Why Apple and Samsung Still Get Along, Behind the Courtroom Battles

After suing each other for the last few years in various courts around the world, you'd think that if Apple and Samsung were human beings they would have walked away from their rocky relationship a while back. The Wall Street Journal explains (beside the larger fact that they're both huge companies with complex links, rather than a squabbling couple) why it's so hard for Apple to take up with another supplier. Things are starting to look different, though: "Apple's deal this month to start buying chips from TSMC is a milestone. Apple long wanted to build its own processors, and it bought a chip company in 2008 to begin designing the chips itself. But it continued to rely on Samsung to make them. ... TSMC plans to start mass-producing the chips early next year using advanced '20-nanometer' technology, which makes the chips potentially smaller and more energy-efficient."

Comments

It's because Steve is gone

[kthreadd]

Now they are just riding it out, both laughing all the way to the bank.

Re:It's because Steve is gone

[Anonymous Coward]

Alliance: two thieves who have their hands so deeply insert into each other's pockets that they cannot separately plunder a third.

Re:It's because Steve is gone

[arbiter1]

Um, not really, Apple needs Samsung, Samsung doesn't need apple. Samsung is one few companies that can keep the demand apple has for chips in its phones. Going from company size, Samsung is much larger and worth a lot more considering they make so many products where as Apple 95-98% of their profits are from 2 product's

Re:It's because Steve is gone

[Guy Harris]

Alliance: two thieves who have their hands so deeply insert into each other's pockets that they cannot separately plunder a third.

That sounds like something out of Ambrose Bierce's Devil's Dictionary.

That's because it is.

Re:It's because Steve is gone

[devleopard]

Samsung's stock took a 6% hit, or $10B in market cap lost, when it was RUMORED they were losing Apple chip contract last year:

http://www.reuters.com/article/2012/05/16/us-samsung-chips-idUSBRE84F0BT20120516

Perhaps Samsung doesn't *need* Apple, but they are a major customer and a major source of revenue. Kinda like saying WalMart doesn't *need* to have stores in Texas or California.

Re:It's because Steve is gone

[Savage-Rabbit]

Um, not really, Apple needs Samsung, Samsung doesn't need apple. Samsung is one few companies that can keep the demand apple has for chips in its phones. Going from company size, Samsung is much larger and worth a lot more considering they make so many products where as Apple 95-98% of their profits are from 2 product's

Samsung's electronics division is a mini corporation within the Samsung empire that cares more about what Apple is doing than what most of the rest of the Samsung empire is doing. At the moment Samsung is making a bundle off of every iPhone, iPad and iPod sold by Apple on top of what they are making from their own like of tablets and smartphones and that has to count as a pretty nice win-win situation. I can't imagine that the bean counters at Samsung are happy at the prospect of a major smartphone and tablet computer manufacturer who commands 20% of the smartphone market and 40% of the tablet computer market (and the lucrative high end segments of those markets at that), will in future be spending money that previously flowed into Samsung 's coffers with Samsung's competitors.

Re:It's because Steve is gone

[Jah-Wren Ryel]

Samsung's stock took a 6% hit, or $10B in market cap lost, when it was RUMORED they were losing Apple chip contract last year:

Are you seriously trying to imply that the stock market in the short term is an objective measure of, well, anything other than the emotions of the participants?

Re:It's because Steve is gone

[maccodemonkey]

Um, not really, Apple needs Samsung, Samsung doesn't need apple. Samsung is one few companies that can keep the demand apple has for chips in its phones. Going from company size, Samsung is much larger and worth a lot more considering they make so many products where as Apple 95-98% of their profits are from 2 product's

TSMC plans to start mass-producing the chips early next year using advanced '20-nanometer' technology, which makes the chips potentially smaller and more energy-efficient.

Seems Apple doesn't need Samsung.

