In a big blow to Samsung, Taiwan Semiconductor Manufacturing Company (TSMC) has won exclusive rights to supply the iPhone 7 chips. Sources familiar with the matter told the Electronic Times that TSMC has beaten the Korean electronics giant in the race to scale 10nm process technology. Samsung reportedly supplies 70% of the A9 chips used in iPhone 6S and 6S Plus, with TSMC picking up the remaining 30%.

Samsung Will Not Make iPhone 7 Chips

TSMC to start A10 production in June

The Electronic Times reports that TSMC will begin full production of the A10 chips in June on its 10-nanometer process technology. Another reason that helped the Taiwanese company secure 100% of the A10 orders is its more advanced device packaging techniques that improve efficiency and power performance. Recent reports suggest that TSMC’s integrated fan-out wafer-level packaging (InFO WLP) outclassed Samsung’s capabilities.

The InFO technology stacks chips on top of each to directly mount it on a circuit board. It reduces weight and thickness while improving efficiency. The InFO technology was a key part of TSMC’s contract with Apple. It marks a major shift in Apple’s supply chain strategy. Even though Samsung’s smartphone business struggled last year, its profits increased on the back of A9 chips for the iPhone 6S and 6S Plus.

A powerful A10 chip needed for new features in iPhone 7

Apple is expected to launch a redesigned iPhone 7 and 7 Plus in September this year. Though the current A9 processor is very powerful, it may not be enough for new features in the iPhone 7. This year’s iPhone is said to feature a dual-camera system to offer DSLR quality images. It will also get rid of the ugly protruding rear camera and antenna bands.

The new iPhones are likely to be waterproof and dustproof. KGI Securities analyst Ming-Chi Kuo has learned from supply chain sources that Apple would also do away with the 3.5mm headphone jack to reduce the thickness of the iPhone 7 and 7 Plus. Before that, Apple is gearing up to unveil a new iPhone 5se, iPad Air 3 and refreshed Apple Watch next month.