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Samsung and Apple, the world's top two phone manufacturers are locked in a court battle that's threatening their supplier-client relationship.  (Source: Into Mobile/AP)

Ultimately Samsung's device business -- whose revenue grew 500 percent last quarter -- is more valuable to it then its fast-growing (but not THAT fast growing) supplier business.
Analysts suggests Apple's customers may hardly notice the difference, even if they're paying more

Even as Samsung Electronics Comp., Ltd.'s (SEO 005930) legal woes [1][2][3][4][5] regarding Apple, Inc.'s (AAPL) campaign of lawsuits and trade court complaints continue, it faces a perhaps more serious crisis in the form of an eroding supply relationship with its legal rival.  Samsung currently "has its cake and eats it too", enjoying a position in that it's the world's second largest phone manufacturer, and at the same time drawing a great deal of revenue from the world's largest phone manufacturer, Apple, whom it supplies NAND flash memory.  But that comfortable situation for Samsung could be coming to an end.

I. Apple Expected to Dump Samsung

Nho Geun-chang, an analyst at HMC Investment Securities tells Reuters in an interview, "Samsung's tablet business will be most affected and its chip business will also take a hit as Apple moves to diversify away from Samsung to the likes of Toshiba. For Samsung, (the) biggest concern is reduced order from Apple. Without Apple's big backing, it would be difficult for Samsung to boost its chip market share sharply."

Mr. Geun-chang suggests that while the chips from rival suppliers will likely be slightly inferior in reliability, power performance, and other metrics, and may increase device costs, Apple's unquestioningly loyal customer will hardly notice the difference.  He comments, "Apple is leveraging the fact that it's got alternative suppliers. They may offer inferior or more expensive components but it's something consumers barely notice and something Apple can successfully use to pressure Samsung."

II. Device Business is More Lucrative for Samsung

The battle against Apple may prove painful, given the slow death of its lucrative supply contract, but it's one that Samsung must commit to, according to Mr. Geun-Chang.

Samsung's supplier contracts to Apple in calendar Q1 2011 constituted 5.8 percent of its revenue, up from 4 percent ($5.7B USD) a year prior.  But its devices business is too valuable to sacrifice even for the lucrative supply contract -- device sales will soon constitute over half of the company's revenue, according to analysts.  States Mr. Geun-chang, "[T]aking passive steps for fear of losing its biggest customer will slow down strong growth momentum at its telecoms business, which Samsung doesn't want to see as the business is set to become the biggest earnings generator this year and make up for weakening chip profits. It'll be a costly battle for Samsung."

Some say the lawsuit campaign could hurt Apple more than Samsung.  Aside from possible quality and price issues with a supplier switch, Apple may be creating the perception that Samsung is the best of the competition.  States Choi Do-youn, an analyst at LIG Investment & Securities, "These legal battles are raising perception among consumers that Samsung is the only one capable of competing against Apple."

There's some truth in that belief.  Samsung is by far the top Android phone manufacturer and holds a huge lead in tablet sales over other Android manufacturers.  In the tablet sector it's the only company to be currently giving serious chase to Apple, selling 7.5 million tablets in H1 2011, compared with Apple's 14 million.

On the smart phone side Samsung's diversified approach is paying even greater dividends.  The company's broad lineup, which includes the best-selling Galaxy family of smart phones
, posted 500 percent growth in Q2 2011, compared to an impressive, but lesser 142 percent growth by Apple.  Some expect Samsung to dethrone Apple's brief reign atop global smart phone sales (by manufacturer) when the Q3 2011 numbers come out next month.

Samsung and Apple are now suing each other in at least 23 lawsuits or trade complaints in 10 different countries.  One key trade complaint will be Apple's request to ban sales of Samsung's tablets and smart phones, via an import ban, which the U.S. International Trade Commission
 will consider [docket record] next month.  In anticipation of that hearing, Verizon Communications, Inc. (VZ) has filed a friend of the court brief on behalf of Samsung, saying an import ban would create economic harm to U.S. customers and lead to job loss. 

Some are holding out hope that the pair will settle their dispute outside court, similar to
 Apple and Finland's Nokia Oyj. (HEL:NOK1V).  Comments HSBC analyst Daniel Kim, "The most likely scenario is an out-of-court settlement, after a long-drawn IP battle... As in the case of the Nokia-Apple dispute, this issue too is likely to be settled out of the court, after a long drawn legal dispute."

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Won't matter
By Motoman on 9/27/2011 10:33:31 AM , Rating: 4
Clearly, the traditional qualities one validates when making a purchase don't apply to Apple. Quality, value, features, reliability, etc. simply don't matter...Apple doesn't compete on any of those points. They compete on the fact that they're Apple.

Ergo, it doesn't matter the slightest bit what chips are in an Apple iToy. Won't matter whether or not the product becomes even less reliable. Won't matter one tiny bit.

RE: Won't matter
By elderwilson on 9/27/2011 10:53:44 AM , Rating: 5
This reminds me a bit of what happened to the American car industry. I remember as a kid people getting defensive if one pointed out a flaw from a particular manufacturer. This moronic brand loyalty contributed to the downfall in auto quality.

