple would have a long hard fall from which it might never fully recover.
The devil you know.
I guess you've never taken any business class, have you?
Apple is a huge corporation and requires huge production volumes (with high quality standards). They can't simply say "ok, tomorrow we'll build a factory to produce our own chips"!
They simply can't do that, because they don't know how to do that. And they wouldn't have economies of scale nor economies of learning (hope they are the correct terms in English). Also, owning plants means having a more rigid cost structure, etc etc. There are thousands of reasons why it's not possible for a company like Apple to manufacture their own devices. Really!
The new partner (and not even Samsung) can't f**k (as you say) them, simply because they have a contract. And because a contract for millions of chips every year is too important.
Samsung will never f**k Apple either. If Apple wishes to change partner, it's just because they don't want Samsung to *learn* from them!
In fact, when Samsung produces a new CPU for Apple, they have to work (together, often) on many different things, to solve issues etc... This means that, even if Samsung can't copy Apple designs, they are still acquiring knowledges, which is fundamental in today's world. "Knowledge" here means "know-how", being able to solve issues, knowing how it's best to do something, acquiring experience (see economies of learning), etc: it's all tacit knowledge, but it's very valuable.
Quote:
Originally Posted by EgoAleSum
I guess you've never taken any business class, have you?
Apple is a huge corporation and requires huge production volumes (with high quality standards). They can't simply say "ok, tomorrow we'll build a factory to produce our own chips"!
They simply can't do that, because they don't know how to do that. And they wouldn't have economies of scale nor economies of learning (hope they are the correct terms in English). Also, owning plants means having a more rigid cost structure, etc etc. There are thousands of reasons why it's not possible for a company like Apple to manufacture their own devices. Really!
The new partner (and not even Samsung) can't f**k (as you say) them, simply because they have a contract. And because a contract for millions of chips every year is too important.
Samsung will never f**k Apple either. If Apple wishes to change partner, it's just because they don't want Samsung to *learn* from them!
In fact, when Samsung produces a new CPU for Apple, they have to work (together, often) on many different things, to solve issues etc... This means that, even if Samsung can't copy Apple designs, they are still acquiring knowledges, which is fundamental in today's world. "Knowledge" here means "know-how", being able to solve issues, knowing how it's best to do something, acquiring experience (see economies of learning), etc: it's all tacit knowledge, but it's very valuable.
Am I talking about next year? Obviously you assumed so. We all know about assuming. I'm talking at the very least 6 years down the road.
Apple didn't know how to do a lot of things, but it learned. You said it yourself, that Samsung "learns" from Apple. Maybe Apple should learn themselves right into the chip business. Apple could buy its way slowly into fabrication.
You say that Apple doesn't want Samsung to learn from them. What about the next guy? Will they not also be learning from Apple.
As far as contracts go... ha! Contracts aren't worth shit if your manufacturing partner f*cks up on the fab and has to pull a line to re-jig it. You said it yourself... Apple has huge demands and you can't learn how to cope with these demands overnight. Right now Apple knows Samsung's capabilities. Samsung learning from Apple might be the least of Apple's worries. You, being the business genius that you are, should know that.
Getting f*cked over by your suppliers can mean a lot more than just breaking contracts.
Why choose?
Apple's been ramping up so much and has so much capital that they can afford to-- and probably need to-- have multiple suppliers. I wouldn't be surprised to see TSMC, Global Foundries, and Samsung all producing chips in volume for Apple.
Intel used to own StrongARM but divested it a long time ago. It would be a pretty strategic decision for Intel to start manufacturing ARM again, and since I doubt they've made that decision and it would take a year or two to start once they do... don't hold your breath there.
Quote:
Originally Posted by melgross
It takes time to come up to speed in process technology. Apple has no recent experience in this. Intel has the best fabs. Everyone else has many more problems. If Apple began their own, it could take two years before the fab was complete. But they would have to hire a large number of people expert in this away from others. What is the guarantee they could get a talented and cohesive team together in that time? Then the fab would need to undergo testing. It could be more than two years down the road, possibly three.
But they would have to upgrade their fab with every process generation. It's estimated from Intel's numbers, that a new 22nm fab costs about $8 billion. Is this really the best way for Apple to be spending its money? Could they break even on this venture? I don't see it.
