Here’s a stellar example of how to keep your enemies close: a multi-billion dollar division of Samsung that makes “logic integrated circuits”—basically, the brains of all mobile devices and PCs—is almost entirely propped up by business from Apple, reports Digitimes Research.
In 2012, 80% of Samsung’s business for its foundries, the specialized factories where microchips are made, came from Apple. In the same year, Samsung spent $7 billion to upgrade those foundries, one of which, in Austin, Texas, is the plant that manufactures Apple’s current latest-generation processor for iPads and the iPhone 5. That plant received at least $4 billion of investment from Samsung in 2012.
No doubt Apple wants to rely less on Samsung, given the ongoing patent dispute between the two companies and their direct competition in the smartphone and tablet markets. All the better for Apple if it guts Samsung’s microchip business in the process.
How would Apple do that? Rumors have been swirling since summer that the next generation of microchips for Apple’s mobile devices will be made not by Samsung, but by its competitor Taiwan Semiconductor Manufacturing Company (TSMC). Those rumors appear to be gaining traction.
Microchip foundries are a tough business. Because they require huge capital expenditures, they have to produce chips at or near capacity to stay afloat. Samsung’s foundries would be left in the lurch if Apple abruptly moved its microchip business away from Samsung. Such a move could cost Samsung hundreds of millions of dollars. Ouch.