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Samsung reportedly hits Apple with 20% price increase for iPhone, iPad chips

post #1 of 107
Thread Starter 
Samsung has allegedly increased the price of its mobile processors by 20 percent for just one company: Apple.

Details on the price hike were published on Monday by Chosun Ilbo, via MarketWatch. The details come from an unnamed person allegedly familiar with negotiations between the two companies.

The person indicated that Samsung asked for a "significant price raise" for building chips such as the A6 chip found in the iPhone 5 and the A6X processor that powers the fourth-generation iPad.

Apple apparently balked at the terms of the deal at first, but eventually accepted the 20 percent price hike, as it could not find any other company to build its mobile processor.

A6


All of Apple's application processors for the iPhone, iPad and iPod touch are made by Samsung. The company produces the chips at its fabrication plant in Austin, Tex.

Samsung is expected to build a total of 200 million chips for Apple this year. The companies have allegedly signed a long-term supply contract through 2014.

Although though Samsung remains the sole supplier of Apple's custom chips found in the iPhone and iPad, the company has long been rumored to be pursuing a chipmaking partnership with Taiwan Semiconductor Manufacturing Co. One report from last month claimed that TSMC could begin building quad-core 20-nanometer chips for Apple as soon as late 2013.

And in October it was said that Apple was getting "serious" about moving chip production away from Samsung. Around the same time, Apple also hired away former Samsung chip designer Jim Mergard, who also designed and developed chips for AMD for 16 years.

Last week, one report claimed that Samsung was expecting to lose a portion of its future chip orders from Apple. It indicated that the Korean electronics company may put off construction of a new fabrication facility because of the expected decrease in orders.
post #2 of 107

no more volume discount for Apple?

post #3 of 107

Rival companies like Samsung pulling shit like this is exactly why Apple is so religious about doing everything they possibly can themselves.

post #4 of 107

This doesn't make sense for Samsung from a business perspective.  They need Apple's money.  Apple's already mad at them over the patent infringement and counter lawsuits.  Driving up the prices for them alone will just make Apple more likely to find/create competing chip-makers to take over production for them at the earliest possible moment.  

 

In what way could Samsung benefit from this decision in the long term?

post #5 of 107

Keep in mind it's just another rumor originating from the Korean press. 

melior diabolus quem scies
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melior diabolus quem scies
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post #6 of 107

It's likely the Apple was getting a healthy discount before deciding to scale back their dependence on Samsung.  Only makes sense that Samsung is going to raise prices to make up for the loss in high volume profits-- as any other company would.  If Apple doesn't want to work with Samsung, why should Samsung work with Apple (to provide a good deal)?

post #7 of 107
Fk samsung. They are a disgusting scumbag company. The faster apple can dump them the better. And FK the UK judge at the same time. Apparently morons abound not only in the US, but in the UK as well.
post #8 of 107
I fear this may be passed on to the customer - but Apples pricing structure seems to be engrained in their customer base. Any changes could result in a backlash.
post #9 of 107
That is good news for the Americans working in that Austin fab, no? That is good for the US economy, no? Personally I don't care if Apple increases the price. We probably have less whiners if they do because less people can afford it.
I’d rather have a better product than a better price.
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post #10 of 107
Quote:
Originally Posted by Shunnabunich View Post

Rival companies like Samsung pulling shit like this is exactly why Apple is so religious about doing everything they possibly can themselves.

 
Seriously, Apple initiated all those lawsuits against Samsung, Apple's largest supplier, and you didn't see this coming? 
post #11 of 107
Quote:
Originally Posted by Gatorguy View Post

Keep in mind it's just another rumor originating from the Korean press. 

Chosun Ilbo is not exactly like the KoreaTimes.com

 

The report claims that they verified the source - unlike the Koreatime.com citing some dubious unnamed Samsung executive. 

post #12 of 107
Quote:
Originally Posted by FreeRange View Post

Fk samsung. They are a disgusting scumbag company. The faster apple can dump them the better. And FK the UK judge at the same time. Apparently morons abound not only in the US, but in the UK as well.

