Samsung gets Apple Watch orders

[prime007]

So the news out of Taiwan (and other sources) is that Samsung has won the processor orders for the Apple Watch using their 28nm process.

Samsung reportedly grabs processor orders for Apple Watch (DigiTimes)

Apple Watch may be powered by Samsung processor (ZDNet)

I guess I'm puzzled as to why Apple would choose Samsung over TSMC (or to a lesser extent UMC or GF) given the following:
1. Patent lawsuits over the past few years
2. Samsung is probably Apple's biggest competitor
3. Samsung ads have tried to de-value Apple as a brand
4. Samsung has raised processor prices on Apple previously

Given all this....Apple STILL choose Samsung?! I guess Apple is all about profits (and short-term thinking).

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[Daniel Nenni]

I have confirmed this with credible sources. The reason being that TSMC 28nm capacity is still fully utilized with very good margins. Samsung 28nm is not and no one else had 28nm capacity at the time (UMC, GF, SMIC). Apple really did not have a choice other than to use 40nm which would not be as power efficient.

 

[hist78]

So the news out of Taiwan (and other sources) is that Samsung has won the processor orders for the Apple Watch using their 28nm process.

Samsung reportedly grabs processor orders for Apple Watch (DigiTimes)

Apple Watch may be powered by Samsung processor (ZDNet)

I guess I'm puzzled as to why Apple would choose Samsung over TSMC (or to a lesser extent UMC or GF) given the following:
1. Patent lawsuits over the past few years
2. Samsung is probably Apple's biggest competitor
3. Samsung ads have tried to de-value Apple as a brand
4. Samsung has raised processor prices on Apple previously

Given all this....Apple STILL choose Samsung?! I guess Apple is all about profits (and short-term thinking).

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From my own observation, Apple is a company likes to maintain a very high profit margin. At the same time Apple doesn't like their suppliers or vendors to have high profit margin. Guided by this attitude, they will do things that are contradictory to common sense. Like what you questioned.

TSMC's capacity might be too tight to do more for Apple watch. But I don't believe TSMC will ignore Apple's need if Apple pays enough and sincerly requested the capacity early enough.

 

[hist78]

Another thinking is TSMC might have recognized that not to have Apple as a customer is not a good thing. But to alllow Apple to control large portion of your capacity with much lower profit margin demanded by Apple is even worst.

 

[LinkedIn]

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[user_2013101]

Highly likely that Samsung produces processors for Apple Watch.

Firstly, I didn’t hear anything about TSMC producing the processors.

Secondly, another supporting evidence is that, paradoxically, Samsung’s PR machine didn’t pump the winning of the Apple Watch.

I have noticed for some time such unusual pattern of Samsung’s PR.

During 2012-2013, Samsung seldom responded to rumors of Apple switching the A6/A7 production to TSMC, because it had the orders firmly in hand.

Except routine announcements, Samsung rarely promotes its memory chips, which enjoy unshakable leads both in technology and market shares – at least for now.

The PR against iPhones has reached insanely high gear recently, when Samsung has been losing market shares since the release of iPhone 6.

Yes, Samsung probably has lost most, if not all, of A9 orders to TSMC, because Samsung generated a lot of rumors of winning and producing A9s.

 

[Daniel Nenni]

The other thing I was just told is that since Apple already has IP and the required tools and licenses for Samsung 28nm LP (ARM architectural license) used for the A7 it was a much easier and less costly to stay with Samsung. Moving everything over to TSMC 28nm would have have been a much more costly and time consuming exercise.

 

[Fred P]

Great analysis, completely agree. S1 is very lightly loaded. I think people would be very surprised to see how little 28nm logic production exists outside of Intel, TSMC and Samsung.

 

[prime007]

Yes, thanks Dani for the great analysis & input on the situation! It really filled in a couple big holes for me.

 

[lefty]

The article says "3,000-4,000 12-inch wafers monthly".
Wouldn't that considered to be pretty small compared to, say, the Snapdragon 810 which is 20,000 wafers per month?

 

[Daniel Nenni]

The article says "3,000-4,000 12-inch wafers monthly".
Wouldn't that considered to be pretty small compared to, say, the Snapdragon 810 which is 20,000 wafers per month?

Given a 28nm fab produces about 40k wafers per month that is about 10% capacity which is not much. Here are a couple of funny things I read about this from Apple tech sites:

"Apple is expected to order 3000 to 4000 wafers per month, each carrying several processors."

This guy is really bad at math. Apple will sell how many iWatches? Millions? 4k multiplied by several processors per wafer?!?!?!

"Many folks have raised question that why would Apple selected Samsung to prepare 28 nanometer process over a smaller, much effective 20 nanometer process from TSMC. Some suspect few reasons such as faulty supplies by TSMC or the price that might be bit high as compared to what Samsung offers."

What an idiot.

http://www.macroinsider.com/technology/samsung-processor-may-power-up-apple-smart-watch-h49981.html

 

[Fred P]

Sorry, which article?