by STEVE HAN
Samsung Electronics will become Apple’s main supplier of application processors (APs) for iPhones and iPads starting in 2016, according to the Korea Times.
The agreement vaults Samsung back to becoming Apple’s primary supplier of AP chips, also known as “logic chips” which create far higher margins that other conventional memory chips for computing devices. Samsung plans to start production for Apple early next year at its factory in Giheung, South Korea before expanding it to its U.S. factories in Texas and New York.
Apple, which designs its own chips for iPhones and iPads, outsources production of AP chips to other manufacturers. Samsung has long been Apple’s No. 1 supplier for chips until the relationship between the two companies soured over a patent infringement lawsuit, which Apple filed against the Korean company in 2012 for allegedly copying its smartphone and tablet designs.
Amid the ongoing legal battle, Apple began relying less on Samsung, opting to make Taiwan Semiconductor Manufacturing (TSMC) its primary supplier for AP chips.
Industry experts believe that Apple is renewing its reliance on Samsung as it determined that the AP chips produced by TSMC weren’t up to the standards in both efficiency and energy consumption.
The renewed agreement will also help Samsung as it is trying desperately to recover from the massive loss it suffered recently after its profit dropped by nearly 60 percent for the third quarter of this year. The rise of Chinese tech companies such as Xiaomi and Huawei, which provides smartphones at significantly lower prices, has greatly contributed to Samsung’s decreasing smartphone sales.
The profit loss has forced Samsung to restructure its business model in recent months. Thus, plans to further develop its chipmaking business has been one of the company’s main goals. Prior to striking the deal with Apple, Samsung also announced plans to invest 15.6 trillion won to build a high-tech chipmaking facility in Pyongtaek, South Korea to “improve” its memory chip business to compensate for the decreasing mobile phone sales.
According to the Korea Times, Samsung will produce and supply 80 percent of AP chips for Apple devices by 2016 under the multi-billion-dollar chip deal.