I think that Apple will have no other choice but to buy its way into the fab business. Production volume is getting too massive. Apple is at a f*cked if you do, f*cked if you don't crossroads. Chip fab is the weak link in Apple's chain. Will Apple ever get what it really needs from another manufacturer? I doubt it. At the very least Apple needs more control over the fab plant and its not going to get it unless it buys the plant.
This aint your Grandpa's Apple...
I tend to agree with you on all points here .. especially the last comment!
Really? Headlines yes. Shockwaves only through Samsung's chip division.
And presumably, Samsung would continue to make older AX chips like the A5 / A5X / A6 / A6X for a few years. So the total transition away from Samsung for all AX manufacturing business would take 2 or 3 years after the TSMC chips (A7 / A7X ?) volume production begins.
I wouldn't be surprised if the A7 / A7X will be 64-bit dual / quad core designs. Dual core for iPhone, iPad, iPod touch, Apple TV. Quad core for MacBook Air running OS X 10.9.
One factor that will undoubtedly also play a role is that during the transition, the chips from Samsung could get significantly more expensive because of the loss of volume. It would surprise the hell out of me (and I DO know something about supply chain management) to find that the price is not linked to volume by some calculation that had been agreed in advance. That is normal practice.
Take an example: If you agree to a delivery target it would be insane to allow the client to vary the ordered volume at will. For example if a plant is running at capacity and the customer wants do double the order: No go. You have to build a new Fab. That takes major investment and time planning. In the other direction, if you build a Fab to meet a customer's projected demand, you won't want to reduce the guaranteed order volume before the Fab is amortized.
Companies just do not get themselves into that situation and survive, and as I said it would amage me if such a price-volume coupling isnt in the contracts. Getting out of a contract is also not as easy as you make believe. That certainly involves lawyers. You can't just say "I changed my mind". Forget it.
So if the fab is paid for then Samsung can probably absorb the production capacity by diverting to their own processors and letting the output flow into the internal vertical supply chain. That will reduce their costs at the same time as it makes Apple's costs rise. Samsung is probably not losing too much sleep about the apple theatricals at this point, particularly considering the amazing demand for Samsung's own products.
Life is mostly not as simple as one would like it to be.
Quote:
Originally Posted by EgoAleSum
There are thousands of reasons why it's not possible for a company like Apple to manufacture their own devices. Really!
And there are over $100 billion reasons they can.
The market cap of several of the pure-play foundries are in the single digit billion range. For example UMC is only $4.7B and is sometimes the rumored takeover target of Qualcomm. Of course they NEED about another $8B (if I recall correctly) in CAPEX to get to the 20nm process. TowerJazz is only 181M if all apple wants is to acqui-hire a company that is already in the foundry business (although not in the CPU one they are a ARM licensee) to manage new fabs. That's a longer road than buying UMC but UMC has a asston of 40nm stuff Apple probably can't use.
Qualcomm is in the same boat. They need more capacity than TSMC is willing to promise.
On the other hand, even AMD/ATI is fabless after spinning off Global Foundries.
Quote:
Originally Posted by Taniwha
Samsung is probably not losing too much sleep about the apple theatricals at this point, particularly considering the amazing demand for Samsung's own products.
Life is mostly not as simple as one would like it to be.
Not for the short term. But if Apple injects a few billion and technology into a competitor and it becomes a long term headache. For more likely for displays than CPUs.
Quote:
Originally Posted by nht
And there are over $100 billion reasons they can.
The market cap of several of the pure-play foundries are in the single digit billion range. For example UMC is only $4.7B and is sometimes the rumored takeover target of Qualcomm. Of course they NEED about another $8B (if I recall correctly) in CAPEX to get to the 20nm process. TowerJazz is only 181M if all apple wants is to acqui-hire a company that is already in the foundry business (although not in the CPU one they are a ARM licensee) to manage new fabs. That's a longer road than buying UMC but UMC has a asston of 40nm stuff Apple probably can't use.
Qualcomm is in the same boat. They need more capacity than TSMC is willing to promise.
On the other hand, even AMD/ATI is fabless after spinning off Global Foundries.
