Samsung's chipmaking business posts weak outlook as rumors of Apple shift persist

Posted:
in General Discussion edited August 2014
To date, Samsung has been the sole supplier of custom A-series processors for Apple's popular iPhone and iPad, but industry watchers again expect that to change after the South Korean company signaled that its microprocessor business has a bleak outlook.

Apple's A7 SoC is manufactured by Samsung and powers the iPhone 5s, Retina iPad mini and iPad Air.
Source: iFixit


In its quarterly earnings report last week, Samsung disclosed that demand from its "main customers" for custom chips has "continued to decline." Investors who spoke with The Wall Street Journal took that as a potential sign that Apple could begin shipping devices with chips built by Taiwan Semiconductor Manufacturing Co. as soon as this fall.

Sources reportedly indicated that TSMC began shipping A-series chips to Apple earlier this year, though the report didn't indicate whether that silicon is actually in the hands of customers. Every Apple "iDevice" teardown to date has revealed only chips built by Samsung.

Samsung's comments about "weak demand" going forward come as Apple is selling more iPhones than ever. Industry watchers expect sales to continue to grow this fall with the debut of an anticipated "iPhone 6," which is rumored to come in two new, larger screen sizes.

For the June quarter, Samsung saw its semiconductor business profits grow by 6 percent, though its overall earnings were a disappointment to investors. The company's lower-than-expected earnings represented its smallest profit in two years, and Samsung blamed increasing competition in the smartphone space for its results.

In addition to being fierce competitors in the smartphone, tablet and other markets, Apple and Samsung are also close partners who have collaborated on numerous custom chip designs. Their most recent creation is the 64-bit A7 processor that powers the iPhone 5s, iPad Air, and iPad mini with Retina display.

Given Apple's continued reliance for parts on the threat that is Samsung, industry watchers have expected for some time that Apple will transition its chipmaking partnerships away. Specifically, TSMC has been pegged as a potential replacement for Samsung, though to date its believed that Apple and TSMC have only worked on shipping Touch ID fingerprint sensors to users.
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Comments

  • Reply 1 of 59
    steven n.steven n. Posts: 1,214member
    Add to that their pending collapse in their primary expansion market of China and Samsung's days of "Samsung will kill Apple" are long gone.
  • Reply 2 of 59
    MacProMacPro Posts: 19,253member
    It would seem to me the profitable chip making division should have been more important to Scammy than the unprofitable 'copy everything Apple does' division.
  • Reply 3 of 59
    I'm confused. I thought I've been reading reports that pall did turning away from TSMC in favor of Samsung for the A8. This doesn't fit.
  • Reply 4 of 59
    Totally agree w/ above comment.

    Essentially - Samsung arrogance (typical in that country) is the key to their demise.

    Samsung believed that they "could not be replaced" %u2026 that "they were in the power seat" %u2026 not Apple .. because "Samsung could copy - and then would undercut/underprice" Apple for EVERYTHING.

    Samsung was seriously in error.

    I proceed (and all smart professionals/business people) as we all can be replaced. Apple created an ecosystem. This ecosystem cannot be replaced by 1 gimic, period. Apple hires the very best Engineers (I know - they only take #1 candidates with experience on top of that - not just out of a great school).

    Sammy is being replaced - the key element is that they "cannot be trusted" .. nothing they can do to unwind this - they are viewed as dishonest, took years to set up their "firing" and they are now being fired %u2026%u2026%u2026%u2026they are toast %u2026 worse for them, their product stinks and even at the low end is being replaced by similar junk - good riddance, that is what they deserve
  • Reply 5 of 59
    gprovidagprovida Posts: 251member
    SAMSUNG made a gamble to put at risk it's biggest customer, Apple, to pursue smartphone competition with Apple and even after Google warned them to not copy so slavishly chose to do so.

    They were unable to repeat their success with Sony, Toshiba, and Panasonic and are now being treated to the same strategy by Chinese manufacturers.

    Their refusal to negotiate non-copy or clone with Apple, as in contrast with HTC, has resulted in a declining business relationship and earning from Apple and likelihood this will continue as Apple insulates itself against a competitor.

