Will Apple Finally Quit Samsung With the iPhone 6?

A look at Apple's relationship with Samsung.

Aug 27, 2014 at 1:05PM

Samsung (NASDAQOTH:SSNLF) might be Apple's (NASDAQ:AAPL) worst enemy. After all, the South Korean electronics conglomerate is arguably the most powerful of the numerous companies vying for a piece of Apple's smartphone and tablet market share.

Interestingly enough, Apple relies on Samsung for a number of components critical to its highly successful product lines. However, as Digitimes reported, Apple has been trying to shift away as much business as possible from its powerful rival. Can it eliminate Samsung completely from its supply chain?

The state of things so far
While CNET said Samsung isn't among the list of display vendors for Apple's iPhone 5 and 5s, it, along with LG Display, provides 9.7-inch high-resolution displays for Apple's iPad Air.

Samsung also manufactures some of the key chips found in most, if not all, of Apple's iDevices. For example, Chipworks reported that Samsung built the latest A7 processor found in the iPhone 5s and current-generation iPad models.

Furthermore, yet again according to Chipworks, the Qualcomm MDM9615 cellular modem found inside the iPhone 5s (as well as the latest cellular-enabled iPad models) is built by Samsung, as is the memory that comes paired with the modem.

That's a lot of Samsung inside Apple's products.

The iPhone 6 sees a shift away from Samsung
According to various rumors and leaks, Taiwan Semiconductor (NYSE:TSM) is likely to build the applications processor found in this year's latest iPhone and iPad models. Also, according to a recent leak from GeekBar (via Weibo), the iPhone 6 will use Qualcomm's MDM9625 LTE-Advanced baseband.

AnandTech's Brian Klug reported that this baseband is built on Taiwan Semiconductor's 28-nanometer HPm process, which would suggest a further diversification away from Samsung. However, this doesn't necessarily mean Samsung will not provide the DRAM for this particular baseband.

Two steps forward, one step back?
Though Apple appears to be moving away from a Samsung-built applications processor and cellular baseband, the Digitimes report stated that Apple would add Samsung as a DRAM supplier for products this fall.

This appears to be a choice made reluctantly, with Digitimes claiming that SK Hynix and Micron have been "reluctant to increase their shipments as chip prices offered by Apple are less than desired."

However, the incremental DRAM business that Samsung should see from Apple is unlikely to offset the alleged loss of revenue from the manufacture of both the applications processor and the baseband. 

Apple, on balance, appears to be doing a good job of decreasing its reliance on Samsung.

But what about the 14/16-nanometer fiasco?
During Taiwan Semiconductor's most recent earnings call, management reported that during 2015 it will "have a lower 16 [nanometer] share than a major competitor."

This led many (including yours truly) to believe that Apple would shift back to Samsung to manufacture the applications processor for the follow-on to the iPhone 6.

However, a recent report from Digitimes stated that Taiwan Semiconductor "will advance volume production on its 16nm process to the first quarter of 2015 with monthly output of 50,000 wafers in order to meet demand for Apple's A9 processors."

If true, then Samsung's foundry business could continue to struggle as it loses more Apple business over time. However, the Yonhap News Agency, reported that Samsung is going to build more chips for Qualcomm., which could offset the loss of Apple business.

Foolish takeaway
It appears that Apple is, indeed, doing a good job of removing Samsung from its supply chain -- at least if the rumors about the iPhone 6 and the recent Digitimes report about Taiwan Semiconductor's 16-nanometer progress hold true.

While this is strategically important to Apple for obvious reasons, it also has interesting longer-term business implications on Samsung. In particular, as Samsung's mobile device unit continues to see increased margin pressure, the company will likely rely further on its components business in order to stabilize and grow its profit base.

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

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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