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].'"

Comments

one word

[magsol]

pwnd

Re:one word

[michelcolman]

Apple has quite a few patents on overcharging for products, I wouldn't be surprised if Samsung were violating one of them. This isn't over...

Re:one word

[Penguinisto]

Well, "pwnd" until another supplier shows up to provide the goods, or Apple funds a new one into existence.

After that, Samsung loses the contract once and for all.

There's a difference between doing business, and killing the golden goose out of childish motive.

Re:one word

[Anonymous Coward]

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.

Re:one word

[Anonymous Coward]

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.

Re:one word

[gstoddart]

After that, Samsung loses the contract once and for all.

I believe Samsung has already told Apple they'd be terminating the contract next year or so ... so it's not like they're at risk of losing a contract they've already decided they don't want any more.

Re:one word

[somersault]

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.

Re:one word

[hattig]

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.

Re:one word

[Vapula]

And, if I remind well, Samsung is/was also a major supplier for LCD screens for Apple... Which are much more expensive than the processor...

And LG (one of the Apple suppliers) is not feeling well...

Re:one word

[t0rkm3]

I prefer to call this, "Don't shit where you eat."

Re:one word

[dintech]

I wonder if the price hike equates to about a billion dollars...

Re:one word

[oxdas]

All of Apple's contracts combined (display, processor, memory, etc) only account for about 3% of Samsung's annual revenue and probably less than 1% of their profits (components are typically low margin). While Apple is a big customer, they aren't really a "golden goose" for Samsung.

Re:one word

[sjames]

Apple better hope that Samsung is a more adult company than Apple is.

Re:one word

[osu-neko]

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.

Re:one word

[slashmydots]

In the gaming world, we'd refer to it more as "self-pwned" actually since it was entirely their fault. You know, like blowing yourself up with your own grenade or rocket launcher or driving your vehicle off a cliff, lol. I'd give a "glass houses" reference but they're way past that. Them suing Samsung was more like riding down a river on a Samsung wooden raft and then lighting it on fire while they're still on it. Did the execs honestly go from "let's sue our competition out of existence because they're selling far more smartphones than us!" to "Ohhhh crap, they make half the stuff we use" without anyone pointing that out ahead of time?!

Re:one word

[maeglin]

There's a difference between doing business, and killing the golden goose out of childish motive.

I think Samsung probably has enough other sources of income to weather any ill effects. But, really, I am curious why you think it's a bad policy to consider more than profit motive when making business decisions? If I can't trust my partner not to sue me why should I trust that they are entering contracts on good faith? I see a lot of this sort of "business is sterile" thinking on the internet and I'm not sure that it's right. Maybe it is, but it seems wrong to me.

Two other similar concepts to yours:

1. "They have no choice! They have to grind up babies for extra profits otherwise their share holders will sue them." If that's really a concern you put "without grinding up babies" in your mission statement -- or, something about "ethics and social responsibility". The mission statement is on page 1 of the annual report so no one can claim it's not there. Granted, not all mission statements mention ethics but many do, and even more declare customer satisfaction as a goal, or something lofty like the betterment of the human condition.

2. "Corporations are comprised of many people and therefore can't have an 'MO'." Umm yeah, there are only two ways that I've seen someone leave a partnership with Microsoft unscathed: they never entered into a partnership Microsoft or they were the largest technology corporation on the planet -- wait, no, even IBM got screwed. Just because they've destroyed all previous partnering firms that doesn't mean that they'll do it again, right?

Re:one word

[TFAFalcon]

Well Apple is trying it's best to keep Samsung from competing against them in the mobile market. So why shouldn't Samsung try the same thing? If no more iPhones are sold, then more of the other kinds of phones likely will.
At the same time this might scare Apple into negotiating instead of suing over rectangular devices in the future.

Re:one word

[WindBourne]

Roughly 200 million units this year will be sold. You can guess that next year, it will be around 250-300 million. And around 300-350 for 2014 (last year of the contract).

So, it is around 15 Billion, give or take.

So far, Tim Cook is making QUITE the splash.