The same thing is happening with Apple. The Apple-zombies will devour ianything.

RE: Won't matter
By Pirks on 9/27/11, Rating: 0
RE: Won't matter
By Miggleness on 9/27/11, Rating: -1
RE: Won't matter
By Reclaimer77 on 9/27/2011 12:35:19 PM , Rating: 2
I'll definitely miss having an AMOLED display.

What could Apple possibly offer you that would be worth giving up that gorgeous display?

RE: Won't matter
By Hieyeck on 9/28/2011 10:31:27 AM , Rating: 2
That precious white logo, which is getting covered up by a $5 Made-in-China case anyways. Don't wanna scratch that logo and risk Lord Jobs' wrath, y'know.

RE: Won't matter
By Kiffberet on 9/29/2011 7:42:20 AM , Rating: 2
People b1tch and whine about apple all the time on this site, but I don't know anyone who can't wait to get rid of their iPhone.
And i'm talking about IT professionals. We haven't got the time or inclination to spend hours tweaking our phones, we do that all day long on company computer systems. We just want the b@stard to work, update easily and be great to use.

A few people have changed from iphone 3GS to HTC or Samsung galaxy S, and are now waiting to revert back to apple when the iphone 5 comes out.

Also, I dropped my iphone in the toilet (don't ask), and when i went to the local apple store to get a damage assessment report for my insurance company, Apple just swapped the phone then and there, free of charge. Brand new iphone 4 within 5 minutes.
You won't get that kind of customer service anywhere!!

RE: Won't matter
By jimbojimbo on 9/27/2011 3:21:48 PM , Rating: 2
but I know I will enjoy many things which this phone doesn't have
Do you really mean "I know I will enjoy many things which I didn't know this phone already did have"?

RE: Won't matter
By Manch on 9/27/2011 5:52:56 PM , Rating: 2
Another sheeple born every minute!

RE: Won't matter
By Booster on 9/27/2011 3:59:20 PM , Rating: 3
'Better products', eh? In what way? Take an iPhone, for example, from a user's standpoint. Sure it has an impression of a higher-grade device than your typical Android offering, but it's just that - an impression. First of all, iTunes. Then - proprietary cabling, inability to pretty much do anything until you jailbreak, hack or whatever those Apple guys are so occupied with.

Yes, iOS may be more stable and more polished than Android, but in no way it's a better product for the buyer. Granted I only had an iPhone 3GS, but the short time I had was enough for me to not want to deal with Apple ever again. iTunes was a huge PITA, I could not send photos over Bluetooth quickly like I am used to, had all kinds of trouble with media and to add insult to injury I had to check the damn thing like every hour or so. And boy did I have to to that manually by pressing a button. It was driving me insane. When I'm at work or at home I usually don't carry the handset everywhere I go, it just lies on the table. One time my boss sent me an urgent message, but I wasn't there to hear it. Guess when I found out about it? Too late, obviously, since the boss was pissed. Android devised have a message LED and there's that Easy Reminder free (!) app, so no trouble being notified of missed calls and messages. But the iPhone has no LEDs, the damn thing just stays black and silent. How is that a better product? Granted in iOS 5 they have finally (!) thought of including missed events notifications, but in a usual moronic way. Notification interval is fixed at 2 minutes whereas I prefer 5. Then - the new iPhone won't notify you more than 10 times. What if I spend more than 20 minutes on the crapper, for example? Am I doomed? I sure am. Just as I'm sure the new iPhone won't have no message LED. No, thanks, I'll pass.

RE: Won't matter
By Booster on 9/27/2011 4:24:33 PM , Rating: 2
That being sad I'm very happy with my humble SE Neo which has not only a proper message LED, but also a camera button. You Apple fans just don't get how much a difference these little things make in a phone.

RE: Won't matter
By Pirks on 9/27/11, Rating: -1
RE: Won't matter
By Booster on 9/27/2011 5:24:36 PM , Rating: 2
Excuse me, but an iPhone by far isn't 'simple to use', in fact it's excruciating. If Apple is so good, why can't it figure out a simple fact that modern screens, when they are off, don't display any information and just stay black? You'd have to press a button in the very least to find out what's going on with your device. Isn't it just moronic that they ignore that? How do you know if you've got mail, a call, whatever? This is simply unusable at the lowest possible level, I'm not talking about satisfying nerd needs or the like.

RE: Won't matter
By Pirks on 9/27/11, Rating: -1
RE: Won't matter
By Natch on 9/28/2011 9:37:05 AM , Rating: 2
Or, perhaps, Apple has figured out that the "masses" you speak of are just too DUMB to know what they want, and only wish to be told what they want......which Apple has happily done, with phenomenal success.

Lemmings pretty much had the same fate with the Pied Piper, if I recall....

RE: Won't matter
By seamonkey79 on 9/28/2011 10:24:26 AM , Rating: 2
Rats. Lemmings just willingly jump off cliffs, rats at least had to be piped to.

