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Samsung hopes 'strict internal firewall' will protect Apple parts deals

post #1 of 82
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Samsung remains a major component supplier to Apple, and the South Korean company hopes to retain that business relationship through a "strict internal firewall" dividing its handset business and components operations.

Following Samsung's legal defeat against Apple last week, the company held an emergency meeting on Sunday led by vice chairman Coi Gee-sung and head of Samsung's mobile business JK Shin, according to Reuters. Not participating in the meeting was Samsung Chief Executive Kwon Oh-hyun, whose responsibility mostly lies with the company's components business.

The reason that Kwon was reportedly not present, even though he is the CEO of Samsung, is because the company has a "strict internal firewall" between its component supply business and handset operations, Monday's report indicated.

Citing an unnamed executive who took part in Sunday's meeting in Seoul, it was said that Samsung considers its supply contract with Apple a "separate issue from the litigation," in which Samsung was found to have copied features of Apple's iPhone and iPad.

Kwon oversees Samsung, but JK Shin aoversees the telecommunications business and BK Yoon is in charge of Samsung's electronics side. The divisions have been made to "avoid potential conflicts of interest" with major customers like Apple.

A5 1


While Apple and Samsung are fierce competitors in the businesses of smartphones, tablets, computers and more, Samsung is also Apple's largest supplier of components and parts for its popular devices. Most notably, Samsung is responsible for building the custom processors featured in Apple's iOS devices, including the iPhone and iPad.

There have been persistent rumors that Apple would like to move production of its custom ARM CPUs away from Samsung to another chipmaker, such as Taiwan Semiconductor Manufacturing Co. However, thus far there has been no indication that anyone other than Samsung has received orders for the A5 chip found in the iPhone 4S or the A5X processor that powers the third-generation iPad with Retina display.
post #2 of 82

Oh my, so they still contend that they didn't copy anything, but for some reason need a firewall?  

post #3 of 82

Samsung simply cannot afford to lose its major client, Apple. It needs Apple. 

post #4 of 82

The firewall is a fig leaf.   The Samsung component division prepared a document on the iPhone that was used by the division making the Samsung phones.  Got to be other fabs that can make the A4/5 chips.  Intel?  IBM? TXN?  It makes sense to fab with a U company to keep trade secrets.  The rest of the stuff is mostly generic, except for QCOM telecom chips and they are not going to mess with Apple.  

post #5 of 82
As long as it doesn't look like Apple's firewall, I don't see a problem.
post #6 of 82
Quote:
Originally Posted by Rob Bonner View Post

Oh my, so they still contend that they didn't copy anything, but for some reason need a firewall?  

 

This is to be fully expected.  The term 'firewall' is just a not-so-appropriate, or somewhat unfortunate, word in this case.  The 'division/s' responsible for component manufacture most certainly would not want to be tainted by the action of other divisions, in this case, the handset business. There are probably separate divisions too for such products as white goods, computer and televisions. None of these would be too happy with the mobile products division right now for sure!

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post #7 of 82
I truly hope Apple have alternative suppliers lined up to enable them to drop Sammy ASAP.
Edited by digitalclips - 8/27/12 at 8:40am
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Been using Apple since Apple ][ - Long on AAPL so biased
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post #8 of 82

Well Apple is already testing other suppliers like LG for their screens. It might take apple some time, but switching to another manufacturer is very possible and companies do it all the time. Samsung knows that they will not be Apple's client forever.

What I really love is that Apple really thinks ahead. They bought that semiconductor company years ago, bought FLASH RAM company in Israel, Mapping service etc. They're really becoming independent and very slowly they will outpace the competitors even further.

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post #9 of 82

Samsung made a decision years ago that this trade was worth the risk.  I believe Apple is adjusting its supply chain for either replace or provide future flexibility.  I doubt Samsung is getting the partnering relationship on new manufacturing technology that Apple does with other manufacturers and this could be a serious strategic loss for Samsung, more than the money from Apple.

 

It is hard to believe a "firewall" in a copy owned by a family clan like Samsung and with clear "pride issue" driving business decisions.  

 

Appearance may be good for Gov't and Public but Apple is very hard nosed about how real this is.

post #10 of 82
Quote:
Originally Posted by netrox View Post

Samsung simply cannot afford to lose its major client, Apple. It needs Apple. 

