The success of Apple's iOS devices has reshaped the landscape of the consumer electronics industry and triggered a sales boom of portable CE products. The wave of Apple product demand has simultaneously spurred improvements in semiconductor fabrication technology, as Apple's designs demand highly-integrated microprocessors in order to emphasize low power consumption and the smallest possible form-factors.
In view of booming demand for Apple's devices, competition among chip producers is also heating up. With Apple reportedly looking to diversify its supplier base, companies are competing for orders through technology development and costs.
Apple's sales expanded from US$19.3 billion in 2006 to US$65.22 billion in 2011, during which its popular iPhone and iPad were introduced.
Apple has in recent years grown its semiconductor spending. Data from Gartner show that the company bought US$12.43 billion worth of semiconductors in 2010, a 65.4% increase from US$7.52 billion in 2009. The significant growth allowed Apple to move to third place in 2010 behind Hewlett-Packard (HP) and Samsung Electronics.
Apple is expected to overtake Samsung and become the world's second-largest chip purchaser in 2011, Digitimes Research believes.
Samsung has been the exclusive manufacturer of Apple's existing A-series processors, despite that it also competes directly as its biggest customer in the smartphone and tablet PC markets. Samsung also supplies mobile DRAM assembled using package-on-package (PoP) technology for Apple's iOS devices powered by its A4 and A5 chips.
But the ongoing patent lawsuits between Apple and Samsung reportedly have encouraged Apple to reduce its reliance on chip supplies from Samsung.
With its lead in technology and advanced process capacity, Taiwan Semiconductor Manufacturing Company (TSMC) is most likely to replace Samsung as the major foundry partner for Apple. The Taiwan-based foundry is already actively negotiating with Apple about potential cooperation by proving its mass production yields on 28nm for manufacturing the next-generation A-series processors.
Grabbing Apple's orders would definitely help TSMC enhance its lead in the global contract chipmaking market.
Elpida Memory has been accelerating its technology transition to 30nm and below processes as the Japan-based memory chipmaker is vying for the majority of orders for mobile DRAM used in Apple's upcoming devices.
Other existing chip suppliers to Apple include Toshiba, which provides NAND flash memory, and Hynix Semiconductor, securing a small portion of mobile DRAM orders from the CE vendor. Toshiba is expected to remain the major NAND-chip supplier to Apple, and is gearing up for transition to 19nm process technology.
Apple is also likely to keep Hynix on its mobile DRAM supplier list, providing mainly 40nm-made solutions.