In a Supply Chain Matters commentary published In late August 2012, we noted that, in the light of the contentious patent infringement court battles that occurred between Apple and Samsung, there may well be strategic supply implications. In that commentary, we speculated as to whether Apple would gradually replace Samsung as a major supplier for its key ARM microprocessor chips that power iPhones and iPads. We noted that few suppliers could scale to the volume and cost delivery targets of Apple, and thus, any transition of strategic sourcing would gradually occur. The next major turning point would most likely be when certain Samsung multi-year strategic supply agreements reach renewal point.

In early January in a follow-up commentary, we cited a posting appearing in The Strategic Sourceror Blog which indicated that Apple was in the process of making a major change in its strategic component sourcing strategy. The Sourceror commentary made note of published reports in the Taiwan Commercial Times that Apple was considering global semiconductor fab provider Taiwan Semiconductor Manufacturing (TSMC) as a new supplier for the A6X microprocessor utilized in some Apple iPad products.

Since that time, there are reports that Apple is also speaking with Intel regarding its long-term chip needs. DigiTimes has speculated that TSMC would finish tapping out Apple’s A7 processor this month and start trial production in May-June, with volume shipments in Q1 2014 time period.

This week, both the sites iClarified and DigiTimes are citing a Korea based media report indicating that Apple has yet to send Samsung Display a Request for Quotation (RFQ) for renewing the existing contract for LCD panels. That report speculates that because Samsung has yet to receive its RFQ, it will no longer be proving panels for iPad and iPad mini products.  That implies that LG Display, Japan Display, AU Optronics, and financially troubled Sharp will continue as display suppliers for these products. DigiTimes further speculates that Samsung will most likely exit its LCD supply commitments after Apple introduces a new 9.7 inch iPad.

Thus, there has indeed been a fallout from the patent disputes among these two companies, and a new era of supply relationships will evolve for Apple in the coming months.  Somehow, though, this is not the final chapter in this ongoing drama of intense competitors.  Samsung may well have other moves yet to come.

Bob Ferrari

 

Disclosure: The author is a current stockholder in Apple.