As margins get tighter the number of chip fabs that can keep up will get smaller. Even five years years from now Apple could be in serious trouble. Apple's biggest competitor, Samsung, is one of the few mobile players, if not the only one, that can manufacture chips in house. Can Apple continue business as usual or is a serious shift needed at this time. I believe that Apple is right on the cusp of serious change. These are the sort of decision points in a company's history that can either make it or break it.
Over the next few years Apple needs to get right up Samsung's ass.
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Originally Posted by melgross
If Apple began their own, it could take two years before the fab was complete. But they would have to hire a large number of people expert in this away from others. What is the guarantee they could get a talented and cohesive team together in that time? Then the fab would need to undergo testing. It could be more than two years down the road, possibly three.
If Apple needs to go down this road the sooner started the better. TI is going to cut 1700 jobs as they move away from OMAP. If they aquihire a functioning fab management team to build a new fab in texas it could work.
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Originally Posted by island hermit
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Originally Posted by nht
And there are over $100 billion reasons they can.
The market cap of several of the pure-play foundries are in the single digit billion range. For example UMC is only $4.7B and is sometimes the rumored takeover target of Qualcomm. Of course they NEED about another $8B (if I recall correctly) in CAPEX to get to the 20nm process. TowerJazz is only 181M if all apple wants is to acqui-hire a company that is already in the foundry business (although not in the CPU one they are a ARM licensee) to manage new fabs. That's a longer road than buying UMC but UMC has a asston of 40nm stuff Apple probably can't use.
Qualcomm is in the same boat. They need more capacity than TSMC is willing to promise.
On the other hand, even AMD/ATI is fabless after spinning off Global Foundries.
As margins get tighter the number of chip fabs that can keep up will get smaller. Even five years years from now Apple could be in serious trouble. Apple's biggest competitor, Samsung, is one of the few mobile players, if not the only one, that can manufacture chips in house. Can Apple continue business as usual or is a serious shift needed at this time. I believe that Apple is right on the cusp of serious change. These are the sort of decision points in a company's history that can either make it or break it.
Over the next few years Apple needs to get right up Samsung's ass.
Yes, but that's why I think when the theatrics are over, business sense will prevail.
I don't think Apple can survive long-term with ANY single-source supplier. Whether Samsung is or is not one of the multi-source suppliers is more of a risk-factor for Apple than for Samsung. We shouldn't forget that Samsung is the #1 Chip Fab worldwide and try as they might, the Taiwanese cannot compete.
As I suggested elsewhere, I think the Apple-Samsung scrap is actually a side-show. The REAL threat to Samsung but also to Apple are in fact the mainland chinese, not the Taiwanese.
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Originally Posted by jameskatt2
Intel certainly wouldn't stab Apple in the back like Samsung does.
You wanna buy an ultrabook...
...inspired by Intel.
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Originally Posted by nht
And there are over $100 billion reasons they can.
The market cap of several of the pure-play foundries are in the single digit billion range. For example UMC is only $4.7B and is sometimes the rumored takeover target of Qualcomm. Of course they NEED about another $8B (if I recall correctly) in CAPEX to get to the 20nm process. TowerJazz is only 181M if all apple wants is to acqui-hire a company that is already in the foundry business (although not in the CPU one they are a ARM licensee) to manage new fabs. That's a longer road than buying UMC but UMC has a asston of 40nm stuff Apple probably can't use.
Qualcomm is in the same boat. They need more capacity than TSMC is willing to promise.
On the other hand, even AMD/ATI is fabless after spinning off Global Foundries.
So many things wrong with this comment.
One of the reasons Apple have $100bn is because they are sensible. Yes, if they wanted to get into manufacturing quickly, they could, but it would cost them massively. They could buy the talent they need to have it happen, but every person they needed would over charge them relative to what everyone else pays, and paying over the odds isn't how Apple came to have so much cash.
UMC would need to do much more than just build a mega-fab (which is the $8bn figure you quote) to be able to run 20nm. Sure, they could buy the latest ASML steppers, and the latest LAM etch chambers, but they still wouldn't have the process capability to make it all work. That takes time to develop.
