TheChek News Flow

{http://recode.net/2015/02/04/apple-taps-samsung-to-manufacture-next-iphone-chip/}

The company has used Samsung for all manner of components, though it has been working to reduce reliance on its chief rival. With the iPhone 6, Apple found an alternative supplier for many of the A8 chips that lend the smarts to its smartphones.

While Apple had hoped to rely more heavily on Taiwan Semiconductor Manufacturing Co. to fabricate the Ax family of processors used in its iOS devices, the company has turned to Samsung for its next-generation A9 chip, according to people with knowledge of the situation.

That’s because Samsung holds a technological edge over TSMC when it comes to the latest manufacturing process. Samsung has managed to shrink the size of the transistors on its chips to 14 nanometers — effectively packing more processing power into a smaller space and consuming less power. TSMC is still at 20 nanometers.

Neither Samsung nor Apple would comment. The arrangement between the two companies was first reported by South Korea’s Maeil Business Newspaper.

Apple had used Samsung Semiconductor to fabricate its main processor on earlier generations of phones. The Cupertino technology giant designs the chip, but it relies on partners for production.

The relationship between the two companies became increasingly fraught after Apple sued its component supplier in 2011, alleging Samsung’s mobile electronics unit had copied its phones and tablets. Apple has been awarded more than $1 billion in damages from juries in a pair of related cases.

With the iPhone 6’s processor — the A8 — Apple split the work between TSMC and Samsung. TSMC, which is a pure foundry and the world’s largest contract chip-maker, received the bulk of the business, analysts say.

Now, the balance of power has shifted back to Samsung, thanks to its advanced fabrication technology. That same advantage is said to be putting pressure on Qualcomm, which has been the biggest maker of chips in high-end phones. Owing in part to its own manufacturing edge, Samsung is expected to use its Exynos processors in forthcoming handsets instead of Qualcomm’s Snapdragon 810, which is made in TSMC’s factories.

Samsung has invested a staggering sum — $21.4 billion — to ramp up capacity in its semiconductor and display businesses over the last year, and plans to spend even more in 2015. The company has foundries in South Korea and in Austin, Texas. Samsung also partnered last year with GlobalFoundries to bring its 14-nanometer process to its facility in Saratoga Springs, N.Y.

Though Samsung refuses to identify chip customers, sources say the company is working to ensure an adequate supply of application processors for the next-generation iPhone.

In October, Dr. Kinam Kim, president and general manager of the semiconductor business of Samsung, told reporters that he expects Samsung’s profits to improve as it starts supplying Apple with chips that come from its 14 nanometer line.

“Samsung LSI hasn’t directly confirmed Apple as its 14nm customer. But the company sounded confident about 14nm FinFET ramp in the second half of this year during its Q4 2014 earnings call,” said Strategy Analytics analyst Sravan Kundojjala. “Samsung LSI is looking to regain share in applications processors with the help of 14nm FinFET chips after seeing a steady share decline in its AP shipments over the past few years.”

Capital return beats and misses, we think, will drive much of relative bank performance in 2015 (our “the good, the bad and the challenged” thesis). We continue to think UBS can hit and beat expectations, and CS likely miss. We update PTs and EPS for Sfr move.

The need for CS to increase its equity leverage ratio by ~30% (2.3% to 3.0%+) to hit our base case of new equity leverage ratio within a revised 'going concern' leverage ratio remains a constraint on divis & capital plan, we think. We expect to get more clarity on new Swiss standards for equity and “going concern” leverage ratio in Q1. Whilst CS targets a 3% equity leverage ratio by end 2015e, our base case is that this is more likely in 2016e, and the recent Swiss franc move also may make the target more challenging. Given all the uncertainties of running a capital markets business and litigation uncertainty, we continue to think CS could clear the air by scripping or cutting the 2014 divi and accelerating meeting the new realities. Our recent meeting with CS's CFO underscored that the bank is keen to show consistent improvement in the leverage ratio. After 3 quarters of no improvement, it seems plausible it will rise somewhat in Q4 - in part through the sale of a flagship high value Zurich property to Swatch before Christmas and some deleveraging. But we also see another Sfr1bn+ litigation around US mortgage issues as likely.

With this note we update our EPS, PT (to SFr 25) and capital ratios for the Swiss franc move to 11.7% CET1 and 3.1% equity leverage ratio in 16e. We have assumed a degree of additional cost cutting, as we saw at Baer, to offset NIM headwinds and Swiss franc appreciation. The key catalyst for a re-rating would be if CS not only announced extra cost cutting but rebalanced the group to lower capital allocated to the investment bank over time. The stock trades at 0.8x TNAV for MSe ~12% ROTE in 16e.

At UBS, on the other hand, we see a meaningful chance of a higher dividend for 2014e, notwithstanding the headwinds from unresolved litigation, Swiss franc move and low yields. A large uncertainty for UBS remains litigation, but we see progress being made as FX is being addressed at levels below consensus' fears. Our thesis has been “that bid/ask on FX & other litigation would narrow substantially in Q4 2014 and so open the door to greater clarity on divis and capital planning into 2015.” We have SFr0.75bn and SFr1bn in our litigation costs for Q42014e and 2015e respectively. UBS reserved SFr1.7bn in the i-bank for Q3, we deduce from disclosure for FX, although clearly we need to wait until it's finalised. We continue to think divis are key to unlocking value and that UBS could have one of the highest dividend yields in the banks sector in 2015/16 as it works through its issues. In part this is driven by a booster as capital tied up in non-core is freed-up (of ~SFr4.6bn), FINMA add-on reversal (currently implied~SFr2.5bn) alongside DTA recognition. We've argued capital will be supported by FINMA add-on being reversed as litigation is settled. Our recent meeting with the CFO also gave us confidence on more cost cutting from rethinking the operating model likely, although this may only offset recent Swiss franc moves in the near term.

We also update our UBS estimates (please see exhibits in the next section) . The stock trades on ~1.3x our TNAV for a ~14% ROTE in 16e. We continue to rate UBS Overweight with a new PT of SFr20, with the biggest risk being litigation.

BT has finalised the £12.5bn acquisition of EE, Britain’s largest mobile network, from Deutsche Telekom and France’s Orange after several weeks of exclusive negotiations.

The British telecoms group will announce the deal as early as Thursday morning, said two people close to the situation, marking the return of the company to the mainstream mobile market for the first time since 2001.

A process of due diligence has been completed with no major issues uncovered, said those close to the talks.

BT has been in exclusive discussions with Deutsche Telekom and Orange since December to acquire EE for £12.5bn.

Analysts do not expect any significant regulatory hurdles because BT’s fixed network — which carries mobile traffic for rivals — is already closely governed by Ofcom, the telecoms watchdog.

Rivals might argue that wholesale prices for access to BT’s fibre network should be monitored more closely and potentially reduced.

A Moody’s analyst note has said it expects the deal to bring cost savings and efficiencies in areas such as procurement, distribution, marketing, head offices and call centres. –

EE has the largest subscriber base in the UK at 24m, the largest holding of spectrum used for mobile services and the most developed 4G network in the country. The deal will allow BT to sell bundles of mobile and home phone, broadband and television to customers.

The acquisition will be financed with about £6.3bn in shares given to Deutsche Telekom and Orange in the combined group, and about £6.2bn to be paid in cash, which will be raised through debt and an equity issuance.

BT is planning to raise £1bn-£2bn in an equity placing with shareholders, said a person familiar with the