Re:It's because Steve is gone

[Bing Tsher E]

If Apple disappeared and 1 Infinite Loop became an instant smoking crater, the market demand for cell phones with Samsung chips and displays would not disappear. So some other company would make those cell phones with Samsung chips and displays in them. Perhaps an enlarged division of Samsung. Perhaps some other customer of Samsung.

The fact that a bunch of speculators leapt at a rumor like that is more a reflection of how flaky investors are, not a reflect on anything about Samsung.

Re:It's because Steve is gone

[JonnyO]

Arrangements like Apple's and Samsung's may sound strange at first but it happens a lot more than one might think. I work for a very large French company that has its own in-house IT services group, yet my subsidiary handles the majority of its IT operations on its own, including using external hosting companies and service providers that directly compete with them. We can get away with it because we execute faster, with better flexibility, higher quality, and for less money.

BTW, controlling the manufacturing isn't the advantage some make it out to be. It's a very low-margin industry, which is why so much of it is done in low-wage places like China. If bringing manufacturing in-house had strategic value then you can be assured that Apple and any other company with a decent mountain of cash would work on acquiring such capabilities. Take a look at Sony- nobody is citing their in-house manufacturing as a key differentiator or advantage.

Re:It's because Steve is gone

[tlhIngan]

Arrangements like Apple's and Samsung's may sound strange at first but it happens a lot more than one might think. I work for a very large French company that has its own in-house IT services group, yet my subsidiary handles the majority of its IT operations on its own, including using external hosting companies and service providers that directly compete with them. We can get away with it because we execute faster, with better flexibility, higher quality, and for less money.

Actually, what's interesting is there's a huge interdependency on every company - Apple, Google, Microsoft, Samsung, etc., they're all interdependent. Everyone thinks it's "Apple vs. Samsung" or "Google vs. Apple", but the world isn't so black and white. In fact, I bet a lot of products contain a significant amount of, shall we say, incest, where competitors actually help build part of the product.

And things don't get easier as well - because these interdependencies ensure that the market stays interesting. Remove any one and things start collapsing. Apple and Google compete on a lot of things (and it allows Apple and Google to do a lot of things that if it wasn't for the other, it could be found as anti-competitive), but they also share a lot of things as well.

Hell, you can probably pick any silicon valley company to boycott, and any high-tech product, and find there's a connection between the two.

Re:It's because Steve is gone

[Jah-Wren Ryel]

But to suggest that it's 100% emotions is just silly.

I do believe it is 100% emotions - economics itself is just a branch of psychology.

However, not all emotions are wrong, I just think they aren't an accurate tool, one way or the other, to evaluate the fundamentals of a company.

Re:It's because Steve is gone

[Jah-Wren Ryel]

I'm sure the cash you're holding is just a bunch of emotions too. Let me guess, you love it so much that you wouldn't want to give them to me.

Yeah, that pretty much sums it up. You got some other interpretation?

Re:It's because Steve is gone

[AmiMoJo]

Assuming TSMC can really start churning high millions of chips on a brand new 20nm process reliably. Seems unlikely considering how often they have had teething problems with new processes in the past.

You don't just buy a machine that turns raw silicone into CPUs or radios. It is of course far too early to predict what will happen but there is a huge amount of risk involved for Apple. It really wouldn't surprise me if new hardware gets delayed or fitted with parts built on an older process as TSMC struggle to ramp up yields and quality to acceptable levels.

Look at it another way, there is a reason why they don't supply chips competing with Samsung's high end stuff at the moment. Apple is hoping they can do it in the future.

Re:It's because Steve is gone

[LordLucless]

No; Apple are planning to not need Samsung in the future. They are doing that precisely because they do need Samsung now. They're getting rid of a single point of failure.

It's because of Steve

[tuppe666]

Now they are just riding it out, both laughing all the way to the bank.

Wow. Ironically Apple could have manufactured themselves under Steve Jobs regime but instead chose through cost saving go elsewhere(Samsung). They famously laughed at the president at the suggestion of bringing Apple Manufacturing to the states, and now are having the unpleasant sunrise of of their top (and only) phone looking mid range and 12-18 months out of date at launch. While Samsung refresh a product range every three months. Now thousands of patents are on various hardware components by various Korean and Chinese companies....with Apple having relatively few design & interface patents, admittedly with a friendly court system looking favourably at them.

