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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].'"
pwnd
"I'd just like to emphasise that taking a million years isn't a metaphor here..." -Rich Bradshaw
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...)
Yeah... Suing a key supplier with no other substitute products is not a good business move. And this response made me laugh. :)
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
1) Sue supplier
2) ???
3) !!!
Either Apple will start developing the chips themselves or someone else will.
Well that worked out well for Apple Maps didn't it? =)
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).
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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.
will be paid on the installment plan.
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
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.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
It looks like Samsung passed their costs for the $1Billion judgment along to the consumer, and that consumer is Apple.
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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.
I thought I lived in the US until I opened Apple Maps.
More Twoson than Cupertino
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.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Huh? Samsung doesn't make money off of the GS3? Then why are the most profitable Android device manufacturer?
retrorocket.o not found, launch anyway?
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.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
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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...you're talking out your ass?
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.
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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?
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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
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.
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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.
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.
Said no CEO of any publicly traded corporation ever.
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.
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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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.