The question of which chip manufacturing giant will manufacture Apple's (NASDAQ:AAPL) A-series processors has been an interesting one over the years. Through the Apple A7, Samsung (NASDAQOTH: SSNLF) was the sole-source for Apple's A-chip manufacturing. Taiwan Semiconductor (NYSE:TSM) won the orders for the Apple A8 and both Samsung, and TSMC split the orders for Apple's A9.
The current word on the street is that TSMC has won the entirety of Apple's A10 chip business.
Although Apple's manufacturing plans for its next-generation A11 chip -- which will probably make its debut in the iPhone 7s -- haven't leaked yet, I believe that TSMC just gave investors a couple of very strong hints that it will win the majority of, if not the entirety of, Apple's A11 chip business.
Clue No. 1: TSMC intends to begin the 10-nanometer generation with high market share
During the call, TSMC management said that, unlike with the 14/16-nanometer generation, the company intends to start the 10-nanometer generation with "very high market share" and the company "intend[s] not to lose it."
Given that Apple is usually one of the first, if not the first, to transition to new manufacturing nodes for mobile-applications processors (it was first to 20-nanometer and again first among the fabless players to transition to 14/16-nanometer), I'd imagine that winning a significant portion of Apple's business would be necessary for this statement to ultimately prove true.
Clue No. 2: TSMC predicting a steep 10-nanometer ramp
Another fairly large clue that TSMC will be building Apple's A11 chips is that the company is predicting an extremely steep ramp-up of its 10-nanometer technology.
Indeed, on the call, TSMC executives said that it expects the revenue contribution from 10-nanometer wafer shipments to exceed the revenue contribution from 20-nanometer seen in the fourth quarter of 2014. Note that 20-nanometer revenue made up more than 20% of the company's fourth-quarter 2014 revenues as a result of the Apple A8/iPhone 6 ramp-up.
Again, Apple is by far the largest single customer for leading-edge chip technology thanks to the sheer number of iPhones it sells, and it usually ramps up before other fabless chipmakers do, so I am led to believe that Apple will source the majority of its A11 chips from TSMC.
Good news for TSMC; maybe not so good for Samsung
Although Samsung was able to get the jump on TSMC as it began production of its 14-nanometer technology before TSMC began its 16-nanometer technology, it's looking as though TSMC has no intention of allowing Samsung to "win" like this again in the future.
Of course, we will have to see TSMC actually deliver upon its bold claims here -- a lot can change between now and when Apple instructs its foundry partner(s) to start pumping out A11 chips -- but TSMC management has earned quite a lot of credibility with me over the past several years.
If it does, though, then I could see Samsung's foundry business feeling the hurt. Although Samsung has been able to get fabless merchant chip vendor Qualcomm (NASDAQ:QCOM) to source its flagship Snapdragon 820 from its factories, I'm interested to see whether this partnership will last in upcoming process nodes.