Apple has reached a preliminary agreement with Intel and is also reviewing Samsung’s Texas fab
For Samsung, a return to Apple’s chip supply chain depends on 2-nanometer yields
Lee Jae-yong, executive chairman of Samsung Electronics.
[Insight Korea = Nam Bit-haneul]
Samsung Electronics may be facing a rare opportunity to expand its territory in the foundry market. Apple, which has long entrusted production of chips for its own devices solely to Taiwan’s TSMC, the world’s largest foundry company, is now reaching out to Samsung and Intel as it seeks to diversify its supply chain.
On May 8, local time, The Wall Street Journal reported, citing multiple sources, that Apple had reached a preliminary agreement to have Intel Foundry produce some of its self-designed chips. It was not disclosed which Apple chips would be produced.
Apple is also reviewing cooperation with Samsung Electronics. Bloomberg reported on May 5 that Apple executives recently visited Samsung’s fab under construction in Taylor, Texas, and discussed chip production. The fab is equipped with advanced processes below 3 nanometers and is targeting operations by the end of the year.
Until now, Apple has maintained a structure in which it designs its own system-on-chips, or SoCs, used in iPhones, iPads and Macs, and outsources production to TSMC. But as global demand for AI semiconductors surges, TSMC’s production capacity has approached its limits, pushing Apple to diversify its supply chain.
During an earnings conference call late last month, Apple Chief Executive Tim Cook said, “In both the first and second quarters, the biggest constraint was not memory, but the lack of availability of advanced nodes used for SoC production.” He added that “supply chain flexibility is currently lower than usual.”
Hopes Rise for a Return to Apple’s Supply Chain
Industry observers say Apple’s move represents a new opportunity for Samsung’s foundry division. If Samsung succeeds in winning actual orders, it would mark the company’s return to Apple’s application processor supply chain after more than a decade, giving the move strong symbolic significance.
In the early years after the iPhone was launched in 2007, Apple used application processors designed and produced by Samsung Electronics. But after Apple began designing its own application processors and shifted production to TSMC in 2015, cooperation with Samsung in that area was effectively severed.
There are also expectations that the opportunity could help Samsung break free from its prolonged loss-making structure in foundry operations. Samsung’s foundry division has remained in the red since 2023 and is estimated to have posted a loss of about 1 trillion won in the first quarter of this year.
In a report released the same day, Kim Dong-won, head of research at KB Securities, said, “Samsung Foundry orders are expected to increase 100 percent year on year this year, and the growing possibility of securing major North American 2-nanometer customers such as Apple and Qualcomm will lead to higher utilization rates.”
“Earnings are expected to move from a 7 trillion won loss in 2025 into visible territory for a turnaround in 2027,” he added.
Ryu Hyung-keun, an analyst at Daishin Securities, also said, “The improvement in the operating environment is being driven by TSMC’s expansion pace, which is below customer demand growth, and customers’ pre-emptive need to diversify supply chains in light of geopolitical risks.” He predicted that foundry losses would shrink rapidly.
Still, experts say the key to turning the opportunity into reality is securing yields in the 2-nanometer process. According to industry sources, TSMC’s 2- and 3-nanometer process yields are said to be around 80 to 90 percent, while Samsung’s remain in the 50 percent range. TSMC has also announced plans to mass-produce 1.4-nanometer chips starting in 2028.
“For Samsung Electronics to increase its chances of winning Apple orders, it is important to secure mass-production capability and yield stability in the 2-nanometer process,” said Lee Jong-hwan, a professor in the Department of System Semiconductor Engineering at Sangmyung University. “Only then can it expect additional orders from other global Big Tech companies.”
“Since TSMC is preparing even for the 1.4-nanometer process, Samsung Electronics also needs to move aggressively to secure next-generation process technologies,” he added.
Jung Woo-sung, a senior researcher at LS Securities, also said in a report, “More important than the size of earnings improvement is whether Samsung can accumulate repeatable mass-production experience and customer trust in leading-edge processes.”
“In that case,” he said, “Samsung Electronics’ valuation could reflect foundry option value in addition to its existing memory-centered earnings.”
- This article was translated by ChatGPT. (이 기사는 챗GPT가 번역했습니다.)
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