TSMC in trial manufacture of Apple chips - source

TAIPEI, July 15 Thu Jul 14, 2011 11:31pm EDT

TAIPEI, July 15 (Reuters) - Taiwan's TSMC has started trial manufacturing of next generation A6 chips for Apple Inc , a source familiar with the matter said, in a sign that the iPad maker is shifting from its traditional chip supplier, Samsung Electronics .

The source said on Friday that whether TSMC would get actual orders for the chips would depend on its yield rate, or the amount of chips per batch that come out with no defects.

"TSMC has got all the authorisation and details ready. Whether Apple puts in a formal order will depend on the yield rate," the source said.

TSMC spokeswoman Elizabeth Sun told Reuters she could not comment on this issue or on market rumours.

Analysts and other sources had previously said TSMC would be supplying some processor chips to Apple, likely starting next year, however they expected the A5 orders would be still be dominated by Samsung.

Any order for TSMC, the world's largest contract chip maker, would be a blow to Samsung, which is the sole maker for Apple's A5 chips, which are used in the hot-selling iPad 2.

But Apple has shown signs of wanting to move away from the Korean company, one of its toughest competitors in the smartphone market and with whom it is involved in an escalating legal dispute over patents.

TSMC is an obvious candidate to win processor business from Apple in the near term as it budgets $7.8 billion for capital expenditures this year to update technology and add capacity. It also has experience with ARM architecture, widely used by Apple to make power-efficient mobile chips. (Reporting by Clare Jim and Argin Chang; Editing by Jonathan Standing and Anshuman Daga)

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