$7.8B in parts will make Apple largest customer of rival Samsung

Posted:
in General Discussion edited January 2014
The partnership between Apple and Samsung is expected to grow in 2011, as a new report claims Apple will become the company's largest customer with $7.8 billion in component purchases -- even as Samsung attempts to compete with Apple's iPhone and iPad with new products unveiled this week.



According to the Korea Economic Daily, Apple is expected to buy about $7.8 billion worth of components from Samsung this year. The parts will reportedly be for Apple's mobile products, including the iPhone and iPad, and include liquid crystal displays, mobile application processors and NAND flash memory chips.



The proposed contract, according to industry sources cited in the story, would make Apple the single largest customer of Samsung.



The news comes as the Mobile World Congress is underway and Samsung has shown off a number of products it hopes will compete with Apple's iPhone and iPad. Among the products unveiled was the Samsung Galaxy S II, the follow-up to its hot selling line of Android handsets.



The new Samsung Galaxy S II has a dual-core processor and runs Google Android 2.3 Gingerbread with the device maker's custom TouchWiz user interface skin. It also sports a large 4.3-inch Super AMOLED Plus touchscreen with a WVGA 480-by-800-pixel resolution with 50 percent more sub-pixels.



The forthcoming handset also includes an 8-megapixel rear-facing camera, a 2-megapixel front-facing camera, 1080p video recording and playback, integrated near-field communications chip, and support for HSPA+, Wi-Fi and Bluetooth. The device is expected to debut in Europe and Asia this month.



Samsung Galaxy S II, photo via Cnet.



Samsung also this week introduced the Galaxy Tab 10.1, a touchscreen tablet it hopes will compete with Apple's iPad. The Android-powered tablet has a screen size slightly larger than the 9.7-inch display used by Apple's iPad, a change from the first Galaxy Tab, which had a 7-inch screen.



The Galaxy Tab 10.1 runs Android 3.0 Honeycomb, the latest version of Google's mobile operating system specifically designed for tablets. That, too, is an improvement over the previous Galaxy Tab, which runs a version of Android intended for smartphones.



The Galaxy Tab 10.1 screen has a resolution of 1,280 by 800 pixels, weighs 21 ounces, and measures 0.44 inches thick. It has an Nvidia Tegra 2 dual-core processor, an 8 megapixel rear-facing camera and a 2-megapixel forward-facing camera.



Samsung Galaxy Tab 10.1, via PCWorld.



In terms of components, this past week it was claimed that Apple has shown interest in Samsung's new "Super Plane to Line Switching" (PLS) display technology. A separate report from Korea claimed that Apple will use Samsung LCD panels for the "iPad 2," and that the Cupertino, Calif., company has shown interest in Samsung's "Super PLS" displays, which allow for superior viewing angles.
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Comments

  • Reply 1 of 40
    radjinradjin Posts: 165member
    Imitation, the finest form of flattery. Also the best admission that you cannot create anything on your own.
  • Reply 2 of 40
    I'm curious though what the experience is like with the new Honeycomb Galaxy Tab. And the new Galaxy phone. These are probably the best Android devices out there, based on reactions to the previous Galaxy phone and tablet.
  • Reply 3 of 40
    shaun, ukshaun, uk Posts: 1,050member
    Hope this means the next iPhone will have a 4.3" screen.
  • Reply 4 of 40
    Great... Now next time Samsung makes some dick move, Apple can "pull a Sony" and threaten to cancel all orders!!!
  • Reply 5 of 40
    Samsung is using the money it made from Apple to create a product to compete with Apple. One day Samsung may decide to withhold critical technical information from Apple to benefit its own products.
  • Reply 6 of 40
    Quote:
    Originally Posted by Shaun, UK View Post


    Hope this means the next iPhone will have a 4.3" screen.



    Keep hoping. 4.3 is not pocket optimized.
  • Reply 7 of 40
    drdoppiodrdoppio Posts: 1,132member
    The way I see this, Apple depends on Samsung for parts, while Samsung doesn't depend on Apple for anything. If Apple would withhold orders, Samsung will simply use the parts to fill the void on the market with their own products. Clearly Samsung's situation seems safer, and will give Samsung a competitive edge in the long run.
  • Reply 8 of 40
    $8 Billion in a year, just for components from one company is a lot of coin. Maybe the comments about Apple never using its profits to invest in future products can end.





