Apple Learns That Suing A Key Supplier May Not Be So Smart; Samsung Jacks Up Prices On Apple

from the oh-look-at-that dept

Apple may be happy it won the first round of its patent fight against Samsung in the US (it’s not faring quite so well elsewhere around the globe), but these things have consequences. Besides being a competitor, Samsung is also a key Apple supplier… and it appears that Samsung is now using that to its advantage, jacking up the price on a mobile processor supplied to Apple by 20%. The report notes that Apple pushed back initially, but after realizing it couldn’t find a reasonable replacement, agreed to the new prices.

According to the report, Apple buys all APs used for production of iPhone and iPad from Samsung Electronics with the volume estimated to be 130 million units last year and more than 200 million units this year.

Samsung Electronics has a long-term contract to supply APs to Apple until 2014, the report added.

So even if Samsung has to pay Apple for patent infringement, perhaps it’ll be financed by the higher prices on processors Samsung sells Apple.

Maybe, next time, instead of suing each other, they could just focus on building products people like and letting the market sort the rest out.

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Companies: apple, samsung

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Comments on “Apple Learns That Suing A Key Supplier May Not Be So Smart; Samsung Jacks Up Prices On Apple”

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75 Comments
Digger says:

Apple is a Yellow-Bellied mucus swilling back-stabber

I believe that Samsung wanted to do things that way, but Apple, petulant child that it is, doesn’t like things that way.

Look back to the Laser 128 Computer that outsold Apple IIe that it was a clone of by a factor of 4. This was of course when Apple rescinded the license for Laser Computers to manufacture the clones.

Poor Apple, never could compete on an even playing field.

Wally (profile) says:

Re: Apple is a Yellow-Bellied mucus swilling back-stabber

So according to your mixed up sense of history…Apple coppied a form factor that Samsung “invented”. If you are referring to The Apple IIe came out in 1983, and used a form factor that had been around as an INDUSTRY STANDARD since 1977 (given the MAJOR design differences betweem the two internally and externally). Did you consider that in 1977, the first Apple II models were sold and the IIe was the result of engineering work done by Steve Wazniak and company? Yup, *rolls eyes in sarcasm* The IIe is definitely a Samsung clone running on totally different hardware, design, memory control, blit masking techniques by the DMA controller rather than CPU, and comparatively simple to use and install hardware controller cards, and coming from a company who INVENTED THOSE tecginques is definitely the sign of the Apple IIe being a clone.

Anonymous Coward says:

Re: Re: Re:2 Apple is a Yellow-Bellied mucus swilling back-stabber

Stop being so condescending, especially when it’s you who needs to learn something: english. You need to practice reading comprehension.

He is saying that the Laser 128 was a licensed clone of the Apple IIe and that the Laser 128 outsold the Apple IIe by a factor of 4. And that’s when Apple rescinded the license.

It’s a bit clumsily worded by Digger, but still perfectly comprehensible.

Anonymous Coward says:

Re: Re: Re:

Of course not. People can rush out and buy immensly expensive phones. They can even throw out their perfectly sufficient and well working phones to buy an even pricier newer version that is only slightly better – but in this economy, you just can’t afford to raise the prices on these phones… people just don’t have ANY money!

Cynyr (profile) says:

Re: Re: Re:

Not always, maybe the rest of the device will be value engineered to make up the difference. I’m sure most of the low hanging fruit is long been picked, but save a few pennies here and there and it’ll add up some.

Also Apples prices have never seemed to reflect any sort of consistent margin on the hardware, so it is possible that they like the devices pricing for some other reason and are willing to accept a smaller margin.

Anonymous Coward says:

Re: Re: Re:

Lose? I ain’t losing. I’m laughing.

Apple products are overpriced pieces of junk…

Well OK, that isn’t completely fair. They have arguably have the most consistent look and feel along with the best UI development.

However their ability at multithreading, or any serious back end heavy lifting programming is subject of ridicule in college classes.

Buster says:

Re:

It’s beyond me why the 2 phone giants won’t work on a project phone together. I know their OS’s are totally opposite, but imagine if they worked together to create a device, then made one for the Apple OS and the other Android. They’d completely monopolize the market in one quick sweep. They’re only competition would be Blackberry and basic old-fashion phones – you know, the phones with more than 3 physical buttons.

Anonymous Coward says:

Re: Re: Re:

They are, and they haven’t.

There’s windows phones available at multiple price points on every major carrier in the US and so far the answer has been: Decent but not phenomenal phones, Decent but not phenomenal OS, crappy app ecosystem, and no compelling reason to buy one over Apple or Android.

DannyB (profile) says:

How will things go for Apple?

First some sources:

http://www.marketwatch.com/story/samsung-hits-apple-with-20-price-hike-report-2012-11-11
http://www.forbes.com/sites/timworstall/2012/11/12/samsung-raises-prices-to-apple-i-wonder-why/
http://semiaccurate.com/2012/10/23/apple-vs-samsung-samsung-put-the-boot-in-hard/
http://www.businessweek.com/news/2012-11-04/sharp-seen-seeking-government-bailout-after-record-loss-forecast

But you can easily Google for other sources of the facts in I’m saying next.

