Here's the Latest Installment of iBeef

The Internet's best of frenemies are at it again.

Samsung will no longer supply Apple (Nasdaq: AAPL  ) with batteries for its iPad and MacBook product lines. Apparently, legal battles are not a good thing for business relationships. This wouldn't be the first time Apple has been accused of shifting its manufacturing needs away from Samsung reliance.

Apple is hoping Chinese firms Amperex Technology and Tianjin Lishen Battery will fill the energy void. Switching suppliers isn't always a fluid experience and problems could arise during production runs. Its products have long pushed the envelope of manufacturing, putting relentless pressure on the process. No one ever said it would be easy to be an Apple supplier. Although Samsung has been well groomed for Apple's standards, it's not the reason Apple has held back from completely torching the iBridge.

It's complicated
Batteries play a small part in what is a much larger saga. Whether Apple likes it or not, it has no choice but to rely on Samsung for the foreseeable future. Apple's most crucial iComponent, the A-series processor, used to power all of its mobile iDevices is solely manufactured by Samsung . It's not like Apple can just walk out on Samsung overnight. There simply isn't enough spare capacity in the marketplace for that to happen.

Given this reality, Apple has taken a close-to-the-vest approach by booting Samsung out  of the chip-design process. This move reduces Samsung's role with Apple, and will make cutting ties a little smoother down the road.

The big question
Rumors have been circulating that Apple has been coaching Taiwan Semiconductor (NYSE: TSM  ) as a replacement for Samsung's chip-producing role. Can Apple really risk partnering with a company that has a long history of yield, capacity, and delay issues?

The majority of fabless chip designers already utilize Taiwan Semiconductor for fabrication. This already creates bottleneck issues whenever Taiwan Semiconductor debuts a more advanced fabrication process. Customers such as Qualcomm (Nasdaq: QCOM  ) and nVidia (Nasdaq: NVDA  ) battle it out for top priority, and both end up without their needs fully met. Throw a massive Apple wrench into the mix and things could get ugly fast.

Foolish takeaway
It's probably in Apple's best interest to grit its teeth and continue dealing with Samsung. As it currently stands, Samsung has the capacity, experience, and quality necessary to be an Apple supplier. If Apple decides to push Samsung further away, it may hurt its economy of scale, and could threaten the quality of its product. In the end, Apple has a long history of delivering high-quality products, and I can't believe it would put that reputation in jeopardy simply because it doesn't like its partner.

Keep digging
There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


 
 
 
 

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