Thankfully Jobs does not have to live with the consequences of this...as he died, but in context of going to the bank article...Apple is going to the bank with less profits (less market share, less market cap, less brand value, less cutting edge, less interesting products, less news, less innovation). At least Dell finally got to say I told you so.

Re:It's because of Steve

[Anonymous Coward]

Here's a decent blog post that I concur with as a multi-platform developer. Time to tuck away that phanboy attitude and open your eyes to the world of tech, it improves your health (always happy to hear of any new tech!) and smells a lot less like shit too! http://www.passion4teq.com/articles/ios-android-development-comparison-1/

Re:It's because of Steve

[immaterial]

Apple uses their own custom-designed ARM CPU core.

How to make money and lose business outsourcing

[Cassini2]

A simple sure-fire plan:
1. Outsource all of your core competencies - parts, production, everything. Keep nothing in house.
2. Profit!!!
Quietly, suppliers start selling direct to customers to make more money.
3. Find cheaper suppliers - more Profits!!!
Discover your original suppliers now sell a better product.
4. Liquidation sale! More Profits!!!

Last Step:
1. Write a business school textbook, preaching the virtues of the first 3 steps.

Highest paid in World

[tuppe666]

I'm just thinking out loud but, could he be taking bribes from Samsung (or others) to make himself rich on the sidelines?...

From his Wikipedia Page http://en.wikipedia.org/wiki/Tim_Cook "In early 2012, he was awarded compensation of 1 million shares, vesting in 2016 and 2021, by Apple's Board of Directors.[5] As of 2012, Cook's total compensation package of US$378 million makes him the highest paid CEO in the world"

So I would say No!

Re:Except that you asume everybody is dumb like yo

[kesuki]

'Or are you too dumb not to question why a company that makes the CPUs and retina displays for Apple can't use them in their own product line."

first off there are patents, which both accuse the other of violating, next of all there is the fact that ios doesn't come with 'knowing' how to make the parts, which you claim samsung doesn't know despite making them. of course the agreement to not reuse apple tech is needed because well we all know how the government feels about patents and trademarks. especially in china where most of apple's product line is made...

personally i call prior art, on tablets as st tng used them heavily...

I remember 2007

[tuppe666]

Midrange and out of date. Last I checked it still blew anything else out there out of the water in pretty much any benchmark. How's the iPhone mid-range in anything other than fanboy nonsense?

2007 was a great year, the film 300 game out, The last episode of the price is right, and Anna Nicole Smith's untimely death.

I can't think of a flagship phone from competing company that is not newer, higher DPI, More RAM, Faster processor, With features like waterproof and IR running a later OS.

Apple fell behind a long time ago, This is just getting more and more marked as time goes on.

Move to Google Play Edition Phones

[tuppe666]

top (and only) phone looking mid range and 12-18 months out of date at launch

Samsung's phones might be more cutting edge at launch. But in 1+ year, the iPhone will still be supported by (decent) software updates, and the Samsung phone will be long forgotten for the latest and greatest.

Interesting I have seen a launch of what is dubbed "Google Play edition phones"(including samsung) from a few manufacturers that come with stock android. In response to this very issue. They now come with Vanilla Android and will be easier to update. Apple conversely is expanding their product line instead of using older models as a product line so expect support lengths to drop dramatically.

Or using industry measures

[tuppe666]

It's telling you are speaking outside your area of expertise, there's a rather large optimization gap between Apple's in-house iOS vs Samsung's use of Android.

http://www.primatelabs.com/blog/2013/03/samsung-galaxy-s-4-benchmarks/ The analysis shows the new Samsung flagship is significantly faster than competing phones including the HTC One, and its predecessor, the Samsung Galaxy S3. However, the S3 also benchmarked faster than the iPhone 5.