RE: Won't matter
By Pirks on 9/28/2011 10:36:53 AM , Rating: 1
Apple has figured out that the "masses" you speak of are just too DUMB to know what they want, and only wish to be told what they want......which Apple has happily done, with phenomenal success
But the other companies were too dumb and too slow to tell the masses what they want. Only Apple was smart and fast enough to do that. Hence the Apple success - because Apple is smarter and faster than the others. Got it?

RE: Won't matter
By Manch on 9/27/2011 5:58:01 PM , Rating: 2
Universal? Theres nothing universal about a closed OS, locked down system with proprietary cables, no flash, with only one current model to choose from.

RE: Won't matter
By Fritzr on 9/28/2011 2:09:29 PM , Rating: 2
Depending on provider there are 2 models to choose from. The 3GS is still available from some providers :P

They will have to kill the 3GS when the 5 comes out ... having 3 models to choose from may be to confusing for Apple customers

RE: Won't matter
By ICBM on 9/27/11, Rating: 0
RE: Won't matter
By croc on 9/27/2011 7:10:23 PM , Rating: 3
Better products? Not really, better marketed products, definitely. The original iPhone, (Cisco) was clumsy to use, required a fixed line to operate, and very expensive as a system. But, as a system, it saved some companies megabucks in call costs. They just couldn't market it properly, their core router business didn't seem to apply to a PABX system, so people just didn't 'get it'. So along comes Apple, offers Cisco an undisclosed sum of money for the trademark (after already using it for a month or two, a fact that Cisco objected to...) and the rest is history. Except that, in Cisco's implementation the 'i' was for 'internet' (as in, voice over internet protocol). In Apple's marketing the 'i' was for 'me'. Look at 'me'. Am 'I' not cool? "If you don't have an iPhone, well, you don't have an iPhone." That kind of smug 'me-ness'. It took off, perhaps because most people felt powerless to control their lives and some smug 'me-ness' helped compensate... Good question for a good Psychiatrist...

RE: Won't matter
By someguy123 on 9/28/2011 2:00:43 AM , Rating: 1
Except they've only improved outwardly since their days of obscurity. The only exceptions I can think of are the ipod and being the first to push an online app store for mobile. The ipad isn't bad either performance wise.

For everything else they've been stagnant. In the case of their PCs, their shift to intel meant that they lost what speed benefits they could claim with PPC over the competition. Seems like this was done due to power and heat reasons, so going intel allowed them to "slim down" their lines further (again, aesthetic improvements).

In terms of internal quality their products haven't improved. What has improved are their case designs and advertising campaigns.

RE: Won't matter
By DFranch on 9/28/2011 9:17:21 AM , Rating: 3
Switching their computers to Intel processors allowed them to dual boot Windows, because Apple knew people need to get work done too, and you need Windows for that.

RE: Won't matter
By Hieyeck on 9/28/2011 10:37:46 AM , Rating: 2
You also need Windows to play games.

The only thing left is internet, and 95% of it is porn. Therefore, 95% of all MacOSX users are only using it for porn.


RE: Won't matter
By Paj on 9/28/2011 7:24:20 AM , Rating: 2
You clearly know very little about marketing and advertising if its your assertion that superior products is all it takes to build a brand.

Ever heard of betamax?

RE: Won't matter
By Pirks on 9/28/11, Rating: 0
RE: Won't matter
By nocturne_81 on 9/29/2011 9:21:33 AM , Rating: 1
You kids are still too young to remember Apple's real golden age in the 80s.. Sure, the tech market is so much incredibly larger at this point, but in terms of market share they'll never even get close to what they once were..

Your typical Apple user is just like my very best and childhood friend. Now, he isn't all too bright, and he doesn't understand tech stuff at all. Hell -- he doesn't own a computer, and could barely figure one out if he did. This same guy also drives a car he can't afford, spends thousands on new glitzy watches, listens to that horrible whiny wall-of-sound indie music, and wears all those ridiculous jersey-style glittery tattoo-esque shirts that only complete ***holes tend to wear.. Ya, I know.. You think you know the same guy, right..?

This same guy also always lusted after the iPhone, since the moment it was released. He doesn't know why he wants it, doesn't really have any use for it -- but he just neeeeeds to have one, to finally fit in with that trendy crowd he's always tried to identify with.

So finally, about 6 months back, he got his iPhone. Since then.. Well, I saw him last week, stole his phone for a minute to see what he's done with it. Now, I wasn't expecting to find it jailbroken with a slick third-party theme installed, but was quite surprised to find only a few various free apps (equating to the complexity of a fart app) and Angry Birds. Four hundred bucks, and he got a phone that he does everything he did on his previous one... but he gets to pull it out wherever he goes, so he can feel special too..

RE: Won't matter
By YashBudini on 9/27/2011 3:51:46 PM , Rating: 2
This moronic brand loyalty contributed to the downfall in auto quality.

This goes way beyond autos. It's happens with virtually every decision made in life. Politics, religion, TVs, anything a person has chosen and made an investment in, time or money wise.