My overall take of the facts,:

* Samsung hikes Apple’s price for microprocessors by 20%
* Probably could not hike it more without attracting scrutiny for predatory pricing
* Rumors Apple will switch to TSMC to fab its processors by 2014, but apparently TSMC cannot fab the volumes Apple needs. (But will it be a 20nm process?)
* Samsung will not be making Apple’s displays next year (my guess: this is earliest that contract allows)
* Apple has been in process of switching to Sharp for production of displays
* Sharp says there is material possibility that it cannot remain in business — losing billions per year
* Japanese government says no bailouts coming
* If Sharp is a source of Apple displays, Apple must keep Sharp afloat (it would seem to me, or they lose a supplier)
* Samsung has a customer lined up for that excess production capacity of displays: Samsung — who just happens to manufacture phones and tablets.
* Samsung now has a display supplier at significantly cheaper cost than Apple. (Can you say Bill Of Materials cost?)
* Samsung owns various patents in fabrication process technology for displays
* Irrelevant to Apple except perhaps competitively, but Samsung also owns the patents for and the only manufacturing capacity of AMOLED displays found on Samsung devices. Once, Samsung briefly sold AMOLED displays to HTC, but now keeps entire production capacity to itself. All others must use LCD.
* Samsung owns about 10% of the patent pool for LTE (often called “4G” cell phone)
* Guess who is number one in both volume and quality for manufacturing Flash memory? (No one else is even close.)
* Apple buys Flash from Samsung by the acre.
* Nobody can supply Apple with the quality and quantity of Flash that Apple consumes — not to mention at Samsung’s (present) price.

I will refrain on speculating on what other announcements we might soon be reading.

I would appreciate any corrections to anything I may have misstated or that is factually wrong.

Austin (profile) says:

Re: How will things go for Apple?

Just wanted to say that 1) All of this is true.

And 2) I HATE that it is true. Why? Because Samsung sucks.

Not Android, mind you. Android is freaking awesome. But really, both Acer and ASUS tablets are vastly superior to anything Samsung (or Apple) makes, and not locking down the bootloaders helps that a LOT. On the phone side, HTC is still king. I mean, they’re losing market share left and right, but they still make the best phones out there, period. And I know this from experience.

In early August I got a T-Mobile Sidekick 4. It’s made by Samsung, and at the time it was just over 3 months old. Yes, really. My previous phone was a G2, also T-Mobile branded, but produced by HTC. I used the sidekick for 2 weeks, and in those 14 short days, I almost totally bricked the damn thing 7 times, including 3 times JUST REBOOTING IT. Yes, it was such a cheap piece of crap simply rebooting the thing was enough to require that I USB it in and re-flash thee stock firmware. It’s THAT bad. And it’s not just that device. The dual-core Samsung phone with the 2GB of memory and the “big, beautiful screen” my mother briefly tried before running screaming back to her iPhone wasn’t any better. Now I’m back on my 2-and-a-half-year-old HTC G2. It’s old, it’s slow, but yanno what? It’s running ICS, it has a BACKLIT HARDWARE KEYBOARD, and it never, ever crashes. The 2 year newer Samsung can’t do ANY of that, much less all of it.

So yeah. As much as I hate Samsung, I hate Apple much more, so I’m happy to see this. But don’t get me wrong – only because, as long as Samsung keeps pushing back, iOS doesn’t take over the market, and that’s a good thing.

RufusBoy says:

Re: How will things go for Apple?

It always amazes me how stories like this always descend into Apple is about to go out of business. If one keeps track of the clairvoyants around here:

Apple will go bust because Samsung is the only one that can supply them with their raw components.

Microsoft is about to go bust because everyone will use cloud computing and no longer have a need for their top selling Office package.

Microsoft is also about to go bust because everyone uses tablets and smartphones now.

Microsoft is about to go bust because: (insert applicable latest OS: Chrome / Linux / MacOS) will wipe out their desktop market completely.

Samsung is about to go bust because Apple sends Billions of dollars their way, and once they stop using them as a supplier their profits will plummet.

Google is about to go bust because their rate of returns on their AdWords product – their primary source of income – has fallen due to poor economic conditions as well as people switching to different search providers, as well as more people using open source alternative to Google Maps.

Facebook is about to go bust because with everyone accessing it on their tablets or smart phone they aren’t using the web browser version anymore, so won’t be viewing any of the paid advertising on the site.

Canon is about to go bust because more an more people are using phones instead of stand alone hand held cameras.

Nikon is about to go bust because Canon is taking away so much or their SLR business as well as smart phones (see above).

HTC is about to go bust because they have only sold, like 5 units this year, worldwide!

The whole tech industry is about to go bust, just because.

If you don’t like a companies products, then fine, don’t buy them. No one cares what you buy / don’t buy, but must we be constantly reminded that pretty much every tech company in the world is right on the verge of going bust?

