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Apple suppliers Samsung, AU Optronics ramp up as iPad 2 demand surges

post #1 of 22
Thread Starter 
Samsung will hire 300 engineers and technicians for a semiconductor plant in Austin, Tex., in the company's latest round of expansion largely driven by increased demand for the iPad and iPhone, while AU Optronics has denied rumors that it received orders for flat panel screens bound for the iPad 2.

Samsung

EETimes reports that Samsung Austin Semiconductor plans to create 300 more engineering jobs this spring as part of a $3.6 billion expansion. According to sources, most of the production at the 300-mm fab is commissioned by Apple.

The 300 new employees will join a large batch of employees from last year's growth. "In 2010, we hired more than 600 employees as part of the current expansion, bringing total employment to approximately 1,700," said Charmaine Winters, senior human resources manager at Samsung Austin Semiconductor, in a statement.

Though rumors had suggested that Apple had inked a deal with Taiwan Semiconductor Manufacturing Co. for production of the A5 chip for the iPad 2, due to concerns of increased competition with Samsung, X-ray analysis of Apple's A5 CPU in the iPad 2 confirmed that the chip was still manufactured by the Korean electronics giant.

All told, Apple is projected to purchase $7.8 billion worth of components from Samsung this year, including liquid crystal displays, mobile application processors and NAND flash memory chips, making Apple Samsung's largest customer.

AU Optronics

Update 2: AU Optronics executive vice president Paul Peng has denied rumors that the company received display orders from Apple.

Taiwanese business newspaper The Economic Daily News claims that AU Optronics, the world's No. 4 LCD maker, has received its first order for LCD screens for Apple's iPad 2, as noted by Reuters.

According to the report, the panels will sell for three to four times the price of regular panels and will represent a substantial boost in profit for AU. The size of the order could occupy more than half the production capacity at the supplier's fifth-generation plant in Taichung, Taiwan, the report noted.

Update: Shares of AU stock jumped up as much as 6 percent as investors responded positively to the rumor. Analysts, however, cautioned that the report should be taken with a grain of salt.

"I think the credibility of this news is only at 30-40 percent, mainly because of the patent authorization for the technology," said Wayne Cheng, an analyst of Primasia Securities. Patent authorization and converting a factory to the new technology could take up to a year, said another analyst.

Last September, DigiTimes reported that Apple had brought on Cando, a subsidiary of AU Optronics, to produce touch sensors for the iPad.

Touch panels were a limiting factor in production of the original iPad last year and have likely contributed to supply constraints for the iPad 2.

Supply of the iPad 2 has yet to stabilize with overwhelming demand as hopeful customers continue to line up more than two weeks after the device's U.S. launch. Though estimated shipping times for the iPad 2 from Apple's website have improved from 4-5 weeks to 3-4 weeks even as the device launched in 25 countries last week, available stock has remained limited.

Positive response to the iPad 2 has prompted several analysts to increase their sales forecasts. Charlie Wolf with Needham & Company increased his projection of iPad sales for 2011 from 20 million to 30 million. The analyst also added 10 million units to his prediction for 2012 iPad sales for an estimated total of 40 million.

"Attempting to forecast the growth trajectory of a new category of computers is difficult, if not perilous," Wolf wrote. "However, the launch of the iPad 2 so far exceeded our expectations that it was evident our 2011 and 2012 shipment forecasts were dramatically low."
post #2 of 22
Quote:
"...making Apple Samsung's largest customer"

wow...

An iPhone, a Leatherman and thou...  ...life is complete.

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An iPhone, a Leatherman and thou...  ...life is complete.

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post #3 of 22
I know the analysts are always crying for Apple to give out dividends and/or do stock buybacks, but I think the money is better off spent in this way. Apple needs to ramp up component supply quite a bit if it expects to own the tablet market for years. In theory, Apple will be going up against dozens of companies and any component shortages could become a serious problem. I suppose the touch panel factories could be used for future products as well. It appears Apple isn't sitting back and waiting for the iPad to fail as the Dell dude says it would. It would be really something if the iPad could become as common as textbooks in the educational system. I know it's just a dream, but you never know how large iPad sales could become.
post #4 of 22
why is samsung trying to compete head to head with their best customer? What do they do if that competition causes Apple to use other suppliers for business they would have given to Samsung while Samsung's own tablet products continue to flounder in the market?
post #5 of 22
300 high tech jobs in Austin? What's that again about Apple only spurs job creation overseas?
post #6 of 22
Quote:
Originally Posted by alandail View Post

why is samsung trying to compete head to head with their best customer? What do they do if that competition causes Apple to use other suppliers for business they would have given to Samsung while Samsung's own tablet products continue to flounder in the market?

