Who Is Apple's Best Processor Friend?

In a report published Thursday, JP Morgan analyst Gokul Hariharan commented that based on his research, Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM) should see its 16nm FinFET process gain an approximately 50 percent share in Apple Inc.'s (NASDAQ: AAPL) A9 processors for iPhone and keep 100 percent allocation for the A9x processor for iPad.

Hariharan said that it was expected Samsung's 14nm FinFET process would be the sole source for A9 processors. However, better early yields at Taiwan Semiconductor, ongoing serious execution issues at GlobalFoundries and rising in-hose demand from Samsung imply that Apple will have to rely more on Taiwan Semiconductor for capacity in 2015.

The reason for the switch is threefold:

• 1) Taiwan Semiconductor's early yields are higher than the competition.
• 2) GlobalFoundries is facing yield and ramp-up challenges, and 14nm wafer output is likely to be minimal.
• 3) Samsung's in-house demand from 14nm Exynos AP for its Galaxy S6 and Note 5 should take up 30 percent to 40 percent of its installed capacity.

The analyst added that as a result, Taiwan Semiconductor could see a 4 percent to 5 percent revenue upside in 2015 from Apple and that Samsung's Apple business may grow "more slowly," but is likely to be amply compensated for by strong-in house demand.