Samsung Chip Sales Down As Apple Chooses TSMC to Supply A8 SoC

Things don’t look good for Samsung: Apple’s most fierce competitor has reported less-than-stellar performance from its smartphone business and has lost its market position to local vendor Xiaomi in China. But this isn’t all: Samsung has another weak thread it its reports. Chip manufacturing business profits are also down for its other lesser known arm, System LSI, as demand is lower than expected (via WSJ).

Until last year Samsung had a monopoly in Apple’s supply chain in terms of chip sales, but that contract expired, and Apple has inked a deal with Taiwan Semiconductor Manufacturing Co. Since then multiple confusing reports have surfaced contradicting each other: one claimed TSMC was the sole provider of Apple’s A8 chips, while another mentioned Samsung as secondary provider.

What Samsung’s lower-than-expected quarterly earnings reveal apparently confirms reports of Apple’s partnership with TSMC: sales and profits are down as demand for the company’s main customers continues to decline, said Robert Yi, Samsung’s head of investor relations.

Looking forward, Yi said that System LSI business will remain weak in the third quarter due to low demand for mobile application processors (AP) in the high-end mobile segment.

Samsung reported a 6% increase in operating profits for its semiconductor business, most of which came from selling memory chips. Earnings growth for its chip business slowed to 6% in the past quarter from 82% recorded in the first quarter.