Apple is reportedly expanding their foundry ties with Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) for the production of the processors of the iPad 2.

Citing an un-named source, the EE Times today reported that Apple and TSMC had entered into a foundry relationship with TSMC to make the 40 nm A5 dual-core processor on a foundry basis for Apple's iPad 2.

If the rumours are true, the move would be a blow for Samsung, which has been making the A4 processor on a foundry basis for Apple's original iPad. Samsung is also making the processor for the iPhone.

The source added that Apple would use TSMC for its high yielding 40-nm process and its 40-nm capacity. Samsung's products such as the Galaxy smartphone and the Galaxy Tab tablet are also competing with Apple's iPad 2 and iPhone.

TSMC and Apple have not made any comment.