Is This Apple’s New Samsung Repellant?
Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) has begun giving out signals that point at an impending chip partnership with Apple (NASDAQ:AAPL). TSMC chief executive Morris Chang predicted during the company’s post-earnings conference call last week that its new 20-nanometer chips will outsell the existing 28-nanometer chips in the first two years of production.
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Apple has long been rumored to be preparing to transfer to TSMC’s 20-nanometer chips for its iPhones and iPads starting next year, moving on from a solitary reliance on Samsung (SSNLF.PK). At the moment, all of Apple’s custom chips for iOS devices are made by a unit of its biggest smartphone rival, Samsung. Apart from a head-on rivalry, the two companies have also been involved in several mutual patent infringement suits over the past few years, accusing each other of copying designs and technology.
But TSMC, unlike Samsung, has shown no interest in building its own consumer electronics. “This is the reason that companies such as Nvidia (NASDAQ:NVDA) and AMD (NYSE:AMD), which actually compete against each other in PCs, both go to TSMC (to make their chips),” Nomura Securities analyst Patrick Liao told The New York Times. “They never worry about technology theft.”
While Chang declined to comment specifically on the Apple-related rumors to The Times, he indicated that his company had had “enough discussions” with “enough customers” to indicate that sales of the 20-nanometer chips will be “very large.”
“That language makes you feel like the direction is headed where we all expect,” HSBC technology research chief Steven Pelayo said.
According to rumors, TSMC is also behind “Project Azalea,” a secretive project involving an unnamed semiconductor manufacturing company considering a new chip fabrication plant in the U.S. The chip manufacturer behind the project is said to have ties to Apple. As The Times points out, TSMC is one of few companies that have the capacity and the technology to meet Apple’s demand. The Taiwan company had $17.5 billion in revenue last year, with its net income rising 32 percent in the fourth quarter. In addition, it is planning $9 billion in capital expenditures to expand production this year.
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