Samsung Hits Apple With 20% Price Increase

one word by magsol · 2012-11-12 04:41 · Score: 5, Funny

pwnd

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Re:one word by michelcolman · 2012-11-12 04:54 · Score: 5, Funny

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 by Anonymous Coward · 2012-11-12 04:59 · Score: 5, Insightful

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 by Anonymous Coward · 2012-11-12 05:03 · Score: 4, Insightful

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 by gstoddart · 2012-11-12 05:09 · Score: 5, Informative

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.

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Re:one word by somersault · 2012-11-12 05:12 · Score: 5, Insightful

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.

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Re:one word by hattig · 2012-11-12 05:12 · Score: 5, Insightful

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 by oxdas · 2012-11-12 05:34 · Score: 5, Informative

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 by osu-neko · 2012-11-12 05:43 · Score: 5, Insightful

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.

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Re:one word by slashmydots · 2012-11-12 05:46 · Score: 4, Informative

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 by maeglin · 2012-11-12 05:47 · Score: 4, Interesting

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 by WindBourne · 2012-11-12 05:56 · Score: 4, Interesting

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.

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Re:one word by Xest · 2012-11-12 06:48 · Score: 4, Insightful

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 by 93+Escort+Wagon · 2012-11-12 07:05 · Score: 4, Informative

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.

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Re:one word by thoughtlover · 2012-11-12 07:41 · Score: 5, Informative

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.

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Re:one word by Anonymous Coward · 2012-11-12 08:39 · Score: 5, Funny

... And the price increase gets pass down to ...
Apple customers! See, nothing wrong at all.
Re:one word by sl4shd0rk · 2012-11-12 09:05 · Score: 4, Funny

So far, Tim Cook is making QUITE the splash.
Yes, like that of a commode.

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Is it a special price hike? by Anonymous Coward · 2012-11-12 04:43 · Score: 4, Interesting

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 by houstonbofh · 2012-11-12 04:46 · Score: 5, Insightful

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

Re:So???? by Missing.Matter · 2012-11-12 04:56 · Score: 5, Informative

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 by Anonymous Coward · 2012-11-12 04:59 · Score: 5, Funny

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

Re:Inevitable by Krojack · 2012-11-12 04:59 · Score: 4, Funny

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

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

Re:20% eh? by jareth-0205 · 2012-11-12 05:03 · Score: 5, Insightful

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.... by roc97007 · 2012-11-12 05:04 · Score: 5, Funny

will be paid on the installment plan.

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Re:Inevitable by bluefoxlucid · 2012-11-12 05:07 · Score: 5, Funny

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

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Re:Inevitable by Missing.Matter · 2012-11-12 05:16 · Score: 5, Insightful

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 by Applekid · 2012-11-12 05:22 · Score: 5, Funny

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

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Re:Inevitable by MightyYar · 2012-11-12 05:23 · Score: 4, Interesting

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.

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Re:Inevitable by MightyYar · 2012-11-12 05:40 · Score: 4, Interesting

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.

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Re:Inevitable by bluefoxlucid · 2012-11-12 05:42 · Score: 4, Insightful

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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So basically... by Andy+Prough · 2012-11-12 05:47 · Score: 4, Funny

...you're talking out your ass?

Re:Inevitable by Ecuador · 2012-11-12 05:48 · Score: 4, Funny

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

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Re:Inevitable by oxdas · 2012-11-12 05:51 · Score: 5, Informative

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 by NatasRevol · 2012-11-12 05:55 · Score: 4, Informative

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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Re:Inevitable by eth1 · 2012-11-12 06:25 · Score: 5, Interesting

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 by SecurityGuy · 2012-11-12 06:29 · Score: 5, Funny

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.

Car analogy by symbolset · 2012-11-12 07:21 · Score: 4, Insightful

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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Samsung Hits Apple With 20% Price Increase

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