Apple relies on Samsung chips despite patent war

By Kim Yoo-chul

Despite a raging patent war, Samsung Electronics and Apple maintain and are expected to maintain their relationship as chip supplier and buyer.

Industry sources say that Apple will continue to use Samsung’s chips and technology for its next smartphone, which may or may not be named the iPhone 5.

``Apple has been in talks with Samsung over shipment of its A6 quad-core mobile processor (AP) chips to be used in the next iPhone. It appears that Apple clearly has concluded that Samsung remains a critical business partner,’’ an executive from an Apple parts supplier based in Korea said on condition of anonymity.

He said that Samsung has been increasing the output of the Apple-designed A6 chips in its manufacturing plant in Austin, Texas.

The plant, opened in 2007, is one of the company’s chief facilities for NAND flash production and is also used for manufacturing system IC circuits and foundry-related businesses.

There had been speculation that Apple would shift its chip sourcing channel to Samsung rival Taiwan Semiconductor Manufacturing (TSMC).

``Samsung Electronics will apply its advanced 28-nanometer processing technology to produce qualified A6 mobile APs. TSMC will provide customized chips with designs from Apple, however, the volume will be very small,’’ said the executive.

Samsung and Apple officials both declined to comment on the issue.

The ongoing chip talks between Samsung and Apple were revealed after Samsung Electronics Chief Executive Choi Gee-sung told reporters that Samsung is handling legal issues involving Apple independently of its business relationship with the company.

He also confirmed its chief operating officer (COO) Lee Jae-yong, son of Samsung Electronics Chairman Lee Kun-hee and heir apparent to the group’s leadership, flew to the United States, following an invitation from new Apple CEO Tim Cook, to participate in a private memorial service for the late Steve Jobs, Sunday.

Lee will have a separate meeting with Cook over several pending issues, which backs assumptions that Apple still views Samsung as a critical parts supplier.

Samsung said its capability to manufacture customized chips on a foundry or contract basis gives it an advantage that TSMC and other rivals cannot currently match.

``The manufacturing process at TSMC hasn’t been stabilized. Considering Apple’s previous patterns of adopting qualified technologies, Apple isn’t taking risks. Samsung offers better pricing and capacity commitment for the A6 mobile APs,’’ said an official from a different Apple supplier.

Apple will become Samsung’s biggest overseas client by the end of this year, according to industry analysts, after buying over $8 billion worth of components including liquid crystal displays (LCDs) and memory chips.

LG's 'Retina Display' still in play

Industry sources believe that the next version of the iPhone will feature a 4-inch LCD screen, 0.5 inch larger than the recently-unveiled iPhone 4GS, and they will continue to be provided by LG Display.

``The iPhone 5 will feature a similar resolution to the iPhone 4, which is 960x640 pixels. It’s very unlikely that Apple will go for organic light emitting diode (OLED) displays considering the problems related to brightness and battery consumption,’’ said another industry executive.

LG Display has been the provider of “Retina Display’’ screens that have been used in Apple’s mobile products. The screen provides a high-level of picture density that makes it hard to see the pixels.

Sohn Young-june, a chief spokesman at LG Display’s public relations office, declined to confirm whether LG has been working with Apple to supply high-resolution LCD panels.

Apple was providing up to 15 percent of LG Display’s total revenue by the end of the first quarter of this year, according to local market analysts.

``With a bigger screen, the surface design of the iPhone 5 will be changed. The iPhone 5 and iPad 3 will be launched within the first quarter of next year,’’ said the executive.

``With Apple using quad-core mobile APs in the next iPhone, South Korean handset majors including Samsung, LG and Pantech are expected to adopt the same technology for their new smartphone models to offer a faster processing speed.’’

Last week Apple released its new mobile operating system, iOS 5, now available for download from Apple’s servers via the latest version of iTunes.