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Apple looks to eliminate reliance on its bitter smartphone rival

Embroiled in an international patent dispute, Apple, Inc. (AAPL) is looking to drop the "friend" bit from its "frienemy" relationship with Samsung Electronics Comp., Ltd. (KSC:005930).  The world's top two smartphone makers, the American and South Korean electronics firms have seen an increasingly belligerent relationship in the smartphone industry; and yet they still are bound by a close tie. Apple pays Samsung to manufacture the semiconductor chip "brains" of its mobile devices.

But Apple is working hard to dump Samsung.  Reports came on Wednesday that Apple was shifting contracts for its fourth generation iPad's A6X system-on-a-chip (SoC) to Taiwan Semiconductor Manufacturing Comp., Ltd. (TPE:2330).  The news was first reported in the Commercial Times.  The report was later picked up by the AFP and other international outlets.

In 2012 Apple and Samsung are estimated to have done $12B USD in business together.  However, as Apple shifts contracts to other chipmakers like TSMC that number is expected to dwindle.
 
2013 should still see large payments from Apple to Samsung.  The TSMC production of iPad SoCs won't even hit the trial phase until sometime this quarter, and likely won't reach volume until the middle of the year if all goes well.  And there's no guarantee all will go well; Apple previously looked to shift away from Samsung only to see those efforts reportedly stymied by poor results from TSMC.


Samsung should also be able to soften the blow of any lost business from Apple with its increasing relationship with Qualcomm Inc. (QCOM), maker of the Snapdragon SoC line which sees frequent use in Android and Windows smart phones/tablets.  While Apple is fleeing Samsung due to external factors, Qualcomm appears to be moving away from TSMC directly due to its yield performance.  Of late Samsung has begun to produce Snapdragon S4 chips for Qualcomm, a contract which TSMC was originally expected to exclusively supply.

Some reports have indicated that Samsung may look to punish Apple for its $1.05B USD patent infringement victory against it by raising prices on i-device SoCs.  However, other reports dispute these claims.

Source: AFP [on Asia News Daily]



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RE: Rule number one of the tech wars
By retrospooty on 1/3/2013 12:57:34 PM , Rating: 2
"Not critizing Apple and lying are too different things. Being partisan and lying are two different things."

Putting you up to the legal test... The Truth, the whole truth and nothing but the truth.

The Truth: Yes. Tony generally posts things that are true.
The Whole Truth: No, almost never does Tony post the whole truth. Only the one side, that being the side that makes Apple appear in the best light.
Nothing but the Truth: 50/50 (The truth plus spin)

If it were a court of law, you'd be held in contempt.


By maugrimtr on 1/4/2013 10:26:47 AM , Rating: 2
Tony never tells the whole truth. If you take his version at face value, it makes Apple look brilliant in outspending its competitors like everyone else should be doing the same thing. This utterly ignores the obvious simple truth...

Apple outspending everyone else is not impressive. It only means that Apple is behind everyone else and trying to catch up. Samsung already has manufacturing facilities and chip fabs. Intel already has too many fabs to keep track of. Google doesn't manufacture anything other than data centres (subsidiaries aside).

Only Apple needs to sink $8B into CapEx to pay its suppliers to ramp up equipment, fab lines, manufacturing capacity, and then to ensure their exclusivity for Apple needs. This keeps the cost of capital and utilisation risks with Apple, and the local risks (including staffing and operation) with the supplier.

From that perspective, what else could Apple do? They require exclusive access to fabs and such to keep their production on time and at capacity. Samsung certainly won't give them exclusive access when it has its own burgeoning market to serve. Apple will take the capital hit, the extra risks, and even a very predictable drop in quality to get that exclusivity. THAT agrees with Tony's opening points about Apple's plans but it doesn't mean that Apple are special - just that they are in a tight corner they didn't see coming and need to spend their way out of it quickly.

If there is a Tech War, this is one battle where Apple was caught with its shorts down. Luckily it has the resources to get back to the War more or less intact.


"Mac OS X is like living in a farmhouse in the country with no locks, and Windows is living in a house with bars on the windows in the bad part of town." -- Charlie Miller














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