Apple explores using Intel, Samsung to build chips

Apple executives have made visits to a Samsung plant under development in Texas (U.S.) that will also make advanced chips

Apple Inc. has held exploratory discussions about using Intel Corp. and Samsung Electronics Co. to produce the main processors for its devices, a move that would offer a secondary option beyond longtime partner Taiwan Semiconductor Manufacturing Co.

The iPhone and iPad maker has had early-stage talks with Intel about enlisting the company’s chipmaking services, according to people familiar with the deliberations. Meanwhile, Apple executives have made visits to a Samsung plant under development in Texas (U.S.) that will also make advanced chips.

Neither effort has resulted in any orders so far, and the work with both suppliers remains preliminary, according to the people, who asked not to be identified because the talks are private. Apple has concerns about using non-TSMC technology and may not ultimately move forward with another partner, the people said.

Apple executives discussed the problem during the company’s quarterly earnings call last week, saying that a lack of chips for the iPhone and Mac was constraining growth.

We have less flexibility in the supply chain than we normally would, Chief Executive Officer Tim Cook said.

But finding backup suppliers is no easy feat. Intel and Samsung can’t reliably offer the type of production and scale that’s turned TSMC into the dominant made-to-order chip manufacturer — and one of Apple’s most critical supply-chain partners.

For Intel, finding external customers for chip production is a key piece of a comeback plan under CEO Lip-Bu Tan. The company remains in the early stages of trying to line up clients for its so-called foundry business after past false starts. Landing Apple as a customer would represent a massive win for Tan and potentially help attract additional new business.

Samsung has had more success in this area, but it too has struggled to keep pace with TSMC and remains a distant second in the foundry market. Samsung would benefit greatly from an endorsement by Apple — a company it competes with in smartphones and other sectors.

Samsung is already working on building more peripheral components for the iPhone and other products, including ones for managing device power, Apple said.

Apple prefers to have at least two suppliers for any major component, giving it leverage in pricing negotiations and protection from supplier disruptions. For instance, it relies on several different manufacturers for the screens used across its product lineup.