The New Rider on Apple's Coattails

Apple (Nasdaq: AAPL  ) is no stranger to harsh breakups. This one was so obviously coming, you could see the signals from outer space.

Reuters reports that Apple is about to say bye-bye to its business relationship with Samsung Electronics, which currently makes chips for the iEmpire.

According to Reuters, Taiwanese chip-manufacturing shop Taiwan Semiconductor Manufacturing (NYSE: TSM  ) -- also known as TSMC -- will start making mobile processors for Apple. That would end Samsung's sole-supplier role for that crucial part, albeit slowly. Fubon Securities analyst William Wang, whose research informs the Reuters piece, thinks TSMC will start with perhaps a 30% share of Apple's processor needs.

Other market watchers have speculated that Intel (Nasdaq: INTC  ) might grab a slice of the Apple pie in order to squeeze some extra cash out of its monstrous investments in chipmaking technology and manufacturing facilities. But TSMC would make more sense at this stage, since it's already a leading third-party manufacturer of the sort of ARM (Nasdaq: ARMH  ) chips used in Apple gadgets.

Intel gave up its license to dabble in that market when it sold the XScale product line to Marvell Technology Group (Nasdaq: MRVL  ) five years ago, while TSMC is actively looking for more business in this specific field. Intel just isn't set up to take this order in the way that TSMC is.

Samsung will likely offer Apple all kinds of incentives to stay in Korea, including lower prices and package deals for other components. That just might work, but the two companies' crisscrossing lawsuits on three continents muddy those waters. Apple could very well turn down some attractive offers just to get this break-up over and done with.

If Apple's ARM chips move elsewhere, I'd expect a cascade of design changes to remove all traces of Samsung from Apple devices. That would be great news for competing memory makers including Micron Technology (Nasdaq: MU  ) and screen slingers such as AU Optronics (NYSE: AUO  ) .

Of course, we're dealing with the notoriously secretive Cupertino folks here, so don't expect any kind of official confirmation. The real news will happen when the iPhone 5, iPad 3, or some other revolutionary iGadget shows up on store shelves with unfamiliar chips inside. We'll have to rely on third-party sources like iSupply and iFixit to tear those lovely devices apart and start decoding chip markings.

Blink and you'll miss it -- or add Apple to your Foolish watchlist,  and you'll always be in the know.

The Motley Fool owns shares of Apple and Marvell. The Fool owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Apple and Intel. We have also recommended creating a diagonal call position in Intel and a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Anders Bylund owns shares of Micron and has sold puts on Intel, but holds no other position in any of the companies discussed here. We Fools may not 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, follow him on Twitter or Google+, or peruse our Foolish disclosure policy.


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