    The manufacturing prowess of SAMSUNG has apparently created an arrogance that the market is about to change. Their choice to put at risk their biggest customer, Apple, has become a reality. If Apple's investments in other display, chip, and materials (sapphire and liquid metal) companies pay off, then SAMSUNG will be on the outside looking in as the Chinese gobble up the low end of the market.

    Whether the Chinese will be a major threat to Apple is an open issue, but if Apple was able to survive the "Android" assaults over the last 7 years, then It can probably survive this assault, not so clear for SAMSUNG.
  • Reply 6 of 59
    blazarblazar Posts: 270member
    Great posts... The Samsung slow decline like japanese companies is in full swing. Just maybe they can buy enough talent to stem the tide of low cost chinese products.
  • Reply 7 of 59
    blazarblazar Posts: 270member
    Great posts... The Samsung slow decline like japanese companies is in full swing. Just maybe they can buy enough talent to stem the tide of low cost chinese products.
  • Reply 8 of 59
    blazarblazar Posts: 270member
    Great posts... The Samsung slow decline like japanese companies is in full swing. Just maybe they can buy enough talent to stem the tide of low cost chinese products.
  • Reply 9 of 59
    Quote:

    Originally Posted by Carson O'Genic View Post



    I'm confused. I thought I've been reading reports that pall did turning away from TSMC in favor of Samsung for the A8. This doesn't fit.

     

    I've read the reports both ways.   But the direction is clear... Apple is not sole sourcing 'custom' chips, and is hoping that TSMC can step in and handle the bulk of the work.   Whether this is punitive, or just good business (two suppliers... pricing race to the bottom, and lowered risk in source issues), Samsung will feel the effect.  Most of the reports I read is who is 'lead' in development, not who is 'sole source' in development.

     

    There's a difference between being 'first source' and 'sole source.'   The profits of a custom chip are striking that 2 year exclusive deal.  You take all the risk up front, and get it back in every chip you make, as the price is locked, and the run is pre-defined.   If Apple 'partners' with you to figure out the 'fab' of the chip, and as part of that partnership, owns the rights to distribute that fab plan to whomever, then you have to charge a lot up front, but you lose the long term amortization, and the other partner gets the fruits of your Development labors.  

  • Reply 10 of 59
    maestro64maestro64 Posts: 4,909member
    Quote:

    Originally Posted by Carson O'Genic View Post



    I'm confused. I thought I've been reading reports that pall did turning away from TSMC in favor of Samsung for the A8. This doesn't fit.

    it was all lies, it was an attempt by whomever to keep Samsung stock pumped up, since Apple will not confirm any rumors or facts it allow those people to malipulate stocks like Samsung. I said it before it was all smoke and mirror to make everyone think that Samsung still have future business with Apple. At some point as it just happen Samsung could not hide real facts. You can tell all the stories you like but when the Dollars do not add up no story can cover that up. Unless you were Enron and we know what happen to them.

  • Reply 11 of 59
    jungmarkjungmark Posts: 6,803member
    Hit these fuckers on all fronts.
  • Reply 12 of 59
    I can feel a shift in which Samsung will become just another generic Android tablet/phone maker. Apple will continue to lead for the foreseeable future.
  • Reply 13 of 59
    lkrupplkrupp Posts: 9,010member
    Quote:

    Originally Posted by AppleInsider View Post





    Samsung's comments about "weak demand" going forward come as Apple is selling more iPhones than ever. Industry watchers expect sales to continue to grow this fall with the debut of an anticipated "iPhone 6," which is rumored to come in two new, larger screen sizes.

     

    This paragraph sums it up quite nicely. Nevertheless, pundits continue to predict doom for Apple.

  • Reply 14 of 59
    ksecksec Posts: 1,567member
    Quote:
    Originally Posted by Carson O'Genic View Post



    I'm confused. I thought I've been reading reports that pall did turning away from TSMC in favor of Samsung for the A8. This doesn't fit.

     

    Or you mean the A9, which has been rumoured to go back to Samsung's 14nm.

  • Reply 15 of 59
    mpantonempantone Posts: 1,530member
    Quote:
    Originally Posted by Carson O'Genic View Post



    I'm confused. I thought I've been reading reports that pall did turning away from TSMC in favor of Samsung for the A8. This doesn't fit.