 

 

 

Apple was Samsung's second-largest customer in 2010 with close to $5.7 billion in orders. 
 
Apple in 2011 was Samsung’s largest customer, and spent over $7.8 Billion on parts.
 
Today, Apple is Samsung's biggest customer, according to Bloomberg, accounting for 8.8% of Samsung’s revenue.
 
Samsung needs to lose Apple like they need another hole in the head. 
 
Samsung is a proven supplier. FOR NOW. 
 
They have competition, because others want a piece of that sweet Apple pie:
 
 
 
post #11 of 82

This seems a little confusing, as outside of the A4 and Hummingbird (intentional overlap), all subsequent chip designs between the Ax line and Exynos line are quite different aside from meeting the ARM Cortex spec. That doesn't seem like where the problem begins with anyway.

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post #12 of 82
Quote:
Originally Posted by Rob Bonner View Post

Oh my, so they still contend that they didn't copy anything, but for some reason need a firewall?  

To be fair, I the context of 'firewall' isn't clear in the article.

Is the concern that Samsung handset will get to copy parts designs made for Apple by Samsung components (as you imply) or a reaffirmation that the firewall won't let the legal decision affect the separate (and lucrative, for Samsung) Apple parts business?

post #13 of 82

To me, this shows a level of maturity that indicates that level-head prevail when rational conversations are had...  Even between Apple and Samsung.

 

It takes an awfully big person to sue a parent company for a record breaking amount (because they refused to negotiate or discuss reasonable solutions), only to turn around and order a record breaking number of parts from one of their subsidiaries.

 

I, for one, applaud Tim Cooks ability to keep business and emotion in separate corners.

post #14 of 82

Who said that one billion wasn't that much for Samsung?

 

Samsung's stock drops more than 7% today! The biggest drop in nearly 5 years! That's 12 Billion dollars! lol.gif

 

As for this internal firewall, Samsung had better pray that Apple decides to keep doing business with them in the future. I can only laugh when some idiot Fandroid says that Samsung should drop Apple. That's been a common comment coming from Fandroids on other sites.

post #15 of 82

I'm sure that Apple and Samsung already have deals in place and often Apple pays up-front. I would expect that all deals would have to go forward for now. When the contracts expire - all bets are off.

 

I'd love to see Apple drop Samsung as a supplier, but only if it makes sense to do so.

post #16 of 82

Samsung needs Apple and Apple needs Samsung. 

 

http://in.reuters.com/article/2012/08/27/idINL3E8JR0PN20120827

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post #17 of 82
Quote:
Originally Posted by bcode View Post

 

It takes an awfully big person to sue a parent company for a record breaking amount (because they refused to negotiate or discuss reasonable solutions), only to turn around and order a record breaking number of parts from one of their subsidiaries.

 

I, for one, applaud Tim Cooks ability to keep business and emotion in separate corners.

He doesn't have a choice. There aren't enough suppliers who can do a good job and handle the amount of production needed for Apple. If there were an equally good supplier then Apple would probably switch, but; switching would bring on new uncertainties. Would the new company be worse or better? These are reasons that Apple needs to manufacture its own parts in the USA.

post #18 of 82
Quote:
Originally Posted by AjitMD View Post

The firewall is a fig leaf.   The Samsung component division prepared a document on the iPhone that was used by the division making the Samsung phones.  Got to be other fabs that can make the A4/5 chips.  Intel?  IBM? TXN?  It makes sense to fab with a U company to keep trade secrets.  The rest of the stuff is mostly generic, except for QCOM telecom chips and they are not going to mess with Apple.  

A4 and A5 CPU's are Samsung chips with some apple unique features

 

there was a rumor a few years ago that apple was going to use marvell as a new base CPU but i doubt anything came of it. and with the apple tv being 32nm apple is sticking with samsung for a long time

post #19 of 82

deleted


Edited by kellya74u - 7/24/13 at 9:22am
post #20 of 82

Even if they claim their right hand doesn't know what the left hand is doing, their left hand is still out there smacking Apple.

post #21 of 82
Quote:
Originally Posted by bcode View Post

To me, this shows a level of maturity that indicates that level-head prevail when rational conversations are had...  Even between Apple and Samsung.

