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Samsung hikes up prices on Apple

The legal battles between Samsung and Apple have reached near legendary proportions. Apple won a major decision against Samsung in U.S. courts where the jury awarded Apple $1 billion in damages. Samsung is appealing that ruling and is even trying to get the case thrown out of court by alleging juror misconduct.

Apple lost a patent infringement suit against Samsung in Europe and was forced to run apology ads in major publications stating that Samsung did not copy the iPad.
Reports are now coming in that Samsung Electronics has recently raised the price it charges for mobile processors to Apple. Samsung supplies the processors for the popular Apple iPad and iPhone.

According to a source claiming to be familiar with negotiations between the companies, Samsung increased the price of processors it provides the Apple by 20%.

"Samsung Electronics recently asked Apple for a significant price raise in (the mobile processor known as) application processor," the person was quoted as saying in the report. "Apple first disapproved it, but finding no replacement supplier, it accepted the (increase.)"

Apple was, understandably, was unhappy with the price hike and initially refused to pay it. However, it came back and agreed to pay the additional costs when no alternative provider could be found.
The source also says that Apple buys all of its application processors from Samsung and purchased an estimated 130 million units last year. The source also estimates that Apple will purchase over 200 million application processors from Samsung this year.
One last tidbit the source noted was that Samsung has a long-term contract to provide the application processors to Apple that runs through 2014. Neither Apple nor Samsung have officially commented.

Source: Market Watch

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Oh! Irony
By amanojaku on 11/12/2012 12:42:47 PM , Rating: 5
Thou art a heartless bitch.

RE: Oh! Irony
By Jeffk464 on 11/12/12, Rating: -1
RE: Oh! Irony
By Brandon Hill on 11/12/2012 12:47:44 PM , Rating: 5
Apple was going to jump ship anyway. Might as well fleece 'em while you can.

RE: Oh! Irony
By HoosierEngineer5 on 11/12/2012 1:52:06 PM , Rating: 5
Apple is going to find out that making chips is harder than it looks - you can't "arrogant" your way through a fab cycle.

This will hurt both comanies greatly (probably Apple more). Better to release each other's gonads now.

RE: Oh! Irony
By RufusM on 11/12/12, Rating: -1
RE: Oh! Irony
By MadMan007 on 11/12/2012 2:10:39 PM , Rating: 3
New 'spaceship' building and campus. New data centers. Not new fabs.

RE: Oh! Irony
By RufusM on 11/12/12, Rating: 0
RE: Oh! Irony
By othercents on 11/12/2012 2:59:32 PM , Rating: 5
Intel sells semiconductors, not computers. Apple sells computers, not semiconductors. There is a big difference and there is probably a breakeven point for the FAB that is well beyond what Apple needs unless they start producing their own memory.

Apple has other options, but I doubt other companies will be as flexible on meeting Apple's needs as Samsung has.

RE: Oh! Irony
By name99 on 11/12/12, Rating: -1
RE: Oh! Irony
By AssBall on 11/12/2012 4:30:51 PM , Rating: 3
For 5 billion maybe you could lose your virginity too. But, much like an aircraft carrier, that has nothing to do with the topic at hand.

If you are going to bother posting, don't forget to wipe the drool froth from your chin first.

RE: Oh! Irony
By Icebain on 11/12/2012 8:35:19 PM , Rating: 2

hate to use wikipedia, but 14 billion is a "top of the line" aircraft carrier. If you're willing to settle for "last years model" then you're a bit closer with the Nimitz class haha

RE: Oh! Irony
By Basilisk on 11/12/2012 9:24:37 PM , Rating: 3
$9B is the cost of a Ford class carrier; your price included the R&D which will be amortized over many (supposedly 10).

That $9B just let's you park it in your driveway. The life-cycle cost of one "Ford" is estimated at $35.6B (2012 USD), so make certain you have the pocket change. (This is LESS than the LCC of a Nimitz class, BTW; reduced LCC was designed into the new Fords.)

If you don't already have a carrier strike group, be prepared to lay out further bux 'cause ya can't take your new toy to the wrong side of town without some hired muscle: "A typical CSG consists of the carrier, three or more destroyers, one or two Aegis guided missile cruisers, two or three guided missile destroyers, up two attack submarines, and a combination ammunition, oiler, and supply ship." Start saving today.

RE: Oh! Irony
By elleehswon on 11/13/2012 8:39:19 AM , Rating: 2
Guys. Chill. No one's buying an Aircraft Carrier. Just....relax.

RE: Oh! Irony
By Captain Awesome on 11/13/2012 9:38:48 AM , Rating: 4
Why don't you go back under your bridge TROLL!

No one likes a Ford class aircraft carrier fanboy. They totally copied the Nimitz class anyway, which is better. If I were a pilot, or a sailor, and they put me on a Ford class carrier, I would go AWOL in the middle of the ocean. I would swim for 7 months until I came to either land, or a Nimitz class carrier.