 

You don't understand how business works.  If you were supplying a client with massive volumes of product at low profit margin and they decided to stop buying from you, what would YOU do?

post #13 of 107

Welcome to the harsh reality of the business world. Vendors do this all the time in other sectors. Is it dirty? absolutely. Frankly I see this as Samsung saying, hey you want to go, there's the door. Obviously they don't appear to care if Apple is a part of their business or not. regardless of what we think it means to them.

I'm not a pessimist. I'm an optimist, with experience.
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I'm not a pessimist. I'm an optimist, with experience.
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post #14 of 107

Build your own factories, Apple. Build them in America.

 

'American Made' will make you the undisputed king, and would shut Apple hating, foreign company loving Fandroids, the Hell up.

 

 

 
post #15 of 107
Quote:
Originally Posted by Neo42 View Post

It's likely the Apple was getting a healthy discount before deciding to scale back their dependence on Samsung.  Only makes sense that Samsung is going to raise prices to make up for the loss in high volume profits-- as any other company would.  If Apple doesn't want to work with Samsung, why should Samsung work with Apple (to provide a good deal)?

 

True enough, and I imagine that Apple expected this. It's worth the short term hit, IMO. The sooner they're shot of Samsung, the better.

post #16 of 107

Remember the story that Samsung was stopping the supply of ALL chips to Apple. Another bogus FUD story along with the news of an imminent iPhone 5s. Pathetic that "news sources" release lies.

post #17 of 107
Quote:
Originally Posted by tooltalk View Post

Chosun Ilbo is not exactly like the KoreaTimes.com

 

The report claims that they verified the source - unlike the Koreatime.com citing some dubious unnamed Samsung executive. 

 

The details come from an unnamed person allegedly familiar with negotiations between the two companies.

 

Yup, that's always a winner.

post #18 of 107

20% increase from what? come on people, this could be a 20% increase over the previous chip and if you are integrating more functionality in the a chip pricing some times goes up not down. As long as the 20% increase is still less than buying the individual piece then it not a cost increase for the product.

 

Making a statement about a 20% increase without providing the reference point is meaningless.

post #19 of 107
Quote:
Originally Posted by TeeJay2012 View Post

Remember the story that Samsung was stopping the supply of ALL chips to Apple. Another bogus FUD story along with the news of an imminent iPhone 5s. Pathetic that "news sources" release lies.

 

And it turns out that the stories about Samsung cutting screen supplies to Apple were also untrue.

 

http://news.cnet.com/8301-13579_3-57537773-37/samsung-says-its-still-supplying-lcd-panels-to-apple/

post #20 of 107
Quote:
Originally Posted by tooltalk View Post

Hmmmn...quote not working.

Seriously, Samsung instigated copying of Apples products, their main customer...and you didn't see this coming?

*flips coin*
post #21 of 107
Originally Posted by tooltalk View Post
Seriously, Apple initiated all those lawsuits against Samsung, Apple's largest supplier, and you didn't see this coming? 

 

Is it even possible for you to be this dense? 

post #22 of 107

Don't know why this is being seen as a dirty move.  Samsung has something Apple wants, and are using their position as the only only supplier able to deliver quantity to leverage a better return.  Apple do the same thing in negotiating lower prices as the biggest purchaser; this is exactly the same, but with the power reversed.  But when Samsung act in their self-interest it's "dirty".  And anyone who doesn't agree is an Apple-hater, I'm sure.

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post #23 of 107
Quote:
Originally Posted by FreeRange View Post

Fk samsung. They are a disgusting scumbag company. The faster apple can dump them the better. And FK the UK judge at the same time. Apparently morons abound not only in the US, but in the UK as well.

Oh Please. Dont make a bad image of Apple Fans. There is nothing wrong with the UK Judge. Apple lost, and it was hard pill to swallow, tough but that is life. Apple isn't immune to lost. And the Judge proved nothing, it was merely a few design patents that was ruled out as not copied or infringe. But we all know Samsung copied, trade dress, and many other similar designs. But those just wasn't part of the case.

So yes, the sooner we get rid of any thing Sammy related the better.

There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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post #24 of 107
I think the story has to do with the stock market. You cant push down apple's share price without some news to work on. And it is stupid stuff like this they could find an excuse to work on it.