 

It takes an awfully big person to sue a parent company for a record breaking amount (because they refused to negotiate or discuss reasonable solutions), only to turn around and order a record breaking number of parts from one of their subsidiaries.

 

I, for one, applaud Tim Cooks ability to keep business and emotion in separate corners.

 

Tim Cook is pretty much doing the only thing he can though, in terms of part supply.  Samsung are such a large part of DRAM and Flash manufacture that if Apple were to rule them out they would end up paying far more than they do, and possibly even having problems getting enough devices.

 

Even with the processor manufacture, TSMC has had problems getting new geometries going for the past 2-3 technology nodes, so Apple are kind of stuck with Samsung for that at the moment as well (though Global Foundries could become an option).

post #22 of 82
Quote:
Originally Posted by Galbi View Post

Samsung needs Apple and Apple needs Samsung. 

 

http://in.reuters.com/article/2012/08/27/idINL3E8JR0PN20120827

Absolute nonsense. Apple should toss this company as a supplier (and Apple will).

 

The arrogant, recalcitrant, incorrigible attitude of their management deserves nothing less.

 

Incidentally, good to see seemingly very efficient markets on Monday: At open, in Seoul, Samsung's market cap was down $12B. This morning here, Apple's market cap is up $12B. Nice bit of wealth transfer from Samsung's shareholders to Apple's shareholders there.

post #23 of 82
Quote:
Originally Posted by gprovida View Post

...  It is hard to believe a "firewall" in a copy owned by a family clan like Samsung and with clear "pride issue" driving business decisions.  ...

 

Exactly.  And as has already been pointed out, the "firewall" is a bit of a myth since both units collaborated on hi-jacking the iPhone's previously.  

 

The way to read this announcement (between the lines) is that the (new) CEO is distancing himself from the group of "bad guys" at Samsung that did the copying.  That unit will eventually be isolated and take all the blame.  This allows the CEO to rise above such bickering and you will probably see a photo-op of him having coffee with Tim Cook sometime soon.  There will be much smiling and pretend back-slapping.  

 

By next year there will be those that will doubt in print whether there was *ever* bad blood between Samsung and Apple (probably some dumb article asserting same on MacWorld or some other hack publication).  

post #24 of 82

If I was Apple I would be working on a steady plan to find or cultivate alternatives and once cultivated move there.  Helping fund your biggest competitor and work on the low level secrets with that competitor seems shortsighted, longterm.

post #25 of 82

It is hard to fully trust Samsung now. Their intentions on some levels may be faultless but its all about the culture. I wonder if Samsung actually believe they are in the right - that they didn't copy Apple and that this is legitimate business practice. If so it is worrying. 

post #26 of 82
Quote:
Originally Posted by anantksundaram View Post

Incidentally, good to see seemingly very efficient markets on Monday: At open, in Seoul, Samsung's market cap was down $12B. 

 

Those people who thought that the verdict was only about a mere one billion dollars were really shortsighted and didn't think things through at all. The verdict will have a far greater impact than just hitting Samsung with a one billion dollar guilty penalty, as evidenced by today's stock action. Samsung's loss in court will have far reaching consequences for them.

 

Then there's the matter of what will happen if bans and injunctions are granted soon. This verdict will end up hurting Samsung to the tune of much, much more than a lousy one billion dollars! It also has a very negative effect on their reputation, as that company has now officially been convicted of stealing.

post #27 of 82
Quote:
Originally Posted by al_bundy View Post

A4 and A5 CPU's are Samsung chips with some apple unique features

...

 

This kind of misrepresents things.  You make it sound like they are modified Samsung designs when in fact they are Apple designs, manufactured by Samsung.  Both are modified ARM's, the SoC's are designed by each company and Samsung manufactures both.   

post #28 of 82
Despite high revenues, Samsung has only $12 billion in cash at hand. This 1 billion penalty will be over 8% of its cash reserves, and a quarter if tripled by the court. For Apple with 100+ billion under its belt, it would be less than 1% and 3%, respectively.
post #29 of 82
Quote:
Originally Posted by Gazoobee View Post

This kind of misrepresents things.  You make it sound like they are modified Samsung designs when in fact they are Apple designs, manufactured by Samsung.  Both are modified ARM's, the SoC's are designed by each company and Samsung manufactures both.   