DannyB (profile) says:

Re: Re: How will things go for Apple?

> It always amazes me how stories like this always
> descend into Apple is about to go out of business.

I hope this thread doesn’t descend into that.

I certainly did not say that.

As for threads descending, there is a Jobs’ Law that is similar to Godwin’s law.

Jobs’ Law: any thread will eventually degenerate into an Apple flamewar.

Anonymous Coward says:

Apple always complain about the charges they get from other companies, yet i read earlier where they are going to be getting between $6 and $8 per smart phone now from HTC. funny how it’s ok when Apple are charging what they like. about time all companies stopped dealing with them altogether. after all, they get components from a supplier one minute, then sue that supplier so end up getting the components for free. gotta end some time

nona says:

Re: Re:

No, Samsung keeps its display and flash in house, reducing its cost of materials. Consumers buy Samsung Android based phones at much lower cost that Apple iPhone. After all Apple just sued Samsung and won due to the fact that Samsung copied Apple’s tech; therefore the Samsung phone ‘must’ be just as good.

For the humor impaired: this is continuing the sarcasm/humor (not sure which *grin* ) of the above comment.

JJ says:

Why is the assumption that Apple formed a supply contract with Samsung with absolutely no price guarantee? No one does that. No one goes to order millions upon millions of chips and has with no control over the cost. Samsung isn’t just allowed to say “well, we’re only half way through shipping your chips, but the next half will cost you more!” Perhaps, if there even was a price increase, it was all built into the plan. Apple agreed that as production slowed, they would pay a higher price per chip because of the reduced ordering volume. The samsung chips are only on the previous generation of Apple products (and the new iPad Mini). The new iPad and iPhone use the A6 chips which are not even manufactured by Samsung, but instead, TSMC. I can’t believe how out of control this story has gotten with only the shakiest of sources.

bigpicture says:

Re: Contract with Samsung

I can see you do not know a whole lot about contracts, and especially supply contracts. Prices are not fixed for the Term of the contract, the longest that I have ever seen is 6 months, and quarterly review more like it.

Now in normal good business relations a price review does not necessarily imply an increase, sometimes it’s a decrease. But under the current situation, if I were handling Samsung’s contract, especially with the leverage it has, (Apple cannot walk away which is the BIG lever) I would jack the prices more than 20%. Why would Samsung worry about maintaining any sort of business relationship with Apple when Apple is so dam stupid. Just gouge them all you can, use the Apple motto. gouge,gouge, gouge.

karen wanza (profile) says:

Samsung Raises prices of processers sold to Apple

It appears to me that the public’s overwhelming support and identification with Apple’s grievances is misguided at best. It is totally unrealistic to think that any company,no matter how enticing its products are,will act in a way that puts the consumer first (other than as a pocket waiting to be picked)therefore it should have been foreseen that the only winners of this lawsuit are the two companies,certainly not innovation. Of course Samsung would jack up its prices in response to Apple’s win of a huge award for damages for what looks like,in light of this revelation about Apple’s dependency on Samsung for supplies,adecision based more on Apple’s popularity than on the law itself. Surely if Apple is forced to pay morefor the parts Samsung sells,the cost will be shifted to the consumer in the form of even higher prices for Apple products (as long as the market will bear this which seems to have been the case so far). So do consumers really have a reason to identify with either company? No. Does the next Steve Jobs have a chance to enter into fair competition with these giants? Hardly. Perhaps people should reserve their loyalty for things that truly have a possible good outcome for everyone such as fair labor practices both here and in the countries that are home to their factories such as China.

John Fenderson (profile) says:

Re: Samsung Raises prices of processers sold to Apple

the public’s overwhelming support and identification with Apple’s grievances

The public identifies with and overwhelmingly supports Apple’s grievances? What public?

Ignoring hardcore Apple fans because they’ll support Apple no matter what (and they’re a pretty small minority), here’s how it looks to me: the general public couldn’t care less either way. Amongst techheads, most either don’t care at all or are enjoying watching two overbearing titans duke it out with each other.

Wally (profile) says:

Re: Re: Samsung Raises prices of processers sold to Apple

Thank you John Fenderson…you were heavily missed!!! 🙂

I do have a message for Android fanboys though…and from a tech head perspective:
By raising the price per chip manufactured by Samsung for Apple, Samsung has done absolutely nothing that would remotely raise the price of Apple’s devices. It will create a shortage yes, but definitely not raise the cost as you had hoped.

For Apple Fanboys:
Apple can afford the increase…shut up. It won’t raise the prices for your next device coming out.

Anonymous Coward says:

Could Samsung retaliate with Patents against Apple for CPUs?

There is a lot of talk about Apple changing its supplier for core chipsets (to TSMC?) — but silicon is a place where Samsung has a lot of Patents (as opposed to software).

Given Apple’s notion that anyone who is downwind of an infringing product is liable, it would be interesting if Samsung sued Apple for switching to non-Samsung chips — even if those chips were 100% designed and fabbed-to-spec for Apple, they probably will require manufacturing processes that Samsung has a patent or two on.

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