Apple introduced the new A5 chip in its iPad 2 and we know that the iPad and the iPhone are closely related hardware-wise. The just released iOS 4.3 — ahead of the March 11 schedule — also suggests that the upcoming iPhone refresh will pack the new A5 chip from the iPad 2.
Cuppertino is rumored to have signed a deal with Taiwan Semiconductor Manufacturing Co (TSMC) to manufacture the A5 dual-core processor. The previous A4 chip Apple used in its iPhone 4 and iPad was made by Samsung and moving away from the Korean manufacturer might imply that Apple is regarding it as a competition to its iPhone. On the other hand, TSMC is rumored to have the highest manufacturing capacity which could also represent a reason for such a move, Apple expecting high volumes of the next iPhone to be sold.