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Apple, TSMC strengthen foundry alliance

Posted: 11 Mar 2011 ?? ?Print Version ?Bookmark and Share

Keywords:foundry? partnership? A5? dual-core processor?

Apple Inc. and Taiwan Semiconductor Manufacturing Co. Ltd (TSMC) are reportedly strengthening their foundry partnershipa move that could spell trouble for Samsung Electronics Co. Ltd.

With little or no fanfare, Apple and TSMC have recently entered into a foundry relationship, sources said. As reported, TSMC will make the A5 dual-core processor on a foundry basis for Apple's iPad 2.

Apple will use TSMC's 40nm process for the A5, according to a source. "Apple will also work with TSMC on 28nm processes," according to a source.

This could be seen as a setback for Samsung. Samsung is making the A4 processor on a foundry basis for Apple's original iPad. It is also making the processor for the iPhone. It is unclear if Samsung will make the A5 for Apple.

Apple itself designed the A4, A5 and processor for the iPhone. The processors are based on ARM's technology.

Apple, according to the source, will use TSMC for three reasons: 1. Samsung competes with the iPhone and iPad; 2. TSMC has the highest yielding 40nm process in the foundry world; and 3. TSMC has the largest 40nm capacity.

Samsung, Motorola, RIM and a plethora of others are also selling tablet PCs. ''Overall inventories are healthy at the moment, but there are concerns of component overbuild in tablet space,'' according to a new report from VLSI Research.

''This is driven in part by overly optimistic unit growth, especially for non-Apple tablets where there's a plethora of new devices (we're tracking more than 200 SKUs). Moreover, as the tablet war shifts into the pricing front, many companies will find it difficult to compete with Apple, which has a significant cost advantage over the competition,'' according to the report. ''While some of these tablets will likely gain traction in the market place, many others will not. If the tablet buildup turns into a glut late in the year, foundries are likely to suffer, given their aggressive capital expansion plans.''

Still, ''iPad 2 production is ramping faster than expected,'' according to a report from FBR. ''Our contacts now see 1Q11 iPad production at 5.5 million units, up from 5.1 million units previously. Importantly, iPad 2 production is now set at about 2 million units, up from about 300,000 units previously, as some key bottlenecks (likely touch panel availability) were addressed in time to meaningfully ramp March production.''

For 2Q11, ''our contacts now see 7.2 million units of iPad production, up from our prior forecast of 7.0 million units. Importantly, almost all of the 2Q11 production is of iPad 2 devices, meaningfully ahead of the prior iPad 2 production ramp plans,'' according to the report.

''Our contacts expect 45 million iPads produced in 2011. Our contacts continue to expect 45 million iPad builds in calendar 2011, meaningfully ahead of the Street. When looking at the linearity of 1H11 (13 million units) and 2H11 (32 million units) iPad production, it seems Apple is planning on some very large iPad 2 sales volumes in 2H11 in order to achieve its annual target, with even cheaper price points likely necessary in order to achieve these 2H11 volumes,'' according to the report.

- Mark LaPedus
??EE Times

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