That's why it was probably easier for Samsung to copy Apple's designs, firewalls and all.
post #30 of 82
Quote:
Originally Posted by bcode View Post

To me, this shows a level of maturity that indicates that level-head prevail when rational conversations are had...  Even between Apple and Samsung.

 

It takes an awfully big person to sue a parent company for a record breaking amount (because they refused to negotiate or discuss reasonable solutions), only to turn around and order a record breaking number of parts from one of their subsidiaries.

 

I, for one, applaud Tim Cooks ability to keep business and emotion in separate corners.

That may be the case, but it also means that you're letting yourself get stabbed in the back by a company without them fearing return fire.  How many times have we seen ATI and NVidia cards get dropped because of issues?  Whether it's performance issues, or them flat-out stealing your designs, it's the same thing.  If Apple can't sever ties with Samsung to punish them and prove a point, then what recourse does Apple have but to continue to bend over and take it from Samsung?  I fully understand what you're saying about Tim Cook keeping a level head and all, but Apple has severed ties for a lot less than this before.  There's only one way to truly drive the dagger home with Samsung, and that's a complete loss of business from their largest buyer.  Think Steve would have been passive about this?  Regardless of separation of divisions inSamsung, their leadership knows full well what they are doing.  Apple would be best served punishing Samsung severely for what they did (and continue to do to this day), and I'm not talking about court cases.  I've read Tim Cook's letter that he sent out to everyone, and that's a nice touch, but he's at the helm of a company that's losing business to a rival that's stealing Apple's designs and pointing and laughing at Apple.  Samsung knew what it was doing, and was counting on Tim Cook not being able to pull the trigger.  Thus far, Samsung has been right, and that ought to piss everyone off (especially Apple shareholders).  

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post #31 of 82

I hope it's not the same firewall that was put between iPhone development and Google's Eric Schmidt when he was on the board.

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post #32 of 82

$1B is really nothing for Samsung, a company that will never go away as long as the Korean government is still supporting the company. If Apple doesn't order parts from Samsung anymore, yes, Samsung stock will take a big hit, etc., but life goes on for Samsung, they'll just sell the parts to other companies. Samsung is just an arm of the Korean government, government just don't go away, even if it's Greece.

post #33 of 82
Being giddy over Samsung's market cap down $12B is quite childish. Like Tim Cook said, this isn't about money it's about values. Apple doesn't care about the mone they care about Samsung and others not copying them.
post #34 of 82
Samsung will lose all of Apple's business one day. The damage is done.

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post #35 of 82
Quote:
Originally Posted by Rogifan View Post

Like Tim Cook said, this isn't about money it's about values. Apple doesn't care about the mone they care about Samsung and others not copying them.

 

For Apple it's about values, that's not the case for Samsung and Fandroids, as they have rather crappy values. So, how does one teach these kinds of people a lesson, you hit them where it hurts most, and that's in their pocketbook. I'm very happy that 12 billion has been shaved off Samsung's market value today.lol.gif

post #36 of 82

Here's hoping AAPL dumps Samsung so violently that Samsung suffers long term permanent irreversible damage! 

post #37 of 82
Absolutely not. They lie and steal and cannot be trusted

Apple accounts for 10% of Sansung's business. They can kiss that goodbye over the next 24 months

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post #38 of 82

I find that hard to believe since Samsung is the most corrupt company in Asia.

post #39 of 82
Quote:
Originally Posted by digitalclips View Post

I truly hope Apple have alternative suppliers lined up to enable them to drop Sammy ASAP.

Exactly! :) Samsung is going to pay for this cheating in more ways than a Billion dollar fine and lawyer fees! 

post #40 of 82

I predict their relationship will only further seperate from here out.  Apple will continue to look for replacement manufacters whenever possible.. and will no longer trust Samsung on its most trusted and secretive parts.  Can you imagine if Samsung was producing the new IPS screen on the upcoming iPhone5, instead of LG.  If they were producing that part.. I'd bet money that a Galaxy S3i would magically pop on on on Sept 11th, with an IPS screen.

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