Is Samsung About to Get Completely Cut Out of Apple’s Supply Chain?

ChainIs Apple (NASDAQ:AAPL) taking steps to completely eliminate Samsung (SSNLF.PK) from its supply chain? Although Apple and Samsung openly battle each other over smartphone market share and patent infringement, the companies are a little more cooperative behind the scenes. In fact, some supply chain experts believe Samsung is still one of Apple’s major component makers.

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However, according to an unconfirmed report from Digitimes, this longstanding supply chain relationship may soon be ending. Digitimes reports that the Taiwan Semiconductor Manufacturing Company, or TSMC, will soon be taking over as Apple’s only application processor supplier.

TSMC is reportedly already building a new production facility in anticipation of increased demand from Apple. Digitimes’ anonymous industry source states that “The Fab 14, Phase 5 facility will be ready for production by the end of 2013.”

Samsung currently makes the application processors, or APs, for Apple’s iPhone. Although Samsung will continue to make the APs for the latest model of iPhone, the Digitimes is reporting that Apple will shift 100 percent of its AP orders to TSMC for the next generation of iPhone that is expected to launch later this year.

Although industry rumors from Digitimes should always be taken with a grain of salt, this move would be in line with Apple’s overall strategy of reducing its dependence on Samsung for its components. As Samsung has grown to be a competitor in the smartphone market, Apple has sought to mitigate the risk that Samsung might one day need to prioritize its own supply needs over that of Apple’s. Previous reports have suggested that Apple has already taken steps to diversify its supply chain by increasing orders to other manufacturers such as SK Hynix, LG, and Foxconn.

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