Your idea about Tower is even more ridiculous. They specialize in MEMS, mixed signal and RF. They know more about GaAs manufacturing than any other foundry companies, but Apple don't need that. Like with UMC, you could buy Tower for $181m, drop $8bn on a mega-fab, but you still wouldn't know how to do 20nm processing. On the plus side, your $181m would get you a CEO called Russell Ellwanger, who's name always amused me. Aside from his comedy name, if you ever get chance to hear him speak, take it - he's really excellent.
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Originally Posted by Taniwha
Yes, but that's why I think when the theatrics are over, business sense will prevail.
I don't think Apple can survive long-term with ANY single-source supplier. Whether Samsung is or is not one of the multi-source suppliers is more of a risk-factor for Apple than for Samsung. We shouldn't forget that Samsung is the #1 Chip Fab worldwide and try as they might, the Taiwanese cannot compete.
As I suggested elsewhere, I think the Apple-Samsung scrap is actually a side-show. The REAL threat to Samsung but also to Apple are in fact the mainland chinese, not the Taiwanese.
I've no idea how mainland China is going to be a threat in the chipmaking space, at least in the medium term. There is very little 300mm manufacturing there, let alone advanced geometries.
While China continues to have low-tech 200mm fabs, everyone else is about to start the arduous shift to 450mm. Korea, Japan, Taiwan and the US are still miles ahead of China in chip manufacture.
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Originally Posted by Taniwha
Yes, but that's why I think when the theatrics are over, business sense will prevail.
I don't think Apple can survive long-term with ANY single-source supplier. Whether Samsung is or is not one of the multi-source suppliers is more of a risk-factor for Apple than for Samsung. We shouldn't forget that Samsung is the #1 Chip Fab worldwide and try as they might, the Taiwanese cannot compete.
As I suggested elsewhere, I think the Apple-Samsung scrap is actually a side-show. The REAL threat to Samsung but also to Apple are in fact the mainland chinese, not the Taiwanese.
ln my opinion, business sense is prevailing right now. I don't think this is theatrics. Samsung intends, if not to bury Apple, to bring Apple to its knees. For all of Apple's volume and for all of Apple's profit, I believe that Apple is in a very precarious position. Samsung, because of its diversification is much better positioned for life without Apple than Apple is for life without Samsung. That is why I think Apple has to boldly go where Apple has never gone before.
I take a look at Google. $12.5 billion seems like a waste of money to some but without that move, and especially had Apple been allowed to buy MotoMobile, I really think we'd be shoveling the dirt on Android right now. As it is, those patents are helping to prop up Android quite well. (Why Google wants an OS is a mystery to me, being that, without Android today, Google would be doing better with Apple mobile alone (in the sense that they wouldn't have had to spend billions)... but maybe their reason is the same scenario that I'm talking about with Apple above... things change and Google might not be able to depend on Apple in the future).
As far as China... read PaulMJohnson above... but that too can change quickly. Regardless, Chinese manufacturing costs to get the same reliability rate are almost the same as anywhere else in the world... but China was there first.
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Originally Posted by PaulMJohnson
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Originally Posted by Taniwha
Yes, but that's why I think when the theatrics are over, business sense will prevail.
I don't think Apple can survive long-term with ANY single-source supplier. Whether Samsung is or is not one of the multi-source suppliers is more of a risk-factor for Apple than for Samsung. We shouldn't forget that Samsung is the #1 Chip Fab worldwide and try as they might, the Taiwanese cannot compete.
As I suggested elsewhere, I think the Apple-Samsung scrap is actually a side-show. The REAL threat to Samsung but also to Apple are in fact the mainland chinese, not the Taiwanese.
I've no idea how mainland China is going to be a threat in the chipmaking space, at least in the medium term. There is very little 300mm manufacturing there, let alone advanced geometries.
While China continues to have low-tech 200mm fabs, everyone else is about to start the arduous shift to 450mm. Korea, Japan, Taiwan and the US are still miles ahead of China in chip manufacture.
