Apple Bid For Exclusive TSMC Chip Supply Access Rejected

Bloomberg reports that Apple and Qualcomm made attempts to invest in Taiwan Semiconductor Manufacturing Co. (TSMC) - the world's largest custom maker of chips.

The report claims that both proposals included investments of more than $1 billion in cash to get exclusive access to the chips supplies from TSMC.

Bloomberg reports:

The two companies are trying to satisfy booming demand for smartphones, a market estimated by to be worth

$219.1 billion, according to data compiled by Bloomberg Industries. Any deal would give Apple an alternate supplier to Samsung Electronics Co. (005930), which builds the main chip used in the iPhone and iPad and is also its biggest rival in smartphones. Qualcomm needs to boost supply, since shortages are starting to limit earnings. 

TSMC however rejected the offers as it wanted to keep the flexibility of working with multiple customers.

While TSMC is Qualcomm’s biggest supplier, according to data compiled by Bloomberg, it has been successful because it has worked with multiple customers. Dedicating one facility to a single product or customer creates the risk of a fabrication plant becoming a burden if the product, client or technology changes, said Ho.

“You have to be careful. Once that product migrates, what are going to do with that dedicated fab?” said Ho. “We would like to keep the flexibility.” 

Last year, several rumors indicated that TSMC will provide the chips for future iOS devices, however production issues forced Apple to continue to source the chips from Samsung. It makes sense for Apple to look for alternative suppliers for the chips to reduce its dependance on Samsung, which is the sole supplier.

While Samsung is taking steps to create an "internal firewall" between its handset business and its components business to ensure that the $1 billion verdict does not have an adverse impact on component contracts from Apple, we've also heard that Samsung is also taking steps to diversify its customer base by adding new customers like Qualcomm to reduce its reliance on Apple.

[via Bloomberg]