To understand this, we've to remember that companies like Samsung have grown so big that they simply have to do a lot of different things in order to maintain a certain level of growth, otherwise their stocks would tank. Just because Samsung has Apple as a big customers doesn't mean Samsung can just sit back and relax. Samsung would have to keep producing own phones/tablets/computers (obviously higher margin than just selling components to Apple) and even do a lot of other things like medical equipments in order to keep growing.
post #7 of 22
Quote:
Originally Posted by alandail View Post

why is samsung trying to compete head to head with their best customer? What do they do if that competition causes Apple to use other suppliers for business they would have given to Samsung while Samsung's own tablet products continue to flounder in the market?

Well, to be fair, Samsung competes in a massive array of markets. If they stopped building stuff in any market where they were supplying components to a competitor, they would have to practically go out of business.
post #8 of 22
Quote:
Originally Posted by alandail View Post

why is samsung trying to compete head to head with their best customer? What do they do if that competition causes Apple to use other suppliers for business they would have given to Samsung while Samsung's own tablet products continue to flounder in the market?

Because Samsung Semiconductor has nothing to do with Samsung Electronics. They may be all under the same Samsung umbrella, but they have nothing to do with each other. Each subsidiary has to make it on their own and will gladly give priority to a customer (Apple) that writes the biggest checks, making their bottom-line look good.

I wonder if the boys on the top of the pedestal are shaking their heads at the folks running their PC subsidiary.

I love their flat-screen super-thin LED TV's though!
post #9 of 22
Quote:
Originally Posted by sflocal View Post

Because Samsung Semiconductor has nothing to do with Samsung Electronics. They may be all under the same Samsung umbrella, but they have nothing to do with each other. Each subsidiary has to make it on their own and will gladly give priority to a customer (Apple) that writes the biggest checks, making their bottom-line look good.

I wonder if the boys on the top of the pedestal are shaking their heads at the folks running their PC subsidiary.

I love their flat-screen super-thin LED TV's though!

Ahh, so they're essentially different companies? I didn't know that. It doesn't surprise me, but I didn't realize it.

BTW, I love my Samsung HDTV and Samsung Blu-Ray player.
post #10 of 22
Quote:
Originally Posted by AaronJ View Post

Ahh, so they're essentially different companies? I didn't know that. It doesn't surprise me, but I didn't realize it.

BTW, I love my Samsung HDTV and Samsung Blu-Ray player.

Companies such as Siemens and General Electric (GE) are essentially the same thing. They make everything from Jet engines, light bulbs, Nuclear Reactors, , Oncology, etc...

Each subsidiary has to show a profit to keep them in business. Ultimately, it's the parent company that gets to stuff their wallets to please the shareholders.
post #11 of 22
Quote:
Originally Posted by sflocal View Post

Companies such as Siemens and General Electric (GE) are essentially the same thing. They make everything from Jet engines, light bulbs, Nuclear Reactors, , Oncology, etc...

Each subsidiary has to show a profit to keep them in business. Ultimately, it's the parent company that gets to stuff their wallets to please the shareholders.

Gotcha. Cool. I learn something new here every day!
post #12 of 22
Quote:
Originally Posted by sflocal View Post

Because Samsung Semiconductor has nothing to do with Samsung Electronics. They may be all under the same Samsung umbrella, but they have nothing to do with each other. Each subsidiary has to make it on their own and will gladly give priority to a customer (Apple) that writes the biggest checks, making their bottom-line look good.

I wonder if the boys on the top of the pedestal are shaking their heads at the folks running their PC subsidiary.

I love their flat-screen super-thin LED TV's though!

Partly true. Samsung semiconductor division is part of Samsung Electronics, which is part of the greater Samsung conglomerate group which dabbles in everything from shipbuilding to selling insurance and from constructing apartment complexes to running hotel and hospital chains.

http://en.wikipedia.org/wiki/Samsung_Electronics

It's true that Samsung's semiconductor business unit really doesn't care where their orders come from - Apple or Samsung's own mobile division. Sure they'd prefer to make the chips for Samsung phones and tablets but the biggest orders are coming from Apple and, accordingly, Apple will get preferential treatment as Samsung Electronics' largest customer.

It's an interesting situation. To Apple, Samsung is Apple's largest and most important supplier and possibly the largest hardware competitor. To Samsung Electronics, Apple is their largest customer and certainly the largest competitor in the smartphone/tablet market - a classic love/hate relationship. And it's quite possible they'll be competing in the TV market as well. In fact, they already do when you consider the current Apple TV and Samsung's own smart TV and ecosystem they're trying to build.
post #13 of 22
Holy Cow! Jobs being created in the USA in the electronics field. It's a start. If only they could create a million jobs to produce electronics like the giant company Foxcon. That would be awesome.
post #14 of 22
Quote:
Originally Posted by alandail View Post

why is samsung trying to compete head to head with their best customer? What do they do if that competition causes Apple to use other suppliers for business they would have given to Samsung while Samsung's own tablet products continue to flounder in the market?