There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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There are only two kind of people in this world.

Those who dont understand Apple and those who misunderstood Apple.

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post #25 of 107
Originally Posted by ksec View Post
There is nothing wrong with the UK Judge.

 

Not just for you, but for everyone since this fiasco began:

 

1000

post #26 of 107
Samsung won't be able to replace this kind of volume from any other customers. They are trying to pad the loss with the short term 20% discount, but it doesn't bode well for shareholders in the long run. Furthermore, the patent infringement lawsuits and price hikes will serve as a deterrent for any other larger company to work with Samsung in the future. It would certainly make me think twice if I had the next best tech idea, but wanted to avoid someone copying it and/or the litigation to prevent it.
post #27 of 107

US Dollar is also about 12% weaker compared to the South Korean WON in just the last 6 months. Could be a factor if Apple is paying in dollars because the plant is in the US.

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Life is too short to drink bad coffee.

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post #28 of 107
Quote:
Originally Posted by PhilBoogie View Post

That is good news for the Americans working in that Austin fab, no? That is good for the US economy, no? Personally I don't care if Apple increases the price. We probably have less whiners if they do because less people can afford it.

Not necessarily. Samsung corporate gets the money. The employees, no matter where they work, are paid a standard wage. Samsung needs this money to pay for legal support so I doubt any will go to the employees.

post #29 of 107
Quote:
Originally Posted by Tallest Skil View Post

 

Not just for you, but for everyone since this fiasco began:

 

1000


I hate the common shift in reasoning. If you dislike something about the legal system, it shouldn't matter who is winning.

post #30 of 107
Quote:
Originally Posted by PhilBoogie View Post

That is good news for the Americans working in that Austin fab, no? That is good for the US economy, no? Personally I don't care if Apple increases the price. We probably have less whiners if they do because less people can afford it.

(Assuming this is even true)

 

Uh... no.  It will just increase Apple's incentive to move more business to other suppliers and AWAY from the plant in Texas.  Unless you think Samsung is passing the result of the price increases to the workers.  Yeah right.

post #31 of 107
Quote:
Originally Posted by Neo42 View Post

 

You don't understand how business works.  If you were supplying a client with massive volumes of product at low profit margin and they decided to stop buying from you, what would YOU do?

 

You think you understand "how business works…"?

 

Here's what I would do first: I would try like hell to win back their business. Not gouge them out of spite…… 

 

Aside from a few stray rumors, can you demonstrate where Apple has "decided to stop buying" from Samsung? No, you cannot. So if this rumor is true, it speaks quite poorly of Samsung.

 

That aside, Samsung has a pretty long and storied history as a "gangster" company… this is just more of the same from them. Now that they've gotten a ton of extra cash from riding Apple's coattails, they will tug at strings to exert a sense of power. If they sense weakness in Apple, they'll exploit that any way they can. It will be short lived, however. I think that within 24 months, Apple will be shifting production away from Samsung on multiple fronts; CPU fab, flash RAM and displays. 

 

Apple may not cut them out completely, they are in fact a reliable and capable supplier, but they will no longer enjoy first-tier status. Not after putting the screws to Apple like they have. 

 

So to reverse the question: If you were a supplier's top-tier client, buying more from them than any other company, and they ran roughshod on you like this, what would YOU do?

post #32 of 107
Quote:
Originally Posted by AppleZilla View Post

Build your own factories, Apple. Build them in America.

'American Made' will make you the undisputed king, and would shut Apple hating, foreign company loving Fandroids, the Hell up.


 

They're already made in Austin, Texas, and nobody seems to care or give them credit for it. Their products are already "Designed in California", and nobody cares about that either. :P

All people focus on is final assembly.
post #33 of 107
So it might even be a bad thing: if less people buy iOS devices there won't be any more new hires for this Austin fab, and therefore wouldn't help the US economy at all. Bummer. Screw Samsung.

I’d rather have a better product than a better price.
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I’d rather have a better product than a better price.
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post #34 of 107
Anyway Apple is not going to do any business with SamScum in near future. So, SamSung - sorry - SamScum want to milk now. So, it increased the price. Apple really really really has to buy Yahoo! and a super semiconductor company. These two are the ones Apple is not having on its own.
1. A search engine
2. Chip maker
post #35 of 107
Quote:
Originally Posted by Tallest Skil View Post

 

Is it even possible for you to be this dense? 

