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Taiwan Semiconductor Manufacturing Company has initiated trial manufacturing of Apple's A6 system-on-chip (SoC) that is expected to power next-generation Apple iPhone and iPad devices. Depending on the yields, costs and volume, Apple may shift production of its custom SoCs from Samsung Semiconductor to TSMC.

"TSMC has got all the authorisation and details ready. Whether Apple puts in a formal order will depend on the yield rate," an anonymous source told Reuters news-agency.

Apple has not decided whether or not to switch from Samsung Semiconductor to TSMC or not. The company is in massive legal fight with Samsung Electronics over patent infringements and it would be strange for Apple to keep Samsung its main strategic partner. The decision will depend on the yields of the A6 chips at TSMC as well as their costs.

While Apple may easily switch contract manufacturer of its processors, especially given the fact that there are at least nine months before the first A6-based devices hit the market, it is not completely clear which advantages will the company get in the short term and which problems this may cause in the short- and mid- terms.

In early 2012 the world's largest contract manufacturer of chips, TSMC, will have a lot of capacities for making chips using 40nm process technology as well as very limited ability to produce chips using various 28nm fabrication processes. The company's current-generation A5 is already made using 45nm manufacturing technology at Samsung, therefore, switching to TSMC's 40nm will hardly bring any cost or performance advantages. TSMC's 28nm fab process is not an option for Apple A6 due to capacity constraints as the company needs millions of chips to launch a product. Meanwhile, in early 2012 Samsung will be able to offer both 28nm and 32nm HKMG manufacturing processes and keeping in mind that the company does not have massive clients like AMD, Nvidia, Qualcomm and others, it may produce the right amount of chips.

Given the fact that the popularity of various iOS devices (iPad, iPhone, iPod, etc.) is growing, it makes sense for Apple to ensure that several fabs can produce generally similar chips. Perhaps, even using different manufacturing processes. The outcome for Samsung is pretty clear: it may lose its biggest foundry customer.

Apple and TSMC did not comment on the news-story.

Tags: Apple, Samsung, TSMC, 45nm, 40nm, 32nm, 28nm, Semiconductor, Business

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