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Samsung's chipmaking business posts weak outlook as rumors of Apple shift persist

Apple's A7 SoC is manufactured by Samsung and powers the iPhone 5s, Retina iPad mini and iPad Air.Source: iFixit

To date, Samsung has been the sole supplier of custom A-series processors for Apple's popular iPhone and iPad, but industry watchers again expect that to change after the South Korean company signaled that its microprocessor business has a bleak outlook.

In its quarterly earnings report last week, Samsung disclosed that demand from its "main customers" for custom chips has "continued to decline." Investors who spoke with The Wall Street Journal took that as a potential sign that Apple could begin shipping devices with chips built by Taiwan Semiconductor Manufacturing Co. as soon as this fall.

Sources reportedly indicated that TSMC began shipping A-series chips to Apple earlier this year, though the report didn't indicate whether that silicon is actually in the hands of customers. Every Apple "iDevice" teardown to date has revealed only chips built by Samsung.

Samsung's comments about "weak demand" going forward come as Apple is selling more iPhones than ever. Industry watchers expect sales to continue to grow this fall with the debut of an anticipated "iPhone 6," which is rumored to come in two new, larger screen sizes.

For the June quarter, Samsung saw its semiconductor business profits grow by 6 percent, though its overall earnings were a disappointment to investors. The company's lower-than-expected earnings represented its smallest profit in two years, and Samsung blamed increasing competition in the smartphone space for its results.

In addition to being fierce competitors in the smartphone, tablet and other markets, Apple and Samsung are also close partners who have collaborated on numerous custom chip designs. Their most recent creation is the 64-bit A7 processor that powers the iPhone 5s, iPad Air, and iPad mini with Retina display.

Given Apple's continued reliance for parts on the threat that is Samsung, industry watchers have expected for some time that Apple will transition its chipmaking partnerships away. Specifically, TSMC has been pegged as a potential replacement for Samsung, though to date its believed that Apple and TSMC have only worked on shipping Touch ID fingerprint sensors to users.