Did Apple, Inc. Just Ditch This Brand-New Supplier?

It isn't easy being an Apple supplier.

Jul 16, 2014 at 8:22PM

Over the past year, it seems that shares of Taiwan Semiconductor (NYSE:TSM) have been en fuego as investors have anticipated that the company would win Apple's (NASDAQ:AAPL) chip manufacturing business for the iPhone 6. Well, it seems that Apple will indeed be building its next-generation A-chip at Taiwan Semiconductor, but the follow-on chip for the successor to the iPhone 6 looks as though it goes back to Samsung

How do we know? TSMC said so. 
In TSMC's most recent call, the company outright stated that during 2015 it would have meaningfully lower share than a key rival for 14/16-nanometer generation foundry business, although it expects that share to rebound in 2016 and beyond. 

Unless Apple decides to use the 20-nanometer manufacturing technology for its A9 chip (very unlikely), or unless Apple doesn't launch the iPhone 6 successor on its traditional cadence (also unlikely), it seems that this business doesn't go to Taiwan Semiconductor -- at least not to begin with. 

Samsung and/or GLOBALFOUNDRIES seem to be the winners
If Taiwan Semiconductor isn't building the 2015 iPhone processor, then unless Intel (NASDAQ:INTC) is the stealth supplier of the A9 (which seems unlikely), Samsung, GLOBALFOUNDRIES (using the Samsung-developed 14-nanometer process), or both will supply the chips there. 

Interestingly enough, Samsung is Apple's most powerful competitor, and it seems unlikely that Apple would be keen to enable Samsung. However, if Samsung is delivering wafers at more competitive prices and/or on a more competitive timeline, then Apple really has no choice.

It is likely that Apple will want to build as much as it can at GLOBALFOUNDRIES, which is not a direct competitor to Apple, but given that GLOBALFOUNDRIES doesn't quite have the track record that Samsung does, Apple may ultimately end up sourcing from both. 

Why isn't Intel making a pass at this?
The big question that's really hard to get an answer for is just why Intel didn't jump in and do everything in its power to be Apple's 14-nanometer manufacturing parters. Intel's reputation for being able to get manufacturing technologies ramped into high yields is legendary, although there is a valid argument that Intel is much less experienced at running a foundry business. 

Nevertheless, if Intel were able to get the Apple business, it would immediately grab about 15% of the total mobile applications processor market -- and a much higher percentage of the high end mobile applications processor market. Further, it would deny these volumes to TSMC and Samsung. 

This remains a mystery to me. 

Foolish bottom line
It seems that Taiwan Semiconductor's time as Apple's preferred foundry may be limited as the Samsung/GLOBALFOUNDRIES tag-team notches back a win here. How much of that volume will come from Samsung and how much from GLOBALFOUNDRIES remains to be seen. Further, Apple may second-source from TSMC once the latter has its 16 FinFET process up and running in high volume. 

That said, TSMC has been doing fine without the Apple business all of this time, enjoying mobile growth from the vendors that sell into many Android smartphones, so even if TSMC's share of Apple comes down during late 2015 and into 2016, it's still in a better place than it was in 2013 and earlier. 

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and to see Apple's newest smart gizmo, just click here!

Ashraf Eassa owns shares of Intel. The Motley Fool recommends and owns shares of Apple and Intel. 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. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers