Don’t Get Too Excited About GlobalFoundries and Apple — At Least, Not Just Yet
Don’t get too excited about an intriguing story from the Albany Times Union saying that chip-manufacturing company GlobalFoundries may soon start turning out chips for Apple’s iPhones and iPads at a factory in upstate New York.
I’ve been checking with industry sources who have a pretty clear picture about what may be going on. And it’s probably not all that it’s initially cracked up to be.
In the most likely scenario, Samsung will still be the primary manufacturer of Apple’s chips for the iPhone and iPad, they said, continuing the role it has played since the earliest days of the iPhone: Building the chips that Apple designs under contract. (In chip-industry lingo, these deals are known as foundry agreements.)
Sources close to the situation said the deal that appears to be taking shape looks more like this: Samsung will use GlobalFoundries for what is known as “flex capacity.” This is a long-standing industry practice under which a chip manufacturer pays to occasionally use another company’s factories when demand on their own factory is running higher than they would like, and they need a little help.
This would be a good time to point out that Apple is not Samsung’s only foundry customer. The Samsung fab in Austin, Texas, also turns out chips for Samsung. Occasionally there will be times when Samsung has to balance the demand on that fab in order to meet both the needs of its primary foundry customer — Apple — as well as its own internal needs for smartphone and tablet chips.
That’s where GlobalFoundries will come in, picking up the additional work on an as-needed basis. Samsung would basically hire GlobalFoundries as a subcontractor, and continue to manage the relationship with Apple. This is a very different business relationship than, say, if Apple were to tap GlobalFoundries as a “second source” for chips. Apple would of course have to give its blessing to the arrangement.
This would explain why Samsung employees have been spotted in Malta, N.Y., where GlobalFoundries operates Fab 8, and is said to have brought the “recipes” for building Apple chips with them. Additionally, there are enough similarities in chip-making technologies and equipment between Samsung and GlobalFoundries that Global can do the job when called upon.
GlobalFoundries — created from the combination of the former manufacturing operations of Advanced Micro Devices and Chartered Semiconductor — is the second-largest foundry company in the world, according to research firm IC Insights. Samsung is the third-largest.
Apple, through a spokeswoman, declined to comment.
Kevin Kimball, a spokesman for GlobalFoundries, declined to comment, saying that the company doesn’t identify its customers “unless they do so first.”