RE: Oh! Irony
By TheJian on 11/13/2012 2:29:46 AM , Rating: 4
Not quite sure what your point is. IT takes years to build a fab. If everyone decided not to make apple stuff this would kill them for X years. TSMC has no trouble keeping fabs 100% and can't make enough (hence they could laugh off Apple/QCOM's 1Bil bid to own their production). Samsung has many options for filling their fabs now that they will probably 100% produce NV gpu's from 2013 on for a while (denver, boulder too). They would all take up slack for no apple products.

Simple supply and demand. If I can't buy an iphone5/6/ or ipad4/5, I don't wait for their fab for 3-4 years I buy a phone from someone else correct? Nobody loses but apple in this scenario and everyone involved with apple loses a WALMART like person forcing you to give a lot of the profits to them due to pricing power. A lot more friendly deals would be made between the rest of the semi's and oems and profits would be quickly growing for everyone since that money would be spread throughout the semi industry instead of making apple get to 200bil cash over the next 3-4 years from the 100bil the have now. It's a no-brainer for everyone to collude and kill them for years. Is there anyone left who hasn't been sued by them? Intel? I don't think they'd lend a hand either. Just pump out the other 10% of macs for more WINTEL's. They may even see an opportunity in phones/tablets etc for their own gear with no apple taking a lions share of a lot of gear.

For the record, Samsung has invested 13Billion in Austin TX fab with the recent announcement of 5B more matching Intel 4B announcement in 14nm. So in answer to your question, NOT MUCH. ONE FAB in 3-4yrs that you might have problems keeping full if android had free reign for 3-4years. Appstore would suffer by then with no new products to buy apps for too, and thus the whole ecosystem gets weaker.


RE: Oh! Irony
By theapparition on 11/13/2012 4:28:45 PM , Rating: 3
Then it's settled. Apple is building an aircraft carrier.

RE: Oh! Irony
By GreenChile on 11/12/2012 4:34:49 PM , Rating: 5
Intel builds new fabs all the time. A new state of the art fab with the latest process technology is said to cost upwards of $10 billion to build and furnish.

Perhaps you should rethink your 'completely dwarfs' statement.

RE: Oh! Irony
By Samus on 11/12/2012 11:08:30 PM , Rating: 5
I seriously doubt Apple will be getting into the supply and manufacturing business anytime soon.

If it isn't obvious Apple makes their fortune on the backs of other "less privilaged" nations, then I don't know what to tell you. The problem is that S Korea is becoming the next Japan as far as electronics and manufacturing so the price parity is closing.

Apple will eventually move more of their supply chain to China, Taiwan, Thailand, the Phillipenes, etc. I wouldn't be surprised if they begin outsourcing software production to India.

Apple is an entirely imported profit corporation, that is, the majority of their products are composed of imported materials, but the majority of their income in from domestic sales. This is in stark contrast to Intel, an export profit corporation, who produces the majority of its products in the United States, but the majority of their sales and income is from exports.

RE: Oh! Irony
By pixelslave on 11/13/2012 12:04:30 AM , Rating: 3
You know, I still have a hard time understand how a business like Apple affect our trade balance. The iPhone is made in China, and we count it as an import? But reports after reports show that the suppliers and factories only profit tiny portion from the revenue of the iPhone sales. Apple is the company that makes a huge profit from the sales, and it's an American company. Do we count the iPhone sales oversea as export?

RE: Oh! Irony
By Shadowself on 11/12/2012 2:07:54 PM , Rating: 4
Please read the DT article and the source material.

These are about negotiations on the next contract. The current contract runs into 2014.

There is no "fleece 'm while you can".

Apple is already planning on moving the vast majority of their chip production to other companies. Samsung has already stated that it will radically decrease the number of chips sold to Apple starting in the first half of 2013.

Also these are leaks about ongoing negotiations on a contract that won't take effect for well over a year from now. The final contract could be any increase at all (0% to 100% or more). The leak is that one of the parties (likely Samsung) is saying 20%.

Starting in 2014 Apple may pay 20% more for the few chips it does get from Samsung. There's nothing more too it than that.

RE: Oh! Irony
By ClownPuncher on 11/12/2012 2:18:37 PM , Rating: 2
Volume pricing.

RE: Oh! Irony
By TheJian on 11/13/2012 7:46:05 AM , Rating: 2
"The two firms have started to reflect the new supply price recently, the report added, citing the same person."

Kind of sounds like it's happening NOW not some imaginary new contract in 2014.

Got any proof. I read the article before it was even posted here and just read it again. I still don't see anything saying new contract AFTER 2014. It's affecting pricing NOW. They are only obliged to make chips to 2014, but it seems there's no defined price THROUGH 2014. Which clearly is changing TODAY with the (yesterday now...LOL) announcement of Googles Nexus 10.