Positively leaden!

post #36 of 107
Quote:
Originally Posted by Maestro64 View Post

20% increase from what? come on people, this could be a 20% increase over the previous chip and if you are integrating more functionality in the a chip pricing some times goes up not down. As long as the 20% increase is still less than buying the individual piece then it not a cost increase for the product.

 

Making a statement about a 20% increase without providing the reference point is meaningless.

 

What difference does it make? If Apple experiences a 20% cost increase, its an increase. If they don't raise retails to cover the cost, whatever that cost actually is, then it is absorbed into their profit margin, hence making earnings more difficult to achieve and the stock takes a hit, which seems to be the pattern these days. Apple is already getting pounced upon for their 'inflated' iPad mini retail, so it's unlikely that you would see any significant retail increase, if any. The market won't allow it.

post #37 of 107

Everybody always talks about TSMC as the best alternative for Apple. But what about IBM? 

 

I know there's some "history" between Apple and IBM on chips. But with Jobs gone, it might be time for a hard headed analysis of all options, including IBM. 

 

Why IBM?

 

1. Because all of these non-Intel chip makers (GloFo, TSMC, and Samsung) use fab technology developed by IBM. So why not just go directly to the technological source? 

 

2. I suspect IBM Microelectronics might very much like to have a big customer for its fabs. That would give IBM better production scale, which would be helpful to them in funding their R&D and in manufacturing their POWER chips. 

 

3. IBM does not compete with Apple in any market. There's not conflict of interest here. 

 

4. I suspect that IBM would be happy to let Apple own the capital equipment while IBM gets paid for management services and IP (IBM is now primarily a services provider). And that seems to be exactly the arrangement Apple is looking for. 

 

Overall, I think Apple plus IBM is a match made in heaven. 

 

But what about that history? Why did the PowerPC relationship flop?

 

I think it really came down to the economic reality that CPU fabrication is a business that relies on economies of scale, and when Apple was buying PowerPC chips from IBM, it was at a very small scale. Neither party could be happy with the arrangement -- it just wasn't worth it for IBM to invest R&D dollars on Apple-specific chips and Apple couldn't afford to do that either. But now the economies of scale have changed radically. Apple's demand for chips is now massive, and Apple is very well capitalized. Now, maybe there were some hurt feelings on one side or the other, but it seems to me that it really wasn't a fault in either party -- it was really just the economic reality of the situation. 

 

So, I hope that people at Apple and IBM are open to giving this serious consideration. Maybe it will still turn out not to be the best arrangement, but I don't think it should be dismissed out of hand based on a misunderstanding of history. 

post #38 of 107
Can apple just have an american made processor where it can create jobs here and have a discount on them
post #39 of 107

hahahahah.

 

Like I said before, share price will dip into the $400.
 

Quote:
Originally Posted by AppleZilla View Post

Build your own factories, Apple. Build them in America.

 

'American Made' will make you the undisputed king, and would shut Apple hating, foreign company loving Fandroids, the Hell up.

 

 

 

 

Never going to happen.

 

Quote:
Originally Posted by Shunnabunich View Post

Rival companies like Samsung pulling shit like this is exactly why Apple is so religious about doing everything they possibly can themselves.

 

Yeah, like manufacturing their components right? You wish. No man ( or company) is an island.


Edited by Galbi - 11/12/12 at 8:01am

"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 #40 of 107
Quote:
Originally Posted by acslater017 View Post

They're already made in Austin, Texas, and nobody seems to care or give them credit for it. Their products are already "Designed in California", and nobody cares about that either. :P

All people focus on is final assembly.

I wonder why Samsung decided to build the chip plant in the US anyway when the chips mostly need to be shipped back to Asia for assembly. Seems counterintuitive to me especially since chip manufacturing can be dangerous to worker's health and the environment so the US would be much stricter. Those factors seem like it would cost more to make them here in the US not to mention that US labor, land and taxes are more expensive as well.


Edited by mstone - 11/12/12 at 8:05am

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