Re:one word

[chinton]

Apple probably has quite a few patents for overcharging for products, too...

Re:one word

[ArcadeMan]

And if you want to make sure people know which comic you're talking about in the future (i.e. not today or tomorrow), you might want to give the full link to the comic in question:

http://penny-arcade.com/comic/2012/11/12

Re:one word

[erroneus]

Indeed. Even though Samsung's continued ability to do business is important in both the short and long terms, they may have to assess what their long term ability to stay in business may be and adjust to better assure their future. If they feel that future is threatened by Apple's legal actions, they may just have to temporarily interrupt a source of income in order to slow down the assault against them.

One might look at it this way:

(finctional) US Arms manufacturers during WW2 were selling to Japan and Germany. Meanwhile, the US is sending soldiers out to fight enemies which are armed with US made weapons. So the dilemma is obvious in that case right? The enemy is a source of revenue. On the other hand, continuing to supply them with weapons may enable them to more easily kick our asses. What a difficult choice this is.

Obviously, in the fictitious scenario, the government would step in and charge someone with supplying arms to the enemy. But in the case of Apple v. Samsung, it's a bit more murky. After all, breaking an arms contract with the enemy is trivial in war. Breaking a contract "in business" is quite a different matter.

Re:one word

[Xest]

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.

Re:one word

[amicusNYCL]

There's a difference between doing business, and killing the golden goose out of childish motive.

Are you referring to Samsung's supply contract with Apple, or Apple deciding to sue their supplier over the shape of their devices? Which one is more childish?

Re:one word

[93 Escort Wagon]

I believe Samsung has already told Apple they'd be terminating the contract next year or so ... so it's not like they're at risk of losing a contract they've already decided they don't want any more.

The idea that Samsung "told Apple they'd be terminating the contract" is silly.

The contract runs through 2014. All contracts have end dates, and, while a company can attempt to renegotiate (and usually the contract contains language regarding under what circumstances a contract can be renegotiated), they are legally binding for the time period defined in the contract. There's no "we don't like you anymore, so we're ending it early".

For that matter, there's no "we don't like you anymore, so we're going to start charging you more just because" in a contract. Samsung would have to justify the price increase according to terms defined in the contract. Also, given the language of the story, it's likely Apple had an opt-out clause that kicked in under those circumstances - but, being unable to find another supplier, they had to agree to the increase.

Heck, given the vague nature of this story - it's possible this was a NEW contract, and Samsung said "we need to charge you more money for this part if we're going to keep making them for you". But then you have the problem of Samsung signing a new contract with Apple, which goes against the prevailing narrative in this discussion.

Now Samsung could tell Apple they're unwilling to renew an existing contract after its termination date, but that would be a different situation entirely. And, if you claimed that, you'd really need to provide at least a tiny bit of evidence to back up your statement... well, anywhere but Slashdot anyway.

Re:one word

[thoughtlover]

In India, we call it KLPD. Apple lost all the way, and Samsung recovered what they lost elsewhere.

And those that continue to support Apple during their fanatical litigious phase will lose out with higher prices. Lawyers cost a lot. Apparently, payback is costly, too.

Re:one word

[thoughtlover]

So far, Tim Cook is making QUITE the splash.

IIRC, Tim Cook was the guy that thought ahead to procure large inventories of flash memory. That kept the cost low and ensured they could meet consumer demand --something Apple has famously struggled with. This patent spat was initiated by Jobs, not Cook (remember Jobs saying he'd use the last cent of the company to sue any other company using 'their' ideas??). Cook has the option to make peace and get back to making computers, not enemies.

Re:one word

[thoughtlover]

Just to reiterate my feelings as how different Jobs and Cook are..... I just read an older story that Cook was as relieved as HTC's CEO to end their patent dispute. I highly doubt Jobs would have taken the path that Cook did.

Re:one word

[gutnor]

Samsung is number 2 by a very large margin above number 3. If they can significantly hurt iPhone market share, they will be in a very strong position to basically define the smartphone market. For the same reason that nobody really cares if Samsung or Apple win whatever lawsuit, they won't really care why the iPhone 6 is so much more expensive. Samsung is overrepresented in the shop catalogs, so that is a good bet that they will get the most benefit from any failing on Apple side.

