The Wall Street Journal reports that two major Apple suppliers are locked in a fierce battle for control of Taiwan based Siliconware Precision Industries, known as SPIL. (Paid subscription required)  This skirmish places Apple as having to be attune to its ongoing relationships among two rather important key suppliers.

The battle centers around a new component-packaging technology termed system-in-package or SiP which is essentially a number of integrated circuits enclosed in a single module (package). SiP can support all or most of the functions of an electronic system, and is typically used inside a mobile phone or consumer device such as Apple’s iPhone.

According to the report, SPIL currently supplies SiP services in small volume and is seeking to roll out this technology on a far broader scale in 2017. The report cites Bernstein Research as indicating that Apple alone will account for $3.1 billion in SiP component orders this year, and that amount could double by 2017.

The two existing Apple suppliers vying for control of SPIL are Advanced Semiconductor Engineering (ASE) and none other than contract manufacturing services provider Foxconn, through its parent, Hon Hai Precision Industries.

ASE is noted as the world’s biggest chip assembler, recently acquired a 25 percent stake in SPIL. In late August, SPIL announced a deal to collaborate with Hon Hai Precision that included a share swap that would afford the contract manufacturer a bigger equity stake and more voting clout than ASE. The WSJ opines that because Foxconn has an existing close collaborate relationship with Apple and its product design teams, SPIL has a better chance for leveraging expanded Apple business. Further noted is that collaboration with SPIL aides in Foxconn’s goals to diversify into lower tiers of the high tech supply chain including semiconductors.

From our Supply Chain Matters lens, we concur with the WSJ that this ongoing battle for emerging supplier control very much underscores the importance that Apple’s scale and business potential has for key suppliers. It further underscores how existing close relationships with key suppliers can influence future strategic supply decisions, particularly when such influence extends to the influence of future product design.  In this specific case, individuals within Apple’s strategic sourcing and iPhone product design teams will have to eventually play the role of peacemaker.