Apple faces manufacturing shortfall due to lack of Samsung chips

Posted on 20 Apr 2015 by Michael Cruickshank

US technology company, Apple, is facing a possible production shortfall due to an under supply of critical microchip processors.

The company’s incredibly popular iPhone smartphone range is due for its annual update in several months time. This new range of devices will feature a more powerful next-generation ARM chipset, likely to be called the A9.

While its predecessor, the A8, which had a 20 nanometer process was produced by Taiwan Semiconductor Manufacturing Co. (TSMC), the new A9 will feature a smaller 14 nanometer process, and was to be manufactured by Samsung alone.

However, according to reporting by Apple Insider, based on a memo given by Ming-Chi Kuo of KGI Securities, Apple now appears to be reconsidering this decision.

Samsung’s own line of flagship smartphone devices, its Galaxy S6 range, has seen sales which significantly exceeded its expectations. The company reportedly now believes sales of these devices will be 40% higher than previous predictions, driven by higher sales of its curved-screen ‘S6 Edge’ device.

Critically, these new phones make use of the same chipsets which will make up the A9 processer used by Apple. The iPhone manufacturer is understandably worried that Samsung will preference its own supply chain over Apple’s and cause the company to suffer from a shortfall of supply.

In order to alleviate this potential problem, Apple is looking to bring TSMC back on board for chip manufacturing, delegating them 30% of the production of the A9 chip.

While the release date of Apple’s next generation iPhone is not yet confirmed, the device is likely to be already in the early stages of production.

Mobile market confusion

This competition for chipset manufacturers in the cutthroat smartphone and consumer electronics industry demonstrates a wider level of confusion within the marketplace.

While smartphone manufactures are natural competitors, through their chip manufacturing holdings they control parts of each other’s supply chains, and can often profit off a competing product that still uses their chips.

Additionally, other streams of revenue such as software and patent licensing result in a further confusion of what defines success for each respective company.