So slower than the last generation of Samsung Phones

Technology Reporting

[Anonymous Coward]

"Potentially" makes them smaller and more power efficient. Or rather "does" but the reporter isn't knowledgeable enough to know one way or another. And the real reason for the switch? TSMC will be shipping 20nm, and Samsung wont be for months and months and months, they haven't even announced a switch to a smaller process.

Apple tends towards sticking the highest quality components it can find in its devices, and next year TSMC will provide that while Samsung won't be. Not hard to figure out why the switch is happening.

Re:Technology Reporting

[TechyImmigrant]

>"Potentially" makes them smaller and more power efficient. Or rather "does" but the reporter isn't knowledgeable enough to know one way or another.

No. The reporter is spot on. While in the past doing a simple shrink without redesign or significant relayout would always give power and area savings, the same is no longer true, since energy density and leakage may go up faster than dynamic power goes down. So you may need to re-layout to dilute the heat concentrations and you may find yourself consuming more power.

These days, adding advanced power features to chips is a necessary step to yield the full power and area benefits of denser transistors. Witness the power and area improvements in Haswell over Ivy Bridge, while the process (22nm) stayed fairly constant.

Why would they?

[tuppe666]

'Or are you too dumb not to question why a company that makes the CPUs and retina displays for Apple can't use them in their own product line.

Apples CPU's are measurably slower tham the Samsung Galaxy SIII Samsung last generation product and retina Display has become synonymous with Low DPI as 1080P becomes the new normal for Android.

It takes years to change logistics

[alen]

Apple can't just order 100 million cpu's from someone. You need the infrastructure and supply chain to be able to meet the orders. And you don't dare drop existing customers

It's taking apple five years to diversify its suppliers which is about average for a company their size

Apple's capital expenses have been huge lately which most likely means they are buying the machinery for their suppliers to make their stuff for them

Perceptions

[DaMattster]

Sometimes the perception of conflict really works well because it draws media attention to those involved: almost like some free advertising. For the longest time, Coca Cola and Pepsi played up on the public's perception of bitter competition and conflict. In reality, the competition is a good bit friendlier with the executives at each company respecting their counterparts; If you recall, a few years ago someone tried to steal a recipe from Coke and hand it to Pepsi. Pepsi Co ended up reporting this to authorities.

Just like Cutler Beckett said...

[AnuradhaRatnaweera]

"It's nothing personal, Jack. It's just good business."

TSMC has a bad track record with new processes

[JDG1980]

"TSMC plans to start mass-producing the chips early next year using advanced '20-nanometer' technology, which makes the chips potentially smaller and more energy-efficient."

I'll believe this when I see it. TSMC has a chronic problem with moving to smaller process nodes; they've got a long history of over-promising and under-delivering. Oh, they eventually get it right, but early customers are basically paying for the privilege of being their beta testers, and Apple is going to find this out if they try to move away from Samsung too quickly. NVIDIA's infamous "bumpgate" fiasco was due, at least in part, to problems with an immature TSMC manufacturing process.

Re:TSMC has a bad track record with new processes

[R3d M3rcury]

Oh, they eventually get it right, but early customers are basically paying for the privilege of being their beta testers, and Apple's customers are going to find this out [...]

FTFY.

But it's okay. I'm sure Tim will write a really nice apology.

My anecdote can whip your anecdote

[Zontar The Mindless]

My S3 runs rings around my girlfriend's iPhone5. She's mad as hell about it, too. ;)

Re:Except that you asume everybody is dumb like yo

[AmiMoJo]

Samsung and LG own all the patents on the LCDs used in the retina screens. Keep in mind they are pretty low end screens, not even 720p HD, where as those guys are both using 1080p as standard on their own high end models.

Apple doesn't really invent much tech. They are mostly a design company. They take technology from other companies and integrate it, then patent the overall design. That's why they are having problems with FRAND patents - they don't have any to license in return so have to pay cash.