IE People hate to admit when they are wrong, especially when the mistake is out of their own ignorance. Apple really succeeds here because being technically ignorant is what the majority of the population is.

RE: Won't matter
By lelias2k on 9/27/11, Rating: -1
RE: Won't matter
By TakinYourPoints on 9/27/2011 10:23:39 PM , Rating: 2
Wow, a well reasoned, balanced, and thoughtful post.

Yup, get ready for the downvotes

RE: Won't matter
By someguy123 on 9/28/2011 2:04:47 AM , Rating: 2
Yes, of course, attacking people with baseless claims, while making anecdotal claims in light of recent issues with screens going yellow and macbooks overheating sure is balanced and reasonable.

The only thing reasonable in that post is that simplified interfaces have their place.

RE: Won't matter
By michael2k on 9/27/2011 8:46:05 PM , Rating: 2
You're saying Apple has somehow conned hundreds of millions of people into valuing the Apple brand over quality, features, value, reliability, etc?

That somehow having the longest supported smartphone (measured in multiple years as opposed to quarters or months) isn't a measure of value?

Or that having some of the highest performing chips in a tablet, or some of the longest battery life in a phone or tablet, or some of the best apps, or highest resolutions, etc, aren't value or quality or features?

That somehow people are paying more, on average, for less?

RE: Won't matter
By TakinYourPoints on 9/27/2011 10:20:59 PM , Rating: 2
Motoman thinks he's Rowdy Roddy Piper from "They Live", and that Apple are the aliens and that only he has the magic sunglasses that lets him see them for the evil corporate bastards that they are.

RE: Won't matter
By DFranch on 9/28/2011 9:21:15 AM , Rating: 2
Wow how many people got that movie reference? I did sadly, but really how many?

How will Apple sell this?
By AwesomeDuck on 9/27/2011 10:18:20 AM , Rating: 3
I wonder how Apple will play this one in terms of advertising. Or if they'll even acknowledge it. One thing they do deserve credit for is their advertising department. I will enjoy a hearty chuckle when this finally happens.

RE: How will Apple sell this?
By Omega215D on 9/27/2011 10:32:57 AM , Rating: 4
"we'll charge you more for less because it's an iPhone. If you don't have an iPhone... well, you don't have an iPhone"

I'm sure it'll still be eaten up by millions of Apple conscious morons out there.

RE: How will Apple sell this?
By kittypuncher on 9/27/2011 10:46:26 AM , Rating: 5
They won't have to sell it. Technically, as far as their marketing is concerned, their chips are "Apple" chips. Anyone with two brain cells to rub together knows they're Samsung. But Apple's marketing and mantra is "we use Apple technology and Apple chips".
As long as Toshiba (or who ever the replacement is) allows them to brand the chips as Apple, they won't have to do a d@mn thing. All technical shortcomings will be a "feature", or simply ignored.
The laugh would be if Toshiba said "yea, we'll sell you crap chips for a whole lot of money, but they must have the Toshiba name on them; no apple markings".

RE: How will Apple sell this?
By Mitch101 on 9/27/11, Rating: 0
RE: How will Apple sell this?
By messyunkempt on 9/27/2011 12:33:04 PM , Rating: 3
Much as im all up for a bit of apple bashing, it does state quite clearly in the linked article that apple products arent manufactured in that location.

RE: How will Apple sell this?
By Mitch101 on 9/27/2011 1:21:24 PM , Rating: 3
Humor Button is available for Apple users.

RE: How will Apple sell this?
By Manch on 9/27/2011 6:09:18 PM , Rating: 2
Back when Apple was fighting against the clones, they released a new version of there software that would only work with there "special IC which cost a couple hundred dollars.

There was nothing special about it. It was a cheap less than $20 part you could get at radio shack. They literally wiped the manufacturers stamp off, bent the pins around 180 degrees effectively reordering the pin layout and relabeled them and called them a brand new chip. It didnt take long for people to figure out all they had to do was buy the radio shack version and flip it lol. The designers of the NEC clone (nicknamed the medfly) figured it out and launched one of the most successful clones ever.

So now that Apple is robbing, suing and everything else, like they did before, I think it's going to bite them in the @$$ just like before.

And no I dont think theyb acctually do that to the chips in their next device, but I wouldnt put it passed them trying to pass off the systems as the same. They arent the only company that has ever tried that crap and wont be the last.

RE: How will Apple sell this?
By mircea on 9/27/2011 3:47:32 PM , Rating: 2
1 week after iPhone 5 is out and 2 million people moved or bought again all their apps they had on iPhone 4, an announcement will come praising their new product:

"We like to inform our customers that in 2 months time they are able to upgrade to the new revolutionary iPhone 5 SB (strictly bull).
It will offer new connectivity enhancements (other chips on the board) with chips that allow for real-time processing and analysis (lag of the slower chips) if the user is 'Doing it right' whatever he is is doing on the device.
For these enhancements and (maybe)other all you need to do is buy the new iPhone 5 SB at just 125% of the price of our old iPhone 5."