Hmmm...Coincidence? Chips shift to google's device and take away from Apples. Hmmm, odd they ran out in an hour? I'm thinking the shorting on apple chips happened a few weeks or months back, which is why Apple didn't have enough to last more than an hour. They are NOT that bad at estimating sales. They just had no way to force sammy to give them more when Google probably bought quite a few of exynos5.

Fleece while you can. Until you prove it wrong :) Might want to re-read the "source material" yourself.

This is like the president saying "I said it was a terrorist act in the garden", when he really said "America won't stand for terrorist ACTS", but didn't call the one that just happened a "TERRORIST ACT" as the lame a$$ candy crowley said he did. She of course backtracked less than an hour later, but 60million people saw her tell mitt romney he was wrong and the obama was right. NOPE. Romney was right, president didn't say it. Romney should have corrected that in the first 2 minutes of the 3rd debate to let america know he lied and so did crowley. A few minutes later in that "garden" speech he again blamed the video...LOL. In his UN speech he blamed the video 6 TIMES! LOL. Sorry, you're creating meaning that isn't there, just like the prick in the white house and his little helpers the liberal media :)

Unless you can show some link that DIRECTLY says Apple isn't going to be charged this 20% extra until 2014, you're wrong. This is directly related to a better price no doubt from google to woo production from apple. Sammy has less need for apple's chips now. Google will sell this out in a week and want more. Then again, maybe they shorted apple a ton, so google will have plenty. I've been up all night waiting for it to go on sale at googleplay...ROFL. Dad wants one for xmas, but we'll settle for the u30gt w/32GB/Jellybean if forced as I don't think google will have enough of these. U30GT really does all he needs I just wanted him to get the better one. I can wait out tegra4 10inchers. Hurry the hell up google! I expected to be putting in my credit card# at 12:01 PST...ROFL.

RE: Oh! Irony
By testerguy on 11/14/2012 11:04:59 AM , Rating: 2
You shouldn't be so influenced by what you want to believe.

He was actually bang on. There has been no price hike, according to Samsung.

A Samsung official has reportedly denied claims that the company has raised the price it charges Apple for its iPhone and iPad processors by almost 20 percent. Speaking with Korean newspaper The Hankyoreh, the unnamed official added that prices were agreed upon at the beginning of each year and "aren't changed easily." Monday's report in rival paper Chosun claimed Apple and Samsung have a supply agreement that runs through to 2014, and unless "special cost factors" were involved, unit prices have traditionally stayed level.

RE: Oh! Irony
By danjw1 on 11/12/2012 3:57:41 PM , Rating: 2
Why do you think this is some sort of counter attack at Apple. Maybe it was just a normal course of business price hike. Not every action that a company takes is nefarious. There may well have been a good reason for the price increase, which is why Apple wasn't able to beat the price from other suppliers.

RE: Oh! Irony
By inperfectdarkness on 11/13/2012 3:10:52 AM , Rating: 2
it's going to be funnier than that. i can't wait to see the look on apple's face as it slinks back to samsung with its tail between tis legs after getting pwnd for trying to migrate to its own fabs.

RE: Oh! Irony
By BB33 on 11/12/2012 12:49:50 PM , Rating: 2
They may have an actual valid reason for the price hike but then again it could be they just want to screw with apple lol.
I dont know and dont really care if they shoot themselves in the foot... sucks for them.

RE: Oh! Irony
By SublimeSimplicity on 11/12/2012 1:43:29 PM , Rating: 5
They have a valid reason. Some company keeps suing them for patent infringement, someone has to pay for those judgments.

RE: Oh! Irony
By RufusM on 11/12/2012 2:02:49 PM , Rating: 2
Story 1: Apple wins $1B in patent judgement.

Story 2: Samsung charges Apple $1B more for processors.

RE: Oh! Irony
By inighthawki on 11/12/2012 3:31:14 PM , Rating: 2
That's about what I got out of it too :)

RE: Oh! Irony
By zero2dash on 11/12/12, Rating: 0
RE: Oh! Irony
By HoosierEngineer5 on 11/12/2012 1:54:52 PM , Rating: 2
I don't think nVidia has a fab. Apple needs a state-of-the-art company to work with. Right now, AMD could use a partner - they probably have good relations with Global.

RE: Oh! Irony
By Solandri on 11/12/2012 2:48:02 PM , Rating: 2
That was my thinking too. Apple could buy up AMD without even blinking. AMD's market cap is only 1.4b. Their annual revenue last year was less than Apple's profit last quarter.