That is going to be interesting, as long as neither Samsung nor Apple manages a kill blow, that will be good for the customers (Apple will have to be quite innovating to offset the price hike. On the other hand, Samsung will have to drop the price to really hurt Apple). Even better if that little battle gives some oxygen to other players like MS and RIM and if Google manages to revive LG and HTC.

Anyway, this is a good example of why relying on your main competitor to build your product is not the best position to be in. (if anybody had any doubt why it was necessary for Apple to have their own Map application, or why Android makers shit their pants when Google bought Moto, or why OEM became pale when MS built Surface). Also that is no wonder that Apple was especially bitter against Samsung in their lawsuit, both companies are on a collision course.

Re:one word

[Anonymous Coward]

... And the price increase gets pass down to ...

Apple customers! See, nothing wrong at all.

Re:one word

[crizh]

Samsung is number 1 by a very large margin above number 2.

Surely.

Re:one word

[sl4shd0rk]

So far, Tim Cook is making QUITE the splash.

Yes, like that of a commode.

Re:one word

[rsborg]

All of Apple's contracts combined (display, processor, memory, etc) only account for about 3% of Samsung's annual revenue and probably less than 1% of their profits (components are typically low margin). While Apple is a big customer, they aren't really a "golden goose" for Samsung.

How much of the rest of the company's semiconductor profits are due to the economies of scale that Apple brings? Yes, they're the top dog now, but they don't own Android, and users can be fickle from one year to the next.

I don't think Samsung can that easily dispose of Apple's business.

Re:one word

[HiThere]

Sharp, another Apple supplier, appears to be on life support (from Apple).

Apple was not wise to antagonize Samsung.

Re:one word

[svirre]

Prices in fabs are normallly on a pr. wafer basis. Also normally prices go down, not up...

Re:one word

[Weezul]

Samsung will never be Microsoft because
(a) Apple would never become the old Apple, NeXT, etc. again,
(b) Google shall keep Motorola running just fine, and
(c) Samsung is not an American company.

I'll personally support Samsung simply because they are not an American company and Korea lacks the political muscle to impose their companies' will around the world.

Also, I'm exceedingly happy with Samsung for making the Galaxy Note, which does double duty as a phone and table. Apple created a new market that basically doubled consumers gadget expenses, but Samsung reduced that price tag.

Re:one word

[mjwx]

So far, Tim Cook is making QUITE the splash.

IIRC, Tim Cook was the guy that thought ahead to procure large inventories of flash memory. That kept the cost low and ensured they could meet consumer demand --something Apple has famously struggled with. This patent spat was initiated by Jobs, not Cook (remember Jobs saying he'd use the last cent of the company to sue any other company using 'their' ideas??). Cook has the option to make peace and get back to making computers, not enemies.

Cook had every opportunity to end it.

They could have bought Samsung to the table. With the way the case was going (Read: how biased Judge Koh was) they would have jumped at the chance. Cook could have dismissed their claims agianst Samsung without predjudice...

But Cook didn't. He's cut from the same cloth as Jobs.

Re:one word

[oxdas]

$220 billion in revenue last year. $7 billion of it from Apple (and low margin at that). The semiconductor business makes very little profit Samsung. Last quarter, 69% of Samsung Electronics profits came from their own branded phones and 14% came from their mobile display business (Apple orders had fallen from more than 10 million last year to only 1.5 million last quarter). Even with processors, your economies of scale do not increase linearly. Samsung sold more than 60 million branded mobile smart devices last quarter alone. That gives them tremendous economies of scale already. Apple is just gravy.