RE: How will Apple sell this?
By bug77 on 9/27/11, Rating: 0
RE: How will Apple sell this?
By MrBlastman on 9/27/2011 12:36:33 PM , Rating: 5
A weak and feeble Steve stood in front of the crowd. His weathered look was partially offset by his sharp, crisp turtleneck and rugged jeans. He lifted the mic up to his lips less gingerly than usual and finally spoke, "Look at these chips. Look at their form."

Steve paused, finally his lips resumed pursing in a measured but rhythmic manner, "Look at how they are shaped. Look at the curves, see how they flow from one circuit to the next?"

Steve then grinned, "They even fit perfectly into the phone. It is a perfect match, like a caterpillar and a cocoon."

The crowd hung on the edge of their seats.

"You're going to like these new chips. Our phone was made for them," Steve said, grinning. He turned to walk off the stage but then stopped and slowly turned his gaze back to the audience.

"Oh, and one last thing," Steve said as the crowd let out a shriek of anticipation, "They are even going to be available in white!"

*the crowd gasps*

That's all it will take. No excuses. Just pure, unfiltered Jobsian hype. A little white paint wouldn't hurt, either.

RE: How will Apple sell this?
By Nakecat on 9/27/2011 11:34:41 AM , Rating: 2
I think apple replaces their advertising department with lawyers. Free Press / Advertising everyday just by suing.

RE: How will Apple sell this?
By bruce24 on 9/28/2011 1:01:42 AM , Rating: 2
Sell what? That some analysts said:

"They may offer inferior or more expensive components but it's something consumers barely notice and something Apple can successfully use to pressure Samsung."

He does't even say will. For all we or this guy knows, the componets could be more reliable.

A classic case of
By phantom505 on 9/27/2011 10:19:41 AM , Rating: 2
cut the nose off to spite the face. Or perhaps it was a preemptive strike.

Personally I think Samsung should have dumped Apple. In fact, they have been planning on it from the looks of things.

RE: A classic case of
By retrospooty on 9/27/2011 10:23:04 AM , Rating: 5
"Personally I think Samsung should have dumped Apple. In fact, they have been planning on it from the looks of things. "

Considering how ego-driven, childish, and vain Apple can be, I agree. It's funny to me, Apple seems like a spited child... "Fine, then I'm not your friend anymore" LOL

RE: A classic case of
By Mitch101 on 9/27/2011 11:02:00 AM , Rating: 2
Apple seems to be running out of companies they can tick off. How long will the relationship with Toshiba last?

RE: A classic case of
By seamonkey79 on 9/27/2011 9:42:27 PM , Rating: 2
Do they realize that Toshiba also makes Android based tablets in the same form as Samsung does? This, even more than before, is stinking like a "I can't believe you're doing this well when you're not me!"

So they're going to leave one competitor to find another competitor that will cost them more, just so they can leave the competitor that is about to overtake them.

Smashing form, go Apple.

RE: A classic case of
By shiftypy on 9/29/2011 7:54:29 AM , Rating: 2
So Samsung loses a NAND chip client... ok
At the same time getting FREE promotion as being producer of great NAND memory
And at the same time world is announced that from now on Apple will use inferior memory in its products

Apple is awesome

RE: A classic case of
By BZDTemp on 9/27/2011 11:47:20 AM , Rating: 2
Most likely Samsung are bound by contracts just as it is likely Apple are bound to Samsung.

If so the delivery of Samsung parts will continue until the contract allows one of the companies to end it since the alternative will likely cost big money.

RE: A classic case of
By Aikouka on 9/27/2011 12:10:54 PM , Rating: 2
I don't think it makes sense for Samsung Electronic's semiconductor business area to drop Apple's business simply because Apple is having legal spats with Samsung Electronic's telecommunication network business area. In my (albeit somewhat limited) experience, business areas tend to operate fairly autonomously from each other.

So why would the semiconductor area want to drop sales and look worse off? :P

RE: A classic case of
By XZerg on 9/27/2011 12:52:34 PM , Rating: 1
exactly... Why would I hurt my own sales for some bullshit one of my prime customers is doing? In the end it is the money that matters in business world.

RE: A classic case of
By bh192012 on 9/27/2011 1:22:35 PM , Rating: 2
You do know that Apple is a competitor to their higher revenue handset business?

By forcing their #1 competitor in their most profitable sector into a bad spot, they'll make back that 5% and more. Then their semi team will be fueling Samsung's fire and not Apple's.

Not a particularly smart move for apple.
By BigEdMan on 9/27/2011 10:56:42 AM , Rating: 3
Not a particularly smart move for apple. Sure nobody wants to put money into the warchest of those who are suing you. But in this case it's probably a matter of keeping friends supply chain close and your enemies supply chain closer. Samsung will simply find somebody else who wishes to use these chips. Bummer more competition for apple.

By danjw1 on 9/27/2011 11:43:24 AM , Rating: 5
"suing you"? Maybe you aren't staying up on recent events, but Apple sued Samsung first. Counter suits are de rigueur, when someone sues you. Apple can't have their cake and eat it too. Apple is anything but a victim here.

