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Apple - Samsung spat threatens iPad chip deal

Taiwan's TSMC has started trial manufacturing of next generation A6 chips for Apple

Taiwan's TSMC has started trial manufacturing of next generation A6 chips for Apple.

Reuters broke the story, quoting a source familiar with the matter. The news indicates that Apple is shifting from its traditional chip supplier, Samsung, with which it is involved in some acrimonious patent battles. Samsung is currently the sole supplier of the A5 chips used in the iPad 2, but Apple has hinted it is keen to diversify its supply chain from the Korean company.

Reuters states the deal for actual orders for the chips is still not solid, as it depends on TSMC's yield rate, or the amount of chips per batch that come out with no defects.

"TSMC has got all the authorisation and details ready. Whether Apple puts in a formal order will depend on the yield rate," said the source, who was not authorised to speak to the media. The source did not provide further details of the orders.

TSMC spokeswoman Elizabeth Sun told Reuters she could not comment on this issue or on market rumours. Apple was not immediately available for comment and a Samsung spokesman declined to comment.

Although the chip may not be called the A6, Reuters pointed out that several sources had previously said TSMC, the world's largest contract chip maker, was set to become a supplier of some processor chips to Apple, likely starting next year. In contrast, some analysts still expect Samsung to dominate A5 orders.

The report quoted Seo Won-seok, an analyst at NH Investment and Securities in Seoul. "It won't be easy for Apple to dramatically change its chip provider from Samsung," said the analyst. "It has to redesign the chipset, which Samsung has been deeply involved from the beginning and has some intellectual property. Apple could try various suppliers but they (Samsung and Apple) need each other and the relationship will continue."

Apple designed the A5 chip in the iPad 2, though analysts say it is based on British chip designer ARM Holdings Plc's technology.

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