Re:one word

[farble1670]

It's well-known that Apple's new A6 leaves other ARM-based chips in the dust.

sorry. the exynos 5 (samsung's A15) wipes the floor with the apple A6.
http://www.androidauthority.com/exynos-5-dual-benchmarks-125134/

Re:one word

[AmiMoJo]

Usually the contract will state that Samsung may review pricing whenever they like, during to changing circumstances. Apple may continue the contract at the new price, or walk away from it. It appears that Samsung looked around, noticed no-one else was in a position to manufacture these parts for Apple, and decided to turn the screw a bit.

Samsung is probably assuming that Apple won't renew the contract anyway, so there is no point trying to generate any good will or future business. Screwing them as much as possible in the here and now is the best option.

Re:one word

[hazydave]

Supposedly, Apple tried to buy TSMC's entire output of 28nm chips... and was denied. Which makes perfect sense -- they have a better position supporting all sorts of companies, particularly given how big the fabless companies (Broadcom, Qualcomm, AMD, nVidia, etc) are getting. It's certain Apple wants to find alternate fabs, now that they're no longer dependent on Samsung to design the A-series SOCs for them. But they may be too large to jump entirely to a single alternate, even in 2014.

Samsung, on the other hand, is already the world's largest semiconductor company in volume if not market cap (that's Intel, of course, with Samsung at #2), and given the rise of the ARM, they'll have plenty of other folks to build chips for in the future. Assuming they don't scare them all away -- the PC industry might have evolved differently if Intel had jumped into retail PCs in the early days.

Re:one word

[hazydave]

Samsung can't just raise the price by 20% on an ongoing contract. This was probably a renewal of an existing contract.

Sure... and Apple can't all of a sudden start charging $500+ per copy of MacOS to kill off Mac Cloning. Yet they did.

It's all based on what's in the contract. There's undoubtedly something in there about increased expenses. A billion in legal expenses sure qualifies, unless specifically excluded in the contract.

Re:one word

[hazydave]

In particular, Apple doesn't seem to have done much with floating point. ARM sure did... check out the expanded Geekbench results:
http://arstechnica.com/gadgets/2012/11/nexus-10-tablet-is-a-solid-house-built-on-shifting-sands/3/

Apple's still ahead on GPU performance. As a big games company, no surprise on that one -- that's what people do with iOS.

Is it a special price hike?

[Anonymous Coward]

Or is it the removal of a special price break?

If farmers told the supermarket chains to go eff themselves and that they can pay the same price as any other wholesaler, then this would be opined by those supermarkets as "a price hike".

Whereas it is instad the removal of a special price.

(cf removing temporary tax cuts becomes a tax hike to those affected...)

Re:Inevitable

[houstonbofh]

Yeah... Suing a key supplier with no other substitute products is not a good business move. And this response made me laugh. :)

Re:So????

[Missing.Matter]

That's the iPhone 4. The iPhone 5's A6 chip (two generations newer) costs an estimated $17.50. So a 20% increase is $3.50.

http://www.isuppli.com/Teardowns/News/Pages/Many-iPhone-5-Components-Change-But-Most-Suppliers-Remain-the-Same-Teardown-Reveals.aspx

New business plan

[Anonymous Coward]

1) Sue supplier
2) ???
3) !!!

Re:Inevitable

[Krojack]

Either Apple will start developing the chips themselves or someone else will.

Well that worked out well for Apple Maps didn't it? =)

This was expected..

[Sassinak]

Come on.. why would you sue and attempt to bully one of the worlds largest manufacturer chips/screens/etc... and especially those used in your own device. Its akin to me suing my employer while I still work for them.. You know there are going to be repercussions.. Its not a lot (most likely because anything higher than 20% could get them sued (ie: retaliatory business practices).

Sucks that its all going to get pushed down to the consumer. (with a suitable markup).. of course, this could be what Samsung wants.. (gets apple to price themselves out of the market).. because the carriers are not going to absorb that cost.. Apple sure as heck won't take it..

(Glad I'm an Android / Hackintosh guy).

Re:Inevitable

[beelsebob]

Uhhh, apple already develops the chips themselves. Samsung just fabs them.

Re:Sad - even if I dislike Apple

[ccguy]

I hope this is not a 'vendetta' but a sound and fair business decision.

