TSMCs Qualcomm Setback Could Be a Big Boost for Apple

Confirming what had long been speculated, Qualcomm announced that it would be contracting Samsung to make Snapdragon processors at 10-nanometer geometry, according to Bloomberg. Those semiconductors will be in products early next year. That's bad news for the world's largest chip foundry TSMC but probably music to the ears of Apple. Using the smaller manufacturing technology, compared with the previous 14-nanometer, allows Qualcomm to sell chips with a tinier footprint and up to 40 percent lower power consumption, the two holy grails of mobile electronics.

TSMC and Samsung wage a battle to shrink chips in approximately two-year cycles, with the quickest to the next milestone gaining a first-mover advantage in shopping that offering to clients. In this round, the timing is roughly equal. Winning the gig for Qualcomm's next batch likely means that TSMC loses out, and that means one less client ready to spend the billions of dollars the Taiwanese chipmaker needs to fund the exorbitant costs of equipping its factories.

TSMC says it already has five products being readied for production at 10-nanometer, yet independent semiconductor analyst Andrew Lu recently noted a change of tone in the company's outlook for expansion of the technology. Knowing this, Apple enjoys an increasingly strong bargaining position when it comes to negotiating the next supply deal. With its own business under assault, any chance to gain an upper hand should be welcome in Cupertino.