Analysts at Bernstein Research predict that Apple Inc.’s (NASDAQ:AAPL) current alliance with supplier Taiwan Semiconductor Manufacturing Company, or TSMC, will prove to be more of a brief fling than a long-term relationship. Though Apple has strayed this year from its historic reliance on Samsung for processors, these analysts believe that the Cupertino firm’s change of supplier is an extremely temporary one and TSMC will soon be out of the loop again.
Their assertions are given additional weight by the fact that TSMC itself seems to believe that Apple (AAPL) will leave it in the lurch, as will other important semiconductor customers such as Qualcomm. TSMC executives make no secret of the fact that they expect their market share to shrink in 2015 as these large purchasers switch back to Samsung for competitive 14 nanometer components, though they also seem to believe their own 16 nanometer products will eventually triumph.
Analysts David Dai and Mark Li believe that Apple (AAPL) will aim for 14 nanometer components regardless of probably slightly higher initial outlays. To fail to do so, the pair argues, would put Apple behind the technological curve compared to its rivals, something the company cannot afford to risk.
Apple’s success has been built on innovation and keeping up with the latest developments, and in any case, Samsung is a familiar company to deal with, though not exactly an ally. The fruit-christened company has maintained a thin but important technical lead compared to its competitors, adopting 20 nanometer processor architecture some six months ahead of frontrunner Qualcomm. Qualcomm is now aiming at a rapid entry into 14 nanometer territory in 2015, however, a move that is very likely to force Apple’s hand.
Ultimately, of course, manufacturing yield will determine which supplier ends up with Apple’s contracts. If Samsung can keep up with Apple’s demand for 14 nanometer components, their 30% or better performance improvement will guarantee that the Cupertino electronics giant buys from them. However, if Samsung’s fabrication muscle is not up to the heavy lifting involved, TSMC may indeed win lucrative contracts in the future for its 16 nanometer product, which is after all superior to 20 nanometer, if not quite as good as 14 nanometer.
At the moment, the market seems inclined to cautiously bet on Samsung, but not go all the way. Analysts are giving TSMC a “Hold” rating rather than “Buy,” which is a downgrade from earlier expectations, though it is a realistic one based on solid analysis.
