A fresh report from Taiwanese tech newspaper DigiTimes says that Apple (Nasdaq: AAPL) is about to shift its chip-making orders out of Samsung. Orders for Apple's next-generation A6 processor are now expected to go to leading contract chipper Taiwan Semiconductor Manufacturing (NYSE: TSM) instead.
According to IHS iSuppli, the current A5 chip found in the iPad 2 costs Apple about $14 apiece, and the last-generation A4 adds about $11 per iPhone 4 or iPad 1. There are licensing fees to ARM Holdings (Nasdaq: ARMH) to be considered in Apple's total chip cost, but most of the total is direct revenue to Samsung. Since Apple designed these chips in-house and treats Samsung as a simple third-party manufacturer, there are no middlemen grabbing slices of this revenue stream.
Considering that Apple sold 20 million iPhones and 9 million iPads last quarter, this adds up to at least a couple hundred million dollars of easy sales for Taiwan Semi. It's a welcome boost for a company that reported sales of $3.7 billion USD last quarter -- perhaps reaching into double-digit territory if the terms of this supposed Apple deal are right. Conversely, Samsung's chip sales office must be a gloomy place on a day like this.
Not that anybody should be shocked by this move. As if to highlight the deep rift between these increasingly rivaling tech giants, Samsung filed motions today to ban sales of the upcoming iPhone 5 in South Korea. The duo is butting heads in American, German, and Australian courts, just to name a few cases. An eternal partnership looks less likely every day.
Mind you, Taiwan Semi is far from the only game in town. Former Advanced Micro Devices (NYSE: AMD) division Global Foundries would have been more than happy to serve Apple's needs, for example. That service happens to be part of the IBM (NYSE: IBM) alliance of chip-making technology researchers, and that agglomerate recently shared some big little news.
Using a special glue developed by unlikely high-tech hero 3M (NYSE: MMM), these guys should soon be able to stack chip layers on top of each other as much as 100 layers deep rather than spreading out horizontally. The space savings and suggested performance boosts of this technology would be invaluable to a mobile gadget of the future like the iPhone 6 or iPad 4.
But you know who else is part of that alliance? Yep -- Samsung. So it's off to Taiwan we go. I'm sure that Intel (Nasdaq: INTC) also made its top-shelf manufacturing services available, but perhaps not on the terms Cupertino wanted.
Taiwan Semiconductor just might be the next Intel. Click here to see a video report with another candidate for that elevated title, which could double or even triple your investment.
