Apple and Samsung are the fiercest rivals. Their respective upcoming smartphones, iPhone 8 and Galaxy Note 8, will be competing against each other. But the two companies also have close relations. Samsung supplies RAM for the current iPhone 7, and will be the sole supplier of OLED screens for the 10th anniversary iPhone 8. While the rumor mill is bombarding Apple fans with iPhone 8 rumors, Samsung has quietly bagged the contract to supply iPhone 9 chips next year.

iPhone 9 Chips
Concept by ValueWalk Team

Samsung to complete testing of iPhone 9 chips soon

Despite their rivalry, Samsung used to be the primary supplier of chips for the iPhones until 2013, when TSMC grabbed a large chunk of orders. The Taiwanese company was the sole supplier of A10 Fusion chips for the iPhone 7. TSMC is also the only supplier of A11 chips for the iPhone 8. The company started mass producing A11 chips in May, months before the iPhone 8 release.

Inside sources told The Investor that Samsung signed a formal contract with Apple last month to produce A12 chips for the 2018 iPhones, likely to be called iPhone 9. The publication added that Samsung had purchased “advanced chip manufacturing equipment” to produce 7-nanometer chips “solely for iPhone.” Using the recently purchased extreme ultra-violet lithography machines, Samsung will soon complete the chip tests and then seek Apple’s approval for production.

The Investor said Samsung’s co-CEO Kwon Oh-hyun, who oversees the chip and other components businesses, played a key role in persuading Apple. The two companies already have “close ties on OLED,” which worked in Samsung’s favor. While Samsung wants its Galaxy phones to beat the iPhones, the company directly benefits from the sale of every iPhone unit. The more iPhones Apple sells, the more it adds to Samsung’s bottom line.

Samsung’s component business is growing strong

Besides making smartphones and consumer electronics items, Samsung makes components such as chips, displays, batteries, and storage for other brands. It commands 95% share in the OLED display market. The Korean company is also the sole manufacturer of Qualcomm’s flagship Snapdragon 835 chips. Supplying the iPhone 9 chips would further boost its bottom line.

According to the report, Samsung will be using 7nm process to manufacture the iPhone 9 chips. It means the A12 chips would be more than twice as efficient as the current A10 Fusion chip, which is built using TSMC’s 16nm manufacturing technology. A smaller chip occupies less space and uses less power, allowing the company to pack a bigger battery or add more components.

TSMC buying equipment for 7nm chip production

TSMC will still be supplying chips for the 2018 iPhones, said The Investor. However, it’s unclear what percentage of orders it would obtain. If Apple is sourcing chips from both the companies, it would be interesting to see whether there would be any performance difference. Back in 2015, the tech giant had sourced the A9 chips from both Samsung and TSMC for the iPhone 6S. Apple drew a flack when benchmark tests showed that the iPhone 6S units running TSMC chips outperformed those running Samsung chips.

While Samsung has already signed the contract to make iPhone 9 chips, TSMC has also been ramping up its capabilities. According to DigiTimes, TSMC will be ready for mass production of chips using 7nm process by 2018. Its 5nm node will start production in 2019. DigiTimes has learned from supply chain sources that TSMC was expanding the number of suppliers of equipment for the 7nm process.