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Samsung Hits Apple With 20% Price Increase
EthanV2 writes "The Wall Street Journal cites a report which quotes a 'person familiar with negotiations between the two tech giants,' apparently confirming this special price hike for Apple. The source said: 'Samsung Electronics recently asked Apple for a significant price raise in (the mobile processor known as) application processor. Apple first disapproved it, but finding no replacement supplier, it accepted the [increase].'"
Yeah... Suing a key supplier with no other substitute products is not a good business move. And this response made me laugh. :)
If by 2014 (the time the current contract runs out), Apple doesn't find another supplier, manages to make their own or changes the product to no longer need them, Samsung could, indeed, prevent them from producing their product at all, by simply no longer selling them that processor. Of course that would also mean Samsung wouldn't get the revenues from selling it, which probably isn't in Samsung's interest.
No, because we're talking about $3.00 per device. Apple will eat it, and instead start building up other foundry companies to build the Ax SoC's and take the billion dollar business away from Samsung.
Typical case of small short term gain, big long term loss.
Well... maybe, depends on whether Samsung are figuring that that's the route Apple is taking anyway (Apple have taken a few pieces of iPhone in-house recently to save costs) and are making hay while they still have a competitive advantage. If Samsung guess that Apple will eventually transition away from them as a supplier (and given the ongoing animosity, it's not a bad guess) then while they are they will want to squeeze their customer.
There's a difference between doing business, and killing the golden goose out of childish motive.
That goose isn't quite so golden anymore. Samsung has the upper-hand; and the time to strike is while the iron is hot. Samsung is right to go for the kill.
Why? If Samsung can make money from iPhone sales, why would they want to stop the sales completely?
If Samsung caused the cessation of iPhone sales altogether, iPhone customers might move to a brand that doesn't use Samsung parts at all.
which is totally what she said
I'm sure Samsung would be happy to continue manufacturing for Apple, as it is still income.
But maybe this is flexing some of their muscles to fire a warning shot over to Apple about Apple's recent lawsuit games. On the other hand, this is the first price rise for Apple in five years of manufacturing (where I imagine pricing is on a per-wafer or per-mm^2 basis - not clarified).
It's not hard to imagine that 32nm is more expensive, and that inflation over that time will have raised costs as well, that Samsung have merely invoked a five year price review clause in their contract with Apple to raise pricing to a reasonable level for the next five years.
I think Samsung is just reading the tea leaves. With the iPhone 4, Apple used to source components such as SDRAM, NAND flash, and CPU from Samsung. With the iPhone 5, they've dropped Samsung as suppliers of commodity chips, and now they're only sourcing the A6 processor from Samsung.
One might reasonably project that with the iPhone 6 or 5s or whatever it will be, Apple will drop Samsung altogether. Samsung might as well milk Apple while they can.
It's fair to make a statistical assumption (i.e. high likelihood) that the popularity of the iPad is tied to the iPhone. That is to say: who the hell buys a Nexus 4 and says, "I want an iPad so I can get all these fancy Android apps on a bigger screen!" iPhone, iOS, iApps, iPad; Android phone, Android, Android apps, Android tablet. Eroding the iPhone market could erode the iPad market, which is better than double-dipping: even if Samsung doesn't make an Android tablet, once Android tablets gain popularity they're suddenly cool and people will match the phone to the tablet (which further weakens the market for the iPhone) in a feedback loop started by getting people off the phone so they'd match the tablet to the phone.
High stakes sure,but it's a good attack plan. As I said, Apple is weak--the Galaxy S3 is single-handedly outselling the iPhone--and so this is the time for Samsung to strike. There is also word on the wind that Apple may be trying to get away from Samsung in a vertical integration scheme (Apple is the next Carnegie Steel) fabbing their own chips, so perhaps Samsung has very little to lose.
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I'm sure Samsung would be happy to continue manufacturing for Apple, as it is still income.
Indeed. Apple charges premium prices for its products. Samsung wants a cut. Nothing wrong with that.
"Convictions are more dangerous enemies of truth than lies."
Yeah, I guess he's learning though. I mean, he's just learnt the basic principle of business that if a company has a sudden increase in costs of doing business, like say, a flawed $1.05bn patent verdict against them, then they have to up their prices to make up for it.
Don't worry Tim, soon you'll get to learn about other business things like redundancy terms, but at least being in the position you're in you'll probably also get to learn all about golden parachutes too which will be nice for you.
Let's say Ford makes car parts and cars. Chevy decides to use Ford's engine in their car, which turns out to be very popular. Then Chevy gets a patent on their car, and uses it to try to sue Ford for making cars. At this point it's obvious Chevy has gone insane, and it's in Ford's best interest to let them go out of business.
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