Report: Samsung Now Charging Apple 20% More for iPhone Processors
November 12, 2012 12:36 PM
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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
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.
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Apple will always be at the mercy of suppliers
11/12/2012 7:05:08 PM
This was long time coming and good on Samsung for doing this. I think the main reason for the price hike is supply and demand and the other customer is Samsung Mobile. Samsung is increasingly selling more and more phones and tablets and will probably need those chips themselves, they can only make so many chips and if sales of their devices are increasing then they will need a bigger share of those chips hence those chips have become a lot more sought after.
Yes Apple does a gazillion dollars but all this isn't much good cos Apple have not f'cking clue how to operate a fab and will need to recruit engineers and start from teh ground up. If all goes well, they may have a fab up and running and producing chips within 3-4yrs and even then the yields may be crap. Also if Apple wishes to make the current chips then they would probably have to pay royalties to Samsung as those chips were designed by samsung (based on ARM licenses?..not sure about this). I would imagine this would be same if TSMC were to make those chips. (could someone clarify?) TSMC is a very advance chip maker but even then it would take them quite a while to fine tune the line to get decents yields. But also remember TSMC makes chips for a lot of clients and have only certain capacity. Switching from chip to another isn;t so straight forward and requires recalibration, etc..for the new chip and this takes time. This is all assuming that TSMC doesn't already have its books stacked with orders, if so Apple would have to wait a very long time. To put this into perspective how important Apple is to TSMC, a while back Apple offered to invest a billion dollars or so in TSMC but TSMC refused because they prefer to make chips for a portfolio of clients and being obliged to make chips for Apple isn't in their best interest.
As we all know Samsung Displays recently dropped Apple and that was their decision and this really is a set back for Apple cos LG planels are not as good quality, in place of Apple, Samsung Dispalys will be supplying Amazon and more likely increasing supply to Samsung Mobile to meet demand. So even though it seems Samsung has 'lost' a customer, in fact they are probably in a better position as they can focus on meeting the increasing demand for their own devices. Who knows the Kindle may end up using more Samsung silicon in future.
It's great Samsung has done this, because it shows to other existing Apple suppliers that they can increase their prices and Apple will/may have to pay. No company will ever take a hit in their bottom line just to satisfy Apple regardless how much Apple buys and since Apple is a device manufacturer, they will always be at the mercy of their component suppliers.
"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
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