Probably Samsung's CEO thought "there's no way we can keep a long term relationship with these assholes so we should just milk them while we can [removes Tim from speed dial and moves Larry one number up]"

Re:This is known as

[tgd]

Global Thermonuclear Warfare.

Looks to me like escalation has begun. Loser will be end users. Buy stock in both Apple as well as Samsung as higher prices mean higher profit margins.

Its probably best for Apple's users, anyway. They've all got Stockholm syndrome at the moment, but once they're freed from that incarceration, they can start the long road to recovery.

Re:20% eh?

[jareth-0205]

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.

so the court costs....

[roc97007]

will be paid on the installment plan.

Re:Inevitable

[MightyYar]

Suing a key supplier with no other substitute products is not a good business move.

It's a good point, but gouging your customers is probably also not a good business move. Apple is not exactly cash-poor, and I expect Samsung to face a very capable competitor in the near future (TSMC?). So sure, in the short term Samsung will make a quick buck and sting their chief smartphone competitor. In the long term, they may see their manufacturing advantage disappear - along with an enormous customer.

Re:Inevitable

[bluefoxlucid]

It looks like Samsung passed their costs for the $1Billion judgment along to the consumer, and that consumer is Apple.

Re:So????

[gQuigs]

Estimating from this chart*: about 40 million iPhones sold each year (it actually was increasing, so this is an underestimate), would bring in an additional 140 million dollars for samsung per year. And if you are Samsung, you know that Apple has got to be considering moving suppliers - but they have no current options! I would charge at least $25 more, which would make up the 1 billion dollar settlement.

*http://www.asymco.com/2012/02/16/ios-devices-in-2011-vs-macs-sold-it-in-28-years/

Re:Inevitable

[Missing.Matter]

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.

Re:Inevitable

[Applekid]

I thought I lived in the US until I opened Apple Maps.

Re:Inevitable

[MightyYar]

The Galaxy S3 (their biggest seller) is selling slightly faster than Apple's biggest seller (the iPhone 4s), in terms of units. I don't know what the respective profit margins are. However, both companies have many other products, not the least of which are the tablets. Losing Apple as a customer would hurt, not just because Apple is their largest - it would also indicate that their competition has gotten good enough and large enough to play with the big boys. Any of their customers would then have the luxury of shopping around, not just Apple.

I suspect that Samsung knows what they are doing, but the stakes are quite high if they misjudge.

Re:Inevitable

[Andy Dodd]

Huh? Samsung doesn't make money off of the GS3? Then why are the most profitable Android device manufacturer?

Re:Inevitable

[anyaristow]

The chip is an Apple design. Samsung is just the foundry.

Re:Inevitable

[MightyYar]

Correct, Apple seems to be throwing money at Samsung's competitors anyway - clearly this is part of Samsung's calculus. I just wonder whether this will accelerate the rate of their competitor's growth.

Re:Inevitable

[the computer guy nex]

Either Apple will start developing the chips themselves or someone else will.

Well that worked out well for Apple Maps didn't it? =)

Actually Apple just joined Intel as the only companies on earth that hand-design their own processors. AMD doesn't even do it anymore. So yes, Apple does design their own chips - Samsung just follows the blueprints in their factories.

Also Apple only designed the interface for the new Maps, which is pretty fantastic. The data behind Apple Maps is supplied by TomTom. Apple did not create their own mapping data set.

Re:Inevitable

[MightyYar]

I sit in the cube across from one of the purchasing guys. He gets on that phone 9 hours a day to negotiate the most trivial amounts of money on parts. And this at a company where we only sell somewhere in the neighborhood of 10,000 machines per year. He can pay for his cost to the company for the year by saving perhaps $150 per machine. If he worked at Apple, he'd only need to save something less than a penny to justify his position. Hiking a single part from approximately $28 to over $33 is going to give their purchasing guys a conniption fit.

Re:Inevitable

[the computer guy nex]

The SGS3 is not a bigger seller than the iPhone. It has sold 30 million, while the iPhone 4S has surpassed this many times over.