Is there really any proof to the claim?
By YashBudini on 9/27/2011 3:56:45 PM , Rating: 2
That non-Samsung chips are inferior? Has this been studied and documented or are people assuming they are better? There's also the possibility that even the "inferior" chips will far outlast the device's useful life in term of being obsolete.

RE: Is there really any proof to the claim?
By Omega215D on 9/28/2011 6:05:54 AM , Rating: 2
Samsung's Exynos SOC is one of the most powerful mobile chips on the market. Not only that but Samsung's production capacity is rather large, maybe even unrivaled.

RE: Is there really any proof to the claim?
By YashBudini on 9/28/2011 11:17:23 AM , Rating: 2
Sorry, nothing you said addresses the question.

By messele on 10/1/2011 7:53:02 AM , Rating: 2
No but then why answer a perfectly reasonable question when you can further enhance Jason Micks' reputation as a sensationalist, lazy crap-peddling cretin.

Samsung's Exynos SOC is one of the most powerful mobile chips on the market.

Quite a statement, so you've already conceded that Samsung are not the best (something that Jason Mick clearly would dispute) and it's conceivable that if (IF) Apple do look elsewhere for supply they may find a superior component?

The idiocy in these Apple-bashing posts is simply staggering.

By NES on 9/27/2011 10:18:42 AM , Rating: 5
Apple may cut off its nose to spite its face.

There. Fixed it.

Holiday Season shortfalls
By mitchebk on 9/27/2011 12:33:01 PM , Rating: 1
Depending on when Samsung's contract expires, I could see a situation where Sammy could "slow-roll" production of vital components to Apple inducing a "back-order" scenario for Apple. Then Sammy takes advantage of the "gap" by providing their own tablet/smartphone equivalent.

Interesting to see how this plays out.

RE: Holiday Season shortfalls
By silverblue on 9/27/2011 12:58:33 PM , Rating: 2
I fear that this will have little effect. Apple were stocking up on parts well before they decided to surprise Samsung with any suits; they had a plan and it was set in motion long beforehand. It's entirely possible that, by purchasing so much, they have created a buffer with which to transfer over to other suppliers with a minimum of fuss.

RE: Holiday Season shortfalls
By Solandri on 9/27/2011 5:57:21 PM , Rating: 2
Or it could end up like the iPad2, where they dumped sub-par quality ancient cameras from their iPod Touch line into their latest gen tablet in order to clear inventory.

All this over NAND Flash
By HPSwami on 9/27/2011 2:00:12 PM , Rating: 2
I don't see how Apple takes a hit switching vendors for NAND Flash. Micron and others will be glad to absorb this commodity business. If this were impacting processor selection, this would be a bigger story. What this implies to me is that device manufacturers who ramp into system manufacturers need to choose carefully who they want to compete with. I'm not a big Apple fan, but if Samsung's going to enter markets and compete with Apple, Dell, HP, etc... should they really be surprised by this sort of result concerning commodity parts?

RE: All this over NAND Flash
By justjc on 9/27/2011 7:54:43 PM , Rating: 2
According to news, at DigiTimes, Apple have found alternative suppliers for more than just the memory.

- The Apple branded processor orders have gone to TSMC, from Samsung, raising the prices on their 28nm wafers around 20% for all other costumers(among them AMD and Nvidia).

- The Flash memory and DRAM now comes from Toshiba and Elpida Memory, instead of Samsung.

- For touch screens they currently have both TPK, Wintek and Chimei Innolux as suppliers replacing Samsung.

I wonder if this will open up for real competition in the Smartphone and Tablet area, or if Samsung will keep their major capacity for producing the key parts to themselves. After all Samsung have built up their capacity to suit Apples needs.

The result is that Samsung:
- Owns around 40% of the worlds production capacity of touch screens.
- Was able to hold 41.6% of the NAND and DRAM market in Q2 2011.
- Is the second largest semiconductor producer, only Intel beats them.

I hope they open up their facilities and the result is that the rest of the competitors in the Smartphone/Tablet area dares to have success, something that so far would mean either long waiting lists or the need to adjust the platform to allow for interchangeable hardware.

Samsung vs. Toshiba NAND
By KPOM1 on 9/27/2011 11:11:07 AM , Rating: 3
There's a huge debate among Mac die-hards over on MacRumors over Apple's use of Samsung and Toshiba SSDs on MacBook Airs. The Samsung drives are faster in benchmarks. Apple appears to use the two interchangeably on its production line.

This appears no different. We'll just see more Toshiba and less Samsung. Techies will notice if they run benchmarks, but average consumers likely won't. Few people pay attention to the chips that are inside a device, particularly a phone. As long as the price is the same, animations aren't slower, and battery life isn't noticeably affected, this is a non-event from the consumer standpoint.

It actually kinda makes sense..
By karndog on 9/27/2011 12:22:15 PM , Rating: 2
I'm strictly a PC and Android man. I don't really like Apple and would never buy a Mac or Iphone unless it actually was the best around and worth the cost. But i agree it isn't in Apple's best interests to keep giving boatloads of money to their biggest competitor by far. Every dollar they give to Samsung is used against them in R&D to directly compete against them on their next gen products, which means Apple has to spend more money to try and stay in front (not that they are.)