RE: Oh! Irony
By Mitch101 on 11/12/2012 6:26:28 PM , Rating: 2
Unfortunately AMD would lose their x86 license if that happened. AMD no longer has FABS. But on the flip side AMD seems to lose money in the X86 war with Intel so maybe cutting off AMD x86 chip war and AMD focusing on Graphics and ARM cpu's they might become a profitable company.

Nah I like AMD chips they keep PC's low priced.

RE: Oh! Irony
By ritualm on 11/12/2012 3:24:58 PM , Rating: 2
Intel is one of the very few chip companies that also runs its own chip foundries. AMD stopped that back in 2009 when it exited the foundry business as part of the new x86 settlement between Sunnyvale and Santa Clara.

Neither AMD nor nVidia has chip foundries for GPUs, that stuff is fabbed by TSMC. Ever heard of the Radeon 5000-series shortages and Fermi problems?

RE: Oh! Irony
By amanojaku on 11/12/2012 12:55:13 PM , Rating: 3
I get that samsung is upset with apple but apple will eventually be able to find another chip maker. Why would you be willing to loose a contract for 200 million chips.
From the article
Apple was, understandably, was unhappy with the price hike and initially refused to pay it. However, it came back and agreed to pay the additional costs when no alternative provider could be found.
Consider that Apple was already dumping Samsung. For example, LG displays that turn out to be inferior to Samsung's. Now it's looking for alternative CPU manufacturers, and can't find any.

Someone on this site once said Apple doesn't need Samsung, but the facts appear to contradict that statement. That's what you get for being just an integrator.

RE: Oh! Irony
By Brandon Hill on 11/12/2012 1:00:50 PM , Rating: 2
From what I gather, Apple wants to and WILL leave Samsung. But it can't just drop them overnight or it would disrupt their production (obviously).

So Apple will begrudgingly stay with Samsung until it can secure enough manufacturing capacity from other fabs to supply enough chips for the iPhone, iPad, and Apple TV.

RE: Oh! Irony
By MadMan007 on 11/12/2012 12:59:26 PM , Rating: 2
Foundry capacity is tight, especially for such large orders. Designing a chip that can be made on good processes at multiple foundries isn't easy, if it's even possible (chips are usually optimized for a certain process.) The only choice Apple has is to look for other foundries for their next chip design rather than trying to move a design to another foundry, but they're competing with all the other fabless companies too.

RE: Oh! Irony
By 440sixpack on 11/12/2012 1:19:51 PM , Rating: 1
Maybe they'll just use that $100 billion cash to build their own foundry. :-)

RE: Oh! Irony
By KITH on 11/12/2012 1:28:41 PM , Rating: 2
Yeah, $100 billion and a little bit of that apple magic and they can have a fab built overnight.

RE: Oh! Irony
By NellyFromMA on 11/12/2012 12:56:41 PM , Rating: 1
Boom! I get a decent amount of enjoyment knowing that Apple didn't prepare for this or even see this coming seeing as how they both relentlessly pursued attacking Samsung on multiple legal fronts, but also because it shows a chink in the armor of an otherwise impenetrable dominance Apple maintains on various supply chains.

Too funny that Apple tried to find an alternative but ultimately had to capitulate. I wonder if Samsung could have faced any types of penalties if it say wanted to price gouge by 30 or 40%?

I assume they would not have been able to, but just wondering if 20% was the sweet spot because of regulatory reasons or just based on market realities.

RE: Oh! Irony
By frobizzle on 11/12/2012 1:08:44 PM , Rating: 4
What does it matter? Apple will simply pass the additional cost on to the consumer and the drones that buy Apple no matter what, will happily pay the additional price for the joy of having an Apple product.

RE: Oh! Irony
By Mint on 11/12/2012 1:21:19 PM , Rating: 2
I seriously doubt that Apple will risk alienating customers by raising prices (or, alternatively, that they would have reduced it with a cheaper chip). This is coming straight out of Apple's fat margins.

RE: Oh! Irony
By NellyFromMA on 11/12/2012 2:57:46 PM , Rating: 1
Evidentally I was down rated for asking a question that involved too much thought that deviated from 'can it play crysis' jokes. Somehow, I'm ok with that...

Anyways, I don't really get all worked up in the 'Apple must be punished beyond repair' or the 'Android is the best OS despite any of its actual flaws' stuff that happens on these forums for better or worse.

As far as consumers go, Apple was never a brand you went to for cost-value, or even for value parity (that is, actually getting what you pay for).

No, Apple is the brand people seemingly gravitate to when cost seemingly is not a variable in value. So, as far as the effects on consumers go... there are plenty of better alternatives from both a functional and cost perspective so I guess I don't feel one way or the other on that. It's not any different before as it will be after. It's still the brand you pay more for to get less of regardless of whether the cost gets passed down to consumers or not.

I only get annoyed about consumer circumstances when there are no viable alternatives.

"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation

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