By Kim Yoo-chul
Samsung Electronics can still edge ahead of Taiwan's TSMC in the heated race for next-generation chip-making technology focusing on 10-nanometer chips, raising the possibility that Apple will rely on Samsung technology for its future A11 processor chips.
That means Samsung Electronics will work with Apple again to fabricate processor chips for the iPhone 7s, which will be released in 2017.
TSMC was recently named the sole supplier for Apple's A10 chips for the iPhone 7 with Apple planning to release it this year, a major blow for Samsung as Apple is one of its largest clients.
In chip-making technology, thinner tech means improved efficiency and lower cost. Theoretically, for example, 10-nanometer tech is better than 14 and 16 nanometers in terms of cost and efficiency.
"We believe Samsung, despite some recent delays, will still be the first mover to 10-nanometer technology," Mark. C. Newman, a senior analyst at Bernstein Research, wrote in a note to clients, Thursday. "TSMC and Intel will soon follow, whereas GlobalFoundries can hardly keep up. Samsung can still edge ahead of TSMC."
The leading research firm said it expects Samsung's production to trickle in late this year for its internal and Qualcomm's upcoming mobile chipsets, tentatively named Snapdragon 830.
The report comes as the competitive landscape in 14- and 16-nanometer technology is stabilizing, opening up an opportunity to shift the focus to 10-nanometer tech.
Bernstein said the 10-nanometer's competitive position will be similar to 14- and 16-nanometer and Samsung will claim the title of "the first 10-nanometer foundry supplier."
However, thanks to its huge manufacturing capacity, TSMC may catch up on a larger scale later.
Therefore, both Samsung and TSMC will handle the new Apple project.
"Samsung is pushing hard to diversify its logic customer base given some losses of Apple and further improve earnings revenue and operating margins from low-single digit to mid-single digit in 2016 and beyond," said the research firm. "We therefore raise our 10-nanometer foundry sales forecast in 2017."
U.S.-based mobile chipset giant Qualcomm will fill the void for Samsung after Apple ditched the Korean tech giant, as Samsung is Qualcomm's sole partner on 14-nanometer tech starting from the first half of this year.
"Qualcomm should continue working with Samsung," the research firm said.
Bernstein said Samsung will clearly have lower spending on chip fabrication this year from the previous year. Its logic chip business, considered as a next-generation revenue stream replacing conventional and volatile memory chips, is possibly also turning more cautious.
"This will buttress the profitability of Samsung's logic-chip division but may lead to supply tightness in 10-nanometer tech later," it said, adding that Samsung Electronics will also compete with Intel, as the tech giant may be shifting in the same direction too.
By naming TSMC as the exclusive chip-sourcing partner for A10 chips, Apple has continued cutting its reliance on its South Korean partner.
However, given that Apple sells a huge amount of iPhones per quarter, it's quite unclear whether TSMC alone can manufacture enough chips for all iPhones.
Any supply shortage in chips will hurt iPhone sales.
"Samsung remains a formidable opponent against TSMC and likely will advance to 10-nanometer earlier," Bernstein's Newman said. "High cost and uncertain outlook may be prompting companies to think harder for capacity expansion but the race to more advanced nodes has no sign of slowing down."