Last quarter, when Apple released the iPhone 5, the SGS3 did outsell the iPhone 4S. If you add the iPhone 5 sales to the iPhone 4S sales and the SGS2+SGS3 sales, Apple comes out ahead.

Re:Inevitable

[bluefoxlucid]

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.

So basically...

[Andy Prough]

...you're talking out your ass?

Re:Inevitable

[oxdas]

Samsung Electronics made profits of about $6 billion last quarter on revenues equal to 19% of South Korea's entire GDP. While not quite Apple's $8 billion over the same period, I don't expect to see Samsung execs begging for change anytime soon.

Re:Inevitable

[Ecuador]

Are you sure your friends are not just happy that you can't find them anymore?

Re:Inevitable

[HaZardman27]

It's a good point, but gouging your customers is probably also not a good business move

You mean like what Apple does to its customers?

Re:Inevitable

[oxdas]

According to Samsung Electronics, two-thirds of their $6 billion in profits last quarter came from their smartphones.

This is about the same percentage for Apple, the iPhone, and their $8 billion in profits last quarter.

http://www.bloomberg.com/news/2012-10-25/samsung-profit-beats-estimates-on-surging-sales-of-phones.html

Re:Missing information

[NatasRevol]

More missing info.

Current chip price: $17.50/phone
After increase: $21.00/phone

$3.50 increase per phone adds up to about $87M cost increase per quarter (assuming 25M iphone5/ipad4 per quarter)

That's like half a day of free cash flow from Apple's operations. For the whole quarter.

It's more of a piss Apple off than actually affect their business/profits. Which doesn't seem like a great business move from Samsung, seeing as Apple is their biggest chip customer.

Re:Inevitable

[KingMotley]

Initially Samsung did some design work in cooperation with Apple on the processor design, but Apple has since moved it's design team totally in house. They don't need to initially hire someone, they already have the entire team in house as is.

Re:Inevitable

[gman003]

Did you jump to that conclusion using directions from Apple Maps?

Re:Sad - even if I dislike Apple

[oxdas]

Remember that Samsung makes components for many companies. It also competes with most of those companies with its own products (Apple is the norm and not the exception here). Samsung is able to accomplish this by touting a "wall" dividing their own products and their component businesses. If Samsung breaches this wall for Apple, it could cost them significantly more business. Given that Samsung has yet to take retribution on Apple with its components, even after the $1 billion verdict, I doubt that this is is a "vendetta."

Re:This is known as

[CnlPepper]

I think your maths suffered from one to many G&Ts..

single:

    2.00 - 0.55 = 1.45 GP (72.5% selling cost)
    1.45 - 0.50 = 0.95 NP (47.5% selling cost)

double:

    3.00 - 1.10 = 1.90 GP (63.3% selling cost)
    1.90 - 0.50 = 1.40 NP (46.7% selling cost)

Re:Inevitable

[Smask]

Last I heard, TSMC only manufactures ICs for companies; they don't do design work. Apple could potentially hire someone to design replacement microprocessors and build them at TSMC, but it could be an uphill battle with all of the patent landmines they could run into.

If you had checked the list of Apple M&A, you'd found that Apple already owns P.A. Semi and plans to make their own chips at TSMC or GF (less likely).

Re:Inevitable

[horza]

Er no. The whole definition of profitable is not losing money. If everybody is losing money then nobody is profitable.

As for the "analyst conjecture" that record sales in their record selling phone leading to record profits may have something to do with their record selling phone... how much are these analysts paid? But yes, I am sure you know better and that their record profits have nothing to do with their best selling phone.

Phillip.

Re:Inevitable

[eth1]

Yep... I just ditched an iPhone for an SIII this round. The hardest part was leaving behind the apps, etc. that I can't use any more, or have to re-purchase an Android version.

Thing is, now that I'm on Android, I have a lot more choice for the next upgrade, and even if I don't get another Samsung, the chance that I'll go back to an iPhone is next to nothing. I think a lot of people keep getting iPhones because that's really the only upgrade path where you don't lose everything. Having switched, Android is much better than iOS, IMO, and once you break out of the lock-in, there's little reason to go back.

