International multimedia news agency Reuters reported that Taiwan Semiconductor Manufacturing Company (TSMC) has begun trial production of Apple’s next generation chips for mobile devices. It signals a shift from its traditional chip supplier, Samsung Electronics, a source told Reuters.

According to Reuters, Samsung is the sole supplier of the A5 chips used in the iPad 2, but Apple has hinted it is keen to diversify away from the Korean company. The two are battling a legal dispute over patents, and Samsung has also emerged as Apple's toughest competitor in the smartphone and tablet market, wrote Taipei based reporters Clare Jim and Argin Chang.

However, the switch to TSMC is not as simple as it sounds. Because Samsung was part of the A5 design, there may be patent and chip design issues, as per the report. Plus, Samsung continues to push Apple to retain the business.

Fubon Securities analyst William Wang told Reuters that, “Apple is trying to diversify its orders but it will still maintain some kind of relationship with Samsung.” He added, “I think TSMC will get the new chip orders, the issue however is allocation. Apple won't give the whole 100 percent to TSMC. Maybe it'll allocate only 20-30 percent.”

However, as per the report, TSMC looks like a strong candidate for several reasons. Besides planning to spend $7.8 billion this year to update manufacturing technology and add capacity, it also brings the experience of working with the British chip designer ARM Holdings Plc, widely used by Apple to make power-efficient mobile chips.

Seo Won-seok, an analyst at NH Investment and Securities in Seoul told Reuters that, “It won't be easy for Apple to dramatically change its chip provider from Samsung,” 

“It has to redesign the chipset, which Samsung has been deeply involved from the beginning and has some intellectual property. Apple could try various suppliers but they (Samsung and Apple) need each other and the relationship will continue,” noted Won-seok.

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