Apple plans to divvy up 14/16nm orders among foundries

Apple, the world's largest buyer of chips made with leading process technology, is expected to allocate its orders for 14/16nm products this year and next as part of a strategy to gain pricing power over foundry suppliers such as Samsung and Taiwan Semiconductor Manufacturing Co. (TSMC), revealed six analysts surveyed by EE Times.

TSMC, which since 2014 has enjoyed sole-source status for Apple's A8 processor that powers the iPhone 6, is wrestling with Samsung to dominate the supply of Apple's A9 and A10 processors, according to the analysts. To enhance its pricing power, Apple has also qualified Globalfoundries as a third source, the analysts said.

The focus is on Apple's yet-to-be released A10 processor, expected sometime in 2016.

"TSMC will receive one-third of Apple's A9 allocation and half of its A10 allocation," said Warren Lau, an analyst with Maybank Kim Eng. "An assumption of 50 per cent is reasonable given Apple's desire to maximise its bargaining power with suppliers," Lau said.

Samsung, which this year was two quarters ahead of TSMC with its 14nm FinFET process, is seeing strong revenue growth through 2015, while TSMC's 16nm ramp is not going to be big until Q4, HSBC analyst Steven Pelayo said. Production of the A10 will stay at the 14/16nm node, even though some think TSMC's 10nm process may be ready in time for the A10 launch, Pelayo said.

Other analysts said reports that TSMC will regain the mantle as sole supplier to Apple are unfounded.

"We disagree with rumours that TSMC will enjoy 100 per cent of the A10 orders," according to Fubon Research analyst Carlos Peng.

"Some say the Apple A10/A10X will be made on 10nm, but we believe Apple will stay at 14/16nm as 10nm will not be ready despite TSMC's strong push," said Mark Li, an analyst with Bernstein.

TSMC will have 30-40 per cent of Apple's allocation with this year's model, according to Credit Suisse analyst Randy Abrams in a July 17 report. That per centage is likely to grow from there with the A10 next year as TSMC brings up its integrated fan out (InFO) packaging technology, he said. The node will broaden to include graphics, FPGA and mobile chips, according to Abrams.

Some disagree, however.

"InFO is not a precursor for winning A10 orders," Lau said. "InFo offers the benefits of lower costs and a smaller form factor with a higher pin count. However, we believe Samsung's latest packaging technology, embedded-Pin-on-Pin (ePoP), offers even more impressive results of 40 per cent savings in area size as it combines mobile DRAM, NAND and application processor in one single stack die."

Price cuts

Foundries have cut wafer prices for 14/16nm twice, barely two months into initial production this year, according to Lau. Apple appears to be biggest beneficiary as it has fully qualified Samsung, Global Foundries and TSMC for the A9, he added.

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