Who Wins When Apple Ditches Samsung?

Keep your friends close and your enemies even closer. Good advice, but you can still get a bit too close to a heated rival.

Rumors and ethereal reports would have it that tech juggernaut Apple (Nasdaq: AAPL  ) is about to cut ties with Korean all-rounder Samsung at its earliest convenience. The rumor mill suggests that Apple's A6 processors, which will be the heart of the 2012 generation of iPads and iPhones, will move out of Sammy's factories and into the cozy new production digs at Taiwan Semiconductor Manufacturing (NYSE: TSM  ) .

This makes sense from a ridiculous number of angles:

  • Samsung and Apple are duking it out in lawsuits around the globe, accusing each other of prying trade secrets out of the current partnership. Eliminate the partnership, and the legal issues will stop eventually.
  • Early iPhones ran on ARM Holdings (Nasdaq: ARMH  ) designs under the Samsung brand. Apple has since moved the chip design in-house under its own ARM license and uses Samsung only as a manufacturer now. There's nothing stopping a further separation from a technical standpoint.
  • TSMC already fabs ARM chips of many stripes, including the Qualcomm (Nasdaq: QCOM  ) Snapdragon, NVIDIA (Nasdaq: NVDA  ) Tegra 2, and Marvell (Nasdaq: MRVL  ) Armada. Adding one more variation of a well-known concept should be a snap from the manufacturer's perspective.

There's very little glue binding Samsung to Apple now, especially since they're direct competitors in personal computers (this story was written on a Samsung laptop, not a MacBook Air), mobile gadgetry, and general consumer electronics. I say the storied relationship will end as soon as current contract terms and pipeline logistics allow.

To make the split complete, Apple could also stop buying DRAM and Flash memory chips from Samsung and shift to chips supplied by Micron Technology (Nasdaq: MU  ) , Toshiba, and/or Spansion, among many other suppliers in this commodity sector. Exactly how Apple would divvy up those memory orders is uncertain, but TSMC is nearly a lock for the bigger processor orders.

If this potential new business wasn't enough to pique your interest in TSMC, you should know that this five-star CAPS stock also carries a dividend yield north of 4%. Read this free report on high-yielding stocks to better understand how that bonus helps you crush the market.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Motley Fool owns shares of Marvell Technology Group, Apple, and Qualcomm. Motley Fool newsletter services have recommended buying shares of Apple and NVIDIA. Foolish newsletters have also recommended writing puts on NVIDIA and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (2) | Recommend This Article (5)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 30, 2011, at 7:23 AM, russfischer1013 wrote:

    I think it will be Intel who gets the Apple "A" chip business. The Intel current 32nm technology is a couple years ahead of TSMC. Apple can look forward to 22nm technology by the next generation of A chips.

    As of about four months ago TSMC was at capacity and expected at least a year to build new output.

    MU simply has to benefit from the Samsung/Apple war.

  • Report this Comment On June 30, 2011, at 8:13 AM, TMFRhino wrote:

    Russ,

    I'd agree with the MU comment, looks pretty darn tempting with today's dynamics and its pricing.

    -Eric

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