By Kim Yoo-chul
Amazon, Sony and NVIDA are emerging as potential customers who will replace Apple as key buyers of Samsung Electronics' semiconductors, sources said Tuesday.
"Samsung is eyeing Amazon, Sony and NVIDIA as customers to offset the lost volume caused by the Apple's decision to reduce purchases," a source said.
Samsung is talking with Sony and NVIDIA, but the status with Amazon has not reached that level yet, he added.
Amazon is developing its own application processors for the core components of its popular Kindle tablets — it previously used OMAP-branded processors manufactured by Texas Instruments.
Sony, which also has no chip-making plants, is using ARM-based processors for its portable PS gaming consoles.
"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 said.
Unlike conventional memory chips, logic chips are used to read and write data and control entire computing systems based on logic patterns that meet clients' specifications. The chips play the role of "brains" that operate mobile devices from smartphones to tablets.
The engineer said that Samsung, which was investing heavily in the logic chip manufacturing business, was disappointed at lower order volumes from Apple.
The Korean firm has been retooling some of its unprofitable memory chip production lines to manufacture logic chips to meet rising demand, which is expected to grow 40 percent annually this year and next.
An "‘Apple tsunami' is impacting on Samsung's logic chip division, cornering top management to implement contingency plans to find new clients," said another Samsung watcher.
In 2011, Samsung agreed with Apple to supply components until the end of 2014. Under the agreement, Samsung will manufacture Apple's logic chips to be used for the upcoming iPhone 5S and advanced iPad until the first half of next year.
According to IC Insights, a leading market research firm, Samsung reported $4.33 billion in revenue by supplying customized applications, last year, with Apple making up 89 percent of them or some $3.8 billion.
Mark Newman at Sanford C. Bernstein in Hong Kong said Apple paid $10 billion to purchase Samsung semiconductors and flat-screens last year, which was 16 percent out of the $59.1 billion worth that Samsung sold in 2012.
"For Samsung's logic chip business, I believe their utilization rate is not that high as Apple's orders are disappointing. Going into 2014, Apple will start to use Taiwan's TSMC so Samsung needs to find alternative customers for their own processor chips,"Newman told The Korea Times via e-mail.