Samsung's fix for losing Apple? Go into business against TSMC

Actually, that makes sense. There will definitely be room for competition.

Last week I wrote about what I felt was a strategic blunder by Apple in taking its chip manufacturing business – all $10 billion of it – from hated rival Samsung to the overloaded TSMC. I felt TSMC could barely handle the work it had now and Apple would only bog it down further.

Faced with losing billions in Apple business, Samsung is now thinking about going into business against TSMC. An article in the Korea Times said Samsung is eyeing Amazon, Sony and Nvidia as potential customers to offset the lost volume from Apple’s departure.

"Samsung is entering a new chapter in logic chips. It is looking for companies with processor design technology but without manufacturing facilities," an industry source told KT.

The status of talks with Amazon was unknown, but it was claimed Samsung is negotiating on a high level with Sony and Nvidia. At present Amazon doesn't even design its own chips, so if it's in talks with Samsung to make something, that would be news in and of itself.

Samsung is no slouch in chip manufacturing. It currently has 32nm and 28nm facilities now and is on track to start making chips using 20nm and 14nm in the coming year. It's one of the few companies with the resources to match Intel for foundry investment. The question is whether it can match volume demands, which has been TSMC's perpetual weakness.

Market research firm IC Insights said Samsung almost doubled its foundry sales in 2012 to surpass UMC to become the third-largest IC foundry in the world behind Globalfoundaries and TSMC. It's eyeing taking the number two spot from Global this year. Losing Apple will hurt it but picking up competition could offset it, if Samsung can get enough.

Meanwhile, in Santa Clara, Brian Krzanich and Renee James gave their first interview to Reuters since becoming CEO and president, respectively, of Intel. Among the things discussed, they said Intel would grow its contract chip manufacturing business.

"If there was a great customer that we had a great relationship with laptops and other mobile devices, and they said look, we'd really love you to build our ARM-based product, we'd consider it. It depends on how strategic they are," Krzanich said.

It's interesting to see how much manufacturing is becoming a hot area of interest in the semiconductor industry. It's expensive, hard to do right and with no room for error. It could prove the competitive difference for some firms, and not their actual chips.

Interesting tidbit on Krzanich: he said he changes laptops and smartphones about once a month to try new ones out. He is currently using a Samsung Galaxy phone and a Lenovo Helix laptop with a detachable keyboard.

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