Samsung Hits Apple With 20% Price Increase

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Samsung Hits Apple With 20% Price Increase

Posted by samzenpus on Monday November 12, 2012 @04:40AM from the pay-up dept.

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].'"

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

pwnd

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"I'd just like to emphasise that taking a million years isn't a metaphor here..." -Rich Bradshaw
1. 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...
2. 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.
3. 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.
  
  --
  Lost at C:>. Found at C.
4. 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.
  
  --
  which is totally what she said
5. 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.
6. 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.
7. 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.
  
  --
  "Convictions are more dangerous enemies of truth than lies."
8. 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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9. 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: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: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.

--
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
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.

--
More Twoson than Cupertino
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: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.