Yes the components will probably be more expensive and possibly lower quality than what Samsung can currently offer, but over time im sure they will fall into line with the current costs Samsung are charging, with the added benefit of not lining their enemy's pockets. I'm sure they have alot of smart people making these decisions and are thinking mid-long term.

Just my humble opinion. I don't really like Apple at all, and the only product i've ever bought of theirs is an Ipod Nano (who didn't?!)

Monkey with a sword...
By garagetinkerer on 9/27/2011 2:22:40 PM , Rating: 2
Who does this hurt more... obviously Apple and more so their foolhardy diehard customers. I wouldn't think for one second that Apple would absorb any of the cost. Also, i wonder how long before Apple sues the other company, for Toshiba also has android powered tablets. It may not be out of reason to think that Toshiba may deny Apple access to its foundry. I think Toshiba has more reasons to side with Android alliance than Apple.

I wonder how far is the day when iDildo and iFlesh are released by Apple for their customer base. Wouldn't surprise me one bit if they sold in their millions.

Apple Cust: What? You have iDildo/ iFlesh on sale?
Sales Guy: Yes! Sex and forbidden apple! Excellent combo
Apple Cust: I jizzed me pants!

Then sadly, it wouldn't just be a metaphor when we say, "Apple f@cks its customers!

By CGJ on 9/27/2011 2:57:17 PM , Rating: 2
Apple have signed a deal with TSMC for the A6 and A7 chips, which are a lot better.

Apple A5 (Samsung) 45nm.
Apple A6 (TSMC), most likely 28nm.

TSMC charge more for their chips, but they are a hell of a lot better. Not only that, but TSMC don't compete in the smartphone market!

you can feed 'em anything
By Cygus on 9/27/2011 3:10:54 PM , Rating: 2
"Apple's unquestioningly loyal customers" (READ: Idiots) "will hardly notice the difference."

Bye Bye Samsung
By ChipDude on 9/28/2011 12:13:43 AM , Rating: 2
Always the challenge of trying to be vertical integrated and horizontal player too.

FLASH lots of players. Yes Samsung is biggest but lots of other fish in that ocean. Samsung losing the biggest customer is bad news for future fab and R&D

Foundry: Ditto, losing big customer means less revenue stream and less amortization of R&D and billion dollar develpment for next gen process and fab.

Apple fanbois care little about what is inside. They drink from the iPhone and iEvent like kids sipping koolaid.

It will be interesting if the biggest chipmaker of all might start thinking about supplying Apple. They got flash and of course the most advanced chipmaking around. All they need to do is get around to offering an ARM core!

By snakeInTheGrass on 9/27/2011 3:55:06 PM , Rating: 1
Samsung "selling 7.5 million tablets in H1 2011, compared with Apple's 14 million."

You mean shipping. Because selling is something else. There are any number of articles out there estimating actual sales, not channel stuffing, and they don't have Samsung anywhere near 7.5 million.

It would also be interesting to see what Samsung's revenue & profits are from Android phones and tablets currently, because saying that almost 1/2 of Samsung's revenue comes from devices doesn't quite tell the whole story.

For Q3 of 2010, Samsung semiconductors were 10.66 trillion won, with 3.42 trillion won in profit. LCD was 8.1 trillion won with 500 billion won profit. Mobile handset sales were 11.1 trillion won, with a profit of 1.13 trillion. So at least at that point, it was a 10% margin on handsets. Assuming they continued along those lines (I didn't see the more recent results sheets, I'm sure they're out there), they need a solid 3x revenue from handsets to overtake profits from semiconductors, meaning that losing Apple as a customer most certainly won't help the bottom line and may hurt more than it appears assuming the margins on those parts are >10%.

Depending on the accounting they're using for those handsets (or tablets in particular), they may be booking them once they're in the channel and not factoring in poor sales so far. It's certainly likely to be a less glamorous picture than Samsung has projected when true sales numbers finally come out. RIM and HP have some stories to tell. (And I do believe the Galaxy S II sales, it's the tablets I (and apparently a lot of others) think are full of it.)

But let's not quibble over details, right?

Clutching at straws
By Tony Swash on 9/27/11, Rating: -1
RE: Clutching at straws
By silverblue on 9/27/2011 12:54:54 PM , Rating: 2
Based on the ridiculous hyperbole of the leading article and the even more juvenile tone of many of the comments it is hard to believe that the topic under discussion is the supply chain of the company with the best track record for supply chain management in the world. By far.

How do you know this? If you make a statement, you've got to back it up with proof. If you're right, it'd be nice to see this verified.

RE: Clutching at straws
By Tony Swash on 9/27/2011 1:29:43 PM , Rating: 2
How do you know this? If you make a statement, you've got to back it up with proof. If you're right, it'd be nice to see this verified.

