Apple Inc. (AAPL) Versus Samsung: Who Wins in a Divorce?

Apple Inc. (NASDAQ:AAPL) and Samsung (NASDAQOTH:SSNLF) are the perfect example of an unhappy marriage. The increasingly acrimonious union is more likely to end than keep going. When it does end, who wins?

A perfect marriage

When Apple Inc. (NASDAQ:AAPL) and Samsung first got together, it was the perfect union. Samsung needed a client to support its chip building efforts and Apple needed a reliable chip maker to support its new phone. With the immense popularity of the iPhone, both companies were big winners.

However, over the years, the relationship has soured. The biggest reason is Samsung’s Galaxy line of products that compete directly with the iPhone and iPad. While Samsung appears to have lived up to its obligation to protect Apple’s secrets, the lawsuits between the two companies have been ugly, at best.

Apple Inc. (AAPL)

All of this suggests that there will eventually be a divorce. It hasn’t happened yet because there aren’t too many companies to which Apple Inc. (NASDAQ:AAPL) could easily turn. Here are a few possibilities:

Intel Corporation (NASDAQ:INTC)

Intel Corporation (NASDAQ:INTC) is one of the largest chip makers in the world. Its chips are at the core of most personal computers. Intel shares, however, have been languishing for years because the company is largely absent from the mobile chip space. The negative view of the stock has left the shares yielding an impressive 4% or more for quite some time.

It hasn’t been sitting idle, however, pairing with Google Inc (NASDAQ:GOOG) to create chips that will work with Android. That mobile operating system powers far more devices than Apple Inc. (NASDAQ:AAPL)’s iOS, making it a notable market opportunity. Moreover, Google Inc (NASDAQ:GOOG)’s open business model means that Intel can design its chips from the ground up, which is the company’s penchant.

Still, a deal with Apple would be a huge boon to Intel’s business. The biggest problem would be that it would turn Intel from a chip designer into little more than a chip foundry. Making chips designed by other companies isn’t its specialty, but it would probably be willing to do so for a company as strategically important as Apple.

Clearly, such a deal would quickly vault Intel’s shares higher. That said, its current chips for Android still present an important opportunity. Patient income investors would do well to consider this well financed tech company at current prices. An Apple deal would be icing on the cake.

Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM)

Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) is the world’s largest chip foundry. Unlike Intel, it is used to building to order. With 14 facilities that it either owns or controls, it would have ample capacity to take on Apple as a customer.

BusinessWeek, however, suggests that such a partnership would be problematic because Taiwan Semiconductor’s reputation for keeping secrets isn’t that good. Apple, which likes to control virtually every aspect of its products, would be right to find this concerning. The problem is that smaller rivals either don’t have the technology or capacity to take on what would be a massive customer.

Complicating any relationship could be the company’s efforts to build businesses in solar power and lighting. Although both are chip based, starting from the ground up is costly and time consuming. Apple would rightly be concerned that it couldn’t take on a big customer at the same time. Indeed, Apple Inc. (NASDAQ:AAPL) couldn’t afford a mistake with its key products.

United Microelectronics Corp (ADR) (NYSE:UMC)

United Microelectronics Corp (ADR) (NYSE:UMC) is the second largest foundry in the world. Like Taiwan Semiconductor, the company does not design chips, so it would be a good fit for Apple. The company is about a third the size of Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM), which means that scale could be an issue.

However, it could also be a way for Apple Inc. (NASDAQ:AAPL) to team up with a hungry competitor looking to take on the industry giant. On that score, it would be a win-win, since United Microelectronics Corp (ADR) (NYSE:UMC) would probably be willing to do just about anything to appease Apple. This could make the company a notable dark horse candidate for a deal.

Not an easy change

At the end of the day, Apple and Samsung haven’t broken up because of convenience. Shifting suppliers isn’t an easy task. However, Apple Inc. (NASDAQ:AAPL) would be foolish to not be looking for a new partner. In fact, its efforts to move beyond Foxconn could be the model it follows with chips.

There, it added Pegatron as a manufacturer for the iPad Mini to complement its relationship with Foxconn. So there could be plenty of transition time between a full switch, for the company and investors. Any deal with Intel, however, would probably lead to an immediate share price increase at the chip maker, wiping out the opportunity the shares present today.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple and Intel.