Mobile

Apple stuck in bed with Samsung as exclusive CPU deal with Taiwan Semi fails

Win some, lose some.

Just a few days after winning its epic patent battle against Samsung (for now), Apple failed to acquire exclusive access to Taiwan Semiconductor’s chip fabrication plants. Which means that Samsung is still a major — if not the major — supplier of components for Apple’s iPhone and iPad.

Apple dominated the MP3 market in previous years partly due to its ability to control global supply of key components such as memory, and it has continued the practice with the iPhone and iPad.

But Samsung is currently the only company that makes the A4 and A5 chips that power both the iPhone and iPad, leaving Apple in the awkward position of sending billions of dollars in business to one of its fiercest smartphone and tablet rivals.

To address the sticky situation, Apple has long been working with Taiwan Semi to produce the A6, the next generation chip for the company’s industry-leading mobile devices. Those plans will likely continue, but failing to secure complete control of the custom chip manufacturer’s assembly lines will result in a slightly weaker competitive position. What Apple does not control, other smartphone makers can also take advantage of.

(And meanwhile, Samsung just invested $4 billion in a Texas factory that makes the iPhone and iPad chips, among other things.)

Apple is a company that’s used to being in bed with the enemy — the company did it for decades as the smaller, weaker contemporary of desktop operating system leader Microsoft. That’s a good thing, since Cupertino is going to need to cozy up to Samsung for a little longer. Without Samsung, which also supplies memory chips for various iProducts, Apple has a huge amount of revenue at risk.

But the situation is probably not permanent.

And Samsung must be devoting beaucoup resources in the unenviable task of replacing Apple’s billions.

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