Market presence...

As much as some of the people in the anti-Apple camp like to believe, Samsung doesn't really care that much about their tablets, as much as it cares about its brand image and getting into as many markets as possible. To Samung, it doesn't matter a whole lot if one iteration of their tablet product line fails miserably, they still have 1001 other products and services that actually bring in the dough (amongst others: selling components). It's simpy a horizontal market strategy, very typical for Asian megacorporations.

Samsung has much more to lose by making Apple's life hard than it has to win by selling tablets. They do appreciate their market presence and brand image though.
post #15 of 22
Quote:
Originally Posted by AppleInsider View Post

"Attempting to forecast the growth trajectory of a new category of computers is difficult, if not perilous," Wolf wrote.

Perilous?

I nominate Charlie Wolfe as Drama Queen of the year!

.
"...The calm is on the water and part of us would linger by the shore, For ships are safe in harbor, but that's not what ships are for."
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"...The calm is on the water and part of us would linger by the shore, For ships are safe in harbor, but that's not what ships are for."
- Michael Lille -
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post #16 of 22
Austin gave Samsung a huge tax bribe, er I mean uh, tax break many years ago to build the initial plant there. I can't say the jobs haven't been good for us, but I really don't like this whole game American cities play with tax breaks and other incentives. My taxes are plenty high as it is. I don't need their effectiveness diluted by some giant corporation that can well afford to build wherever they want without any kickbacks.

http://www.statesman.com/business/te...on-742828.html
post #17 of 22
Quote:
Originally Posted by Smallwheels View Post

Holy Cow! Jobs being created in the USA in the electronics field. It's a start. If only they could create a million jobs to produce electronics like the giant company Foxcon. That would be awesome.

No it wouldn't. A million jobs paying sub minimum wage, and in a facility that's one rung above a forced labor camp in terms of personal freedom wouldn't be welcomed anywhere in this country.
post #18 of 22
Quote:
Originally Posted by WelshDog View Post

Austin gave Samsung a huge tax bribe, er I mean uh, tax break many years ago to build the initial plant there. I can't say the jobs haven't been good for us, but I really don't like this whole game American cities play with tax breaks and other incentives. My taxes are plenty high as it is. I don't need their effectiveness diluted by some giant corporation that can well afford to build wherever they want without any kickbacks.

Except that all those jobs created pay taxes too, so it's a wash.
post #19 of 22
Quote:
Originally Posted by studiomusic View Post

Except that all those jobs created pay taxes too, so it's a wash.

Well, that's what all the politicians say, but there is never any oversight or accounting of the alleged benefits.
post #20 of 22
Quote:
Originally Posted by drobforever View Post

Samsung would have to keep producing own phones/tablets/computers (obviously higher margin than just selling components to Apple) and even do a lot of other things like medical equipments in order to keep growing.

True, True. Devices are higher margin but also higher risk, higher investment in working capital, inventory etc. and the bigger downside that you can be left with a million or two unsaleable 7" GTabs if you get it wrong ;-)
Semiconductors are building to contract orders so it is a more predictable business (though bad if a demand dip happens after you invested a billion $s in a new fab you no longer need right now).
post #21 of 22
Quote:
Originally Posted by d-range View Post

... Samsung doesn't really care that much about their tablets, as much as it cares about its brand image and getting into as many markets as possible. To Samung, it doesn't matter a whole lot if one iteration of their tablet product line fails miserably, they still have 1001 other products and services that actually bring in the dough (amongst others: selling components). It's simpy a horizontal market strategy, very typical for Asian megacorporations.

Samsung has much more to lose by making Apple's life hard than it has to win by selling tablets. They do appreciate their market presence and brand image though.


Have you talked to any Samsung execs about that?

Or are you just speculating the whole thing?

I bet you'll get a different answer when you talk to the head of the mobile division.


Business 101: No one spends money (expense) to break even or lose money. They are in the business to make money. The only way to make money is to win market share which is a leverage used to gain lower cost components which further increases making money.

Your talk about "they dont care" is just purely layman's way of lumping up corporations as if they are people. They are not.

"Like I said before, share price will dip into the $400."  - 11/21/12 by Galbi

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"Like I said before, share price will dip into the $400."  - 11/21/12 by Galbi

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post #22 of 22
Quote:
Originally Posted by Galbi View Post

Have you talked to any Samsung execs about that? Your talk about "they dont care" is just purely layman's way of lumping up corporations as if they are people. They are not.

I wouldn't go so far as to say that Samsung "doesn't care"...

But if Apple is gonna write Samsung a check for $8 billion for iPad parts... you gotta wonder if Samsung would make that same kinda money from designing, building and marketing their own tablets.

Probably not... but Samsung will continue to sell their own stuff as well.

Samsung makes money from both ends... providing components to other companies, and by selling their own products.
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