The web is littered with such evidence. All of 30 seconds in Google found this:

7 June 2010

A report by AMR Research has named Apple as the company with best supply chain practices in the world for the third year running.

AMR praised Apple’s “embedded innovation, networked supply and demand shaping”. It also highlighted the company’s effective use of vertical integration as a strategy, in particular the purchase of chipmaker Intrinsity “acquired by Apple to ‘steal a march’ on competitors looking to enhance the performance of mobile devices”.

In a feature exploring the secret behind Apple’s success, SM found the company’s ability to bring together two sides of the supply chain (digital and physical) efficiently and at increasingly low cost is a central plank to its rise to global dominance.
Kevin O’Marah and Debra Hofman, the authors of the AMR report, noted that responsibility for the supply chain is moving to board level. “Twenty years ago, a typical product company had the supply chain reporting to manufacturing, with responsibility mainly for inbound materials management and outbound shipping.

“New data shows that supply chain reports to manufacturing in only 6 per cent of companies surveyed, while 61 per cent have the head of supply chain reporting directly to the CEO, general manager or president of the business. It seems clear that supply chain has grown up and the business has taken notice.”

The report also noted that there is growing evidence of a link between effective supply chain activities and good financial results.

and this

and this

3 June 2011 | Adam Leach

Apple’s supply chain has been rated the best in the world for the fourth consecutive year.
According to the annual supply chain ranking compiled by research company Gartner (following their acquisition of previous ranking publisher AMR Research), the California-based technology firm scored consistently strongly in each category, but particularly highly in the ‘peer opinion’ category – which fellow supply chain professionals are asked for their views – and ‘Gartner opinion’ category – which takes into account the view of Gartner researchers. The rank is based on a range of factors, including financial performance, inventory and revenue growth, in addition to opinions.

Like I said clutching at straws and then denying they snapped off in your hand. A lot of you sound desperate to me :)

RE: Clutching at straws
By wiz220 on 9/27/2011 2:42:39 PM , Rating: 5

"demand shaping”

What a great marketing term for, "manipulating the idiot masses".

RE: Clutching at straws
By The Insolent One on 9/27/2011 3:53:15 PM , Rating: 2
"Idiot masses"
Of which you and I are part of.

The first and most crucial part to being manipulated is thinking that only "the idiot masses" are.

RE: Clutching at straws
By Pirks on 9/27/2011 4:39:40 PM , Rating: 2
Why do you think the people who are not experts in computers are necessarily idiots?

Maybe they are great English literature or automotive engine experts for instance, and they too think that whoever is not an English literature or an automotive engine expert must be an idiot :)

So, have you ever thought that those people may also consider YOU an idiot, huh?

RE: Clutching at straws
By Tony Swash on 9/27/11, Rating: 0
RE: Clutching at straws
By Reclaimer77 on 9/27/2011 7:02:24 PM , Rating: 3
Thinking like that, dismissing millions of people as idiots, is a defence mechanism.

Millions of people listen to country music. Millions of people don't bathe every day. Millions of people thought Rebecca Black's "Friday" was a good song. Millions of people get fat and die. Millions of people will buy something just because it's shiny and new.

We could go on and on, you see my point. It's not a defense mechanism, it's a value judgment. In this case, a valid one.

RE: Clutching at straws
By snakeInTheGrass on 9/27/2011 8:25:02 PM , Rating: 1
Millions of people get fat and die.

Hahaha - news flash! Everyone dies. Not a value judgement.

RE: Clutching at straws
By Tony Swash on 9/27/11, Rating: 0
RE: Clutching at straws
By Reclaimer77 on 9/27/2011 9:02:34 PM , Rating: 2
Coming from YOU that means next to nothing lol.

By Murst on 9/27/11, Rating: -1
RE: Silly
By ksherman on 9/27/2011 10:52:47 AM , Rating: 1
And there's nothing wrong with ceasing to support (on some level) a top rival in the industry. And you better bet that who ever Apple will source parts from next will be getting a nice infusion of capitol to bring their product up to the level of Samsung's.

RE: Silly
By Murst on 9/27/2011 11:03:03 AM , Rating: 1
Certainly there's no harm in not supporting a rival (actually, that's generally a good idea). But that has nothing to do w/ spite, which this article is suggesting.

A business will never do harm to itself in order to harm another business. That's not how business works (at least not one that is successful).

RE: Silly
By jiffylube1000 on 9/27/2011 6:35:36 PM , Rating: 2
There's nobody else in the industry like Samsung, and nobody out there who they can "bring [up to] the level of Samsung". Toshiba and TSMC are already huge companies; it's not like an order from Apple will suddenly make them an industry leader in CPU or NAND flash technology overnight.

Apple's options for their CPU's are basically TSMC, Texas Instruments, and a few others. Their options for NAND flash are more varied, and include Toshiba whom they are rumoured to be courting, as well as Intel (wouldn't that be interesting) and other flash manufacturers.

However, there is no other competitor out there like Samsung who, top to bottom, make the CPU, RAM, phone and even customized OS (TouchWiz) like Samsung does.

"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs

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