I will not dispute your comments relating to the state of Chipmaking in mainland China as of NOW. However I think that it would be a major mistake to underestimate what China can achieve if they decide a particular technology is a national priority. That is the advantage of the semi-capitalistic semi-state-controlled economy. As elsewhere in the world it is largely a matter of how much and by which channels the country is prepared to invest. The resources, including the human resources, are available. Buying the necessary skills or entering into certain kinds of bilateral agreements is an option for example, that may well allow them to jump generations in Chipmaking if they decide its a strategic issue. A few hundred billion dollars is pocket money to china. They may also come to some deals with France or Germany in chipmaking (in return, for example, for low-interest loans and support in the Euro-crisis ... and that's going to be on the European agenda for a generation or more into the future.
I really don't believe that China will let itself be held to ransom by foreign chipmakers for an indefinite period. That's really all I am saying. They do have some incredible advantages ... patriotism in the consumer market, an almost unlimited supply of top-rate academics and technology graduates ... and so on. For most of Asia (including Japan and South Korea) the countries close to China have a lot of reasons for wanting closer, better, friendlier ties with China, which is an increasingly formidable world economic force. They will eclipse the US in the next few years as the US economy continues to be hamstrung by failed economic policies, staggering debt (that has to be serviced) and internal dissent and unsustainable military expenditure.
Let's face it, if you're in the neighborhood of a tiger, you don't want him to be aggressive towards you, and all asian countries are sick and tired of US hegemony and their "**** the rest of the world" mentality. They don't "Like" the US. They "need" the us ... but only as long as it is a credible counterbalance to the chinese. If the balance continues to swing towards China and against the US, then the endgame is clear.
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Originally Posted by PaulMJohnson
So many things wrong with this comment.
One of the reasons Apple have $100bn is because they are sensible. Yes, if they wanted to get into manufacturing quickly, they could, but it would cost them massively. They could buy the talent they need to have it happen, but every person they needed would over charge them relative to what everyone else pays, and paying over the odds isn't how Apple came to have so much cash.
UMC would need to do much more than just build a mega-fab (which is the $8bn figure you quote) to be able to run 20nm. Sure, they could buy the latest ASML steppers, and the latest LAM etch chambers, but they still wouldn't have the process capability to make it all work. That takes time to develop.
Your idea about Tower is even more ridiculous. They specialize in MEMS, mixed signal and RF. They know more about GaAs manufacturing than any other foundry companies, but Apple don't need that. Like with UMC, you could buy Tower for $181m, drop $8bn on a mega-fab, but you still wouldn't know how to do 20nm processing. On the plus side, your $181m would get you a CEO called Russell Ellwanger, who's name always amused me. Aside from his comedy name, if you ever get chance to hear him speak, take it - he's really excellent.
UMC is in the process of building out their sub 28nm capabilities so I have no clue what the hell you are smoking. Are you stating that UMC is licensing IBM's 14nm and 20nm FinFET tech only to sit on it? The reason they are offering 10% equity stakes is because the need the capital injection to build out their capacity...although I think they are claiming they are skipping 20nm planar to jump to 14nm FinFET. Certainly Apple can use their 28nm planar capacity and UMC has stated it has developed 20nm planar capabilities but aren't going to offer them due to lack of interest.
The question is also whether Apple is also ready to go 3D with the A7 or if 20nm planar is a better fit for where they are at. Because I guarandamntee you that if Apple went to UMC and asked for billions worth of 20nm planar capacity UMC and offered billions of aid to build the fabs that they would reconsider the direct jump to 14nm FinFET.
ASML also offered equity stake which Apple could also buy into (Intel bought 15% for $3B) earlier this year to get a starting push.
Yes, I know Tower does mostly CMOS and they specialize in SiGe not GaAs. However they do have the operational knowledge of running fabs although how well that translates into the volume Apple needs is debatable. Maybe it's not as good a fit as UMC but I think it's kinda like buying the very small PA Semi, not for the product they made at the time but because of other knowledge. In this case operational rather than technical...although the RF CMOS expertise is likely useful the Apple as well. That they have some SGOI experience helps too.
UMC is the better fit but as I said, Qualcomm is the most rumored partner for equity and a lock on UMC capacity. Apple wont likely want to get into a bidding war with Qualcomm to buy UMC or even UMC capacity unless it has no choice in the matter. Pursuing a smaller company and building out their own capabilities seem more in line with what they do.
Being an IDM is risky. Being fabless is risky. Between the two Apple has more supply constraint issues than worries about how to fill capacity.