Apple is rumored to have signed a deal with TSMC (Taiwan Semiconductor Manufacturing Co) to manufacture the A5 dual-core processor found in the iPad 2. The deal is said to be a foundry relationship. Apple will use TSMC’s 40-nm process for the A5 and will work with TSMC on a 28-nm process too.

This new deal could spell trouble for Samsung, the manufacturer of the A4 processor found on the original iPad.; Samsung also manufacture the processor for the iPhone 4. It is now "unclear" whether Samsung will play any part in building the A5 chip for Apple in the future.

There are supposedly a number of reasons for this deal with TSMC. Apple considers Samsung a major competitor in the iPad and iPhone channels with their range of Android phones and tablets. On top of that, TSMC has the highest yielding 40-nm process in the foundry world and the most 40-nm capacity. This should enable Apple to ramp up the manufacturing levels of iPad 2’s, to keep up with the expected huge demand.

[EE Times]