So every person that Samsung knocks away from Apple, is likely a permanent loss for Apple.

Re:Cutting off your nose to spite your face

[SecurityGuy]

Making a short term gain for a long term loss is not the way to handle the problem.

Said no CEO of any publicly traded corporation ever.

Re:Inevitable

[oxdas]

What does it matter "where" they made that money? They booked about $4 billion in profit to their phone sales last quarter. Apple booked about $5.3 billion in profits to their phones last quarter. Both companies are making money hand over fist on phones. Apple's margins are certainly higher as they made more profits on less than half the smartphones shipped compared to Samsung last quarter (57 million to 27 million smartphones). That said, insinuating that Samsung isn't making a tremendous profit on its phones doesn't reflect reality.

Car analogy

[symbolset]

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.

Re:Inevitable

[aitan]

even if Samsung doesn't make an Android tablet,

Uh?
Besides their own branded tablets, have you checked which is the manufacturer of the Nexus 10 monster (2560x1600 screen, 16Gb at 400$) that comes out tomorrow?

Re:Inevitable

[oxdas]

Sorry. I was replying to the person stating that Samsung was not making money off of their phones and I thought you were commenting on that point.

As for profits on the GSIII:

Most of the financial media single out the GSIII's strong sales to explain the enormous growth in Samsung profits. Considering that their feature phone sales have declined, yet their profits have surged, I think it is safe to say the feature phones are drivers of profit for Samsung.

The numbers:
Samsung Sales 3rd quarter:
feature phones: 2012 48.5 million 2011 59.1 million: net decline of 10.6 million phones
smartphones: 2012 56.9 million 2011 28.1 million: net increase of 28.8 million phones

Telecommunications Profits 3rd quarter: 2012 $4.14 billion 2011 $1.94 billion: net increase of $2.2 billion

Conclusion: Samsung shipped considerably less feature phones versus a year ago, yet posted much larger profits. The feature phones are unlikely to be the driver of profits. Samsung shipped roughly twice as many smartphones since the same period last year and more than doubled their profits from phones. The GSIII represents 18 million of the 56.9 million phones sold (or just under a third of smartphone sales) Given that the GSIII accounted for a high percentage of sales versus a year ago and Samsung's phone profits surged over the same time period, I would say it is very likely that the GSIII's are highly profitable.

Re:Missing information

[symbolset]

I'm pretty sure Samsung's biggest chip customer is... Samsung.

People just forget obvious examples

[SmallFurryCreature]

Steve Jobs vowed to destroy Android, Steve Ballmer did the same with Google and threw chairs. THAT is what corporations are like, they aren't run by a hive mind or a robot, they are run by people who we wouldn't like to be with.

Re:Intel?

[thammoud]

Seriously doubt that Intel will do this. Intel is by far, the best manufacturer. Why would Intel agree to manufacture chips that will potentially threaten its own x86?

Re:Inevitable

[HiThere]

Well, as others have pointed out this contract runs for a couple of years. Also, some of the "competitors" that Apple is throwing money at appear likely to die anyway. Sharp, perhaps?

Additionally, Samsung is selling it's own models quite well. Perhaps they figure they'll need their own fabs themselves. AND yet more additionally, setting up a fab requires lots of money and lots of expertise. And IIRC, Apple got out of the chip manufacturing business quite awhile ago. (Around the time of the Mac II?) So while they've got the cash, they may well not have the expertise to either do it themselves, or the judge the expertise of others.

*I* think that when Apple decided to antagonize Samsung, they made a very bad strategic move.

Re:Intel?

[viperidaenz]

They used to make ARM processors for PDA's but sold the business in 2006. It went under the name of XScale. They still have a license to make ARM processors as well.

Dear Apple,

[Nyder]

Due to our rising legal fees, we need to increase the price of the products we sell you by 20%.

Thank you for understanding,

Samsung.

Re:Do lawyers cost a lot?

[BronsCon]

Losing market share while the competitor you are suing eats your lunch is not how you "define the market".