    That's because all of those reports are rumors. They can't all be right which is why they conflict with each other.

     

    When will you know who is right? When Samsung and TSMC report earnings for the time period in question. Every other "report" is essentially worthless.

     

    You can safely ignore pretty much any tech "report" unless the original information source is from the company's quarterly report, government security filings, a press release, or perhaps a teardown of the actual shipping product.

     

    It also means you can safely think that 95% of what AppleInsider (or any other tech rumor blog) posts is poppycock. The most pragmatic way to deal with tech rumor sites is to treat them like parodies of old-school media (like the NY Times).

     

    Celebrity gossip sites like TMZ and Perez Hilton are way more accurate than tech rumors sites like AI, MacRumors, 9to5Mac, BGR, etc.

  • Reply 16 of 59
    Quote:



    Originally Posted by Maestro64 View Post

     

    it was all lies, it was an attempt by whomever to keep Samsung stock pumped up, since Apple will not confirm any rumors or facts it allow those people to malipulate stocks like Samsung. I said it before it was all smoke and mirror to make everyone think that Samsung still have future business with Apple. At some point as it just happen Samsung could not hide real facts. You can tell all the stories you like but when the Dollars do not add up no story can cover that up. Unless you were Enron and we know what happen to them.


    I think the opposite it true.  The 'demise' of Samsung's chip deals with Apple have been sung for 3 years, and each iPhone release, you see another Samsung foundry stamp on the A chip.   The crux of the issue is Samsung is getting out Samsunged in China.

     

    Apple is in business to make money, and while the ASeries chip is full of great IP, it's not anything that is revolutionary as far as chip logic goes.  So partnering with Samsung, and now, with others (lowers business risk).   If it was so critical, it would take it all in house (you don't see iOS development outsourced;-)   And Samsung has likely had to lock down it's NDA in the wake of everything, if not for Apple for every other customer seeking custom chip development.    (But Samsung just flat out stopping payment of royalties to Microsoft makes it apparent, they really, truly don't buy into any 'agreements' that cost them money.... so who knows?). 

     

    The secret sauce is the 'plan' on how to exploit the power of the chipset to attract consumer 'need.'  That's where Samsung is lost, not because they couldn't figure it out, but their company is a conglomerate, and no division is aligned with the others to any great extent.  So they try to attract consumer 'want' (or dis-want... 'their screens are too small... their lines are too long')

     

    Apple is a singular company, where it's divisions don't have individual products, all divisions feed into one product set (mac and iDevice notwithstanding).  and really don't care what other companies do... they care what consumers do and need to do with their mobile devices. 

  • Reply 17 of 59
    tallest skiltallest skil Posts: 43,399member
    Originally Posted by TheOtherGeoff View Post

    Apple is in business to make money, and while the ASeries chip is full of great IP, it's not anything that is revolutionary as far as chip logic goes.


     

    Then why do Apple devices perform better than every single other device on the market, regardless of clock speed and RAM?

  • Reply 18 of 59
    SpamSandwichSpamSandwich Posts: 33,408member
    I nominate this thread for First Prize in the category of "Most Spelling and Grammar Errors in the History of the English Language." Outstanding work!
  • Reply 19 of 59
    I'm confused. I thought I've been reading reports that pall did turning away from TSMC in favor of Samsung for the A8. This doesn't fit.

    I know several people have already responded to your post. I wanted to add the following links for your review.

    The first link is to an AI article published on March 5, 2014... Rumor: TSMC now building quad-core 'A8' chips for Apple's next-gen iPhone
    http://forums.appleinsider.com/t/162580/rumor-tsmc-now-building-quad-core-a8-chips-for-apples-next-gen-iphone

    The second link is to an AI article published 5 days later on March 10, 2014... Apple to stick with Samsung for A8 chip, final manufacturing prep underway - report
    http://forums.appleinsider.com/t/163257/apple-to-stick-with-samsung-for-a8-chip-final-manufacturing-prep-underway-report

    What I found interesting in the way AI titled the articles. The TSMC article is considered a rumor, while the Samsung article is not.

    Check out the comments in both articles, but pay close attention to the comments in the second article. Those are very telling about people think and feel about the second article.
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