    Quote:
    Originally Posted by winstein2010 View Post


    Samsung is using the money it made from Apple to create a product to compete with Apple. One day Samsung may decide to withhold critical technical information from Apple to benefit its own products.



    All companies should always be careful, but that doesn?t mean that Apple using Samsung for components is a bad thing. Most of these CE companies are multinational conglomerate corporations.



    I?d say they need Apple because of the profit they get from component profits, and the growth associated with their trivial CE markets which Apple is leading in making viable for all vendors who wish to compete.
  • Reply 9 of 40
    Quote:
    Originally Posted by DrDoppio View Post


    The way I see this, Apple depends on Samsung for parts, while Samsung doesn't depend on Apple for anything. If Apple would withhold orders, Samsung will simply use the parts to fill the void on the market with their own products. ..



    Assuming the people who would have bought Apple devices would settle for a pile of crap instead.



    Business is business, Samsung is no threat to Apple.
  • Reply 10 of 40
    aaronjaaronj Posts: 1,595member
    Can't Apple just buy Samsung?
  • Reply 11 of 40
    blastdoorblastdoor Posts: 1,883member
    Quote:
    Originally Posted by DrDoppio View Post


    The way I see this, Apple depends on Samsung for parts, while Samsung doesn't depend on Apple for anything. If Apple would withhold orders, Samsung will simply use the parts to fill the void on the market with their own products. Clearly Samsung's situation seems safer, and will give Samsung a competitive edge in the long run.



    I don't think it's nearly that clear-cut. Samsung is not irreplaceable. Apple can get flash from a wide range of other companies, they already get screens from several other companies (LG and Sharp spring to mind), and while Samsung is the only source for the A4, Samsung is hardly the only contract chip manufacturer out there (GF, TI, etc). To the extent that Samsung is selling Apple things that are hard to replace with a different vendor, then I'm sure Apple has a long-term contract with Samsung to prevent them from doing what you suggest (thereby giving Apple time to find an alternative supplier for the A4, for example, if needed).



    Also, Samsung does depend on Apple for something -- demand for $7-$8 billion worth of output from their fabs (which are big, expensive investments). Samsung can't afford to lose that much revenue instantly anymore than Apple can afford to lose that much chips/screens instantly.



    So overall, I'd say it's a complex relationship that on net benefits both companies. If, in the future, either company decides that this relationship no longer benefits it, then the existence of long term contracts ensures that the other company has time to make other arrangements.
  • Reply 12 of 40
    sheffsheff Posts: 1,407member
    I think this arrangement is good because apple gets good components at good prices. It would have been worse if Samsung straight out denied apple access to its tech, forcing apple to develop even more hardware components in house or with firms that have less expertise.



    In other words - no deal = bad deal. End of deal = bad deal. Having a deal for any amount of time = good deal. But of course you gotta keep your options open.
  • Reply 13 of 40
    Quote:
    Originally Posted by Radjin View Post


    Imitation, the finest form of flattery. Also the best admission that you cannot create anything on your own.





    except for the screen hahaha.



    yea, kinda wondering if anyone will ever make something that Apple copies haha
  • Reply 14 of 40
    Apple's component pricing is unmatched in the industry. Case in point: 10" android tablets costing $700-$900 or more. Never thought I'd see the day that competing hardware vendors can't beat apple on price. Times have changed!
  • Reply 15 of 40
    Samsung is a major components supplier for Apple who's capable and have the resource to supply the volume numbers Apple needs. Business is business.
  • Reply 16 of 40
    Quote:
    Originally Posted by AppleStud View Post


    Apple's component pricing is unmatched in the industry. Case in point: 10" android tablets costing $700-$900 or more. Never thought I'd see the day that competing hardware vendors can't beat apple on price. Times have changed!



    Could be worse.





    (Full Best Buy page truncated to adhere to forum etiquette)
  • Reply 17 of 40
    lkrupplkrupp Posts: 6,445member
    Quote:
    Originally Posted by AaronJ View Post


    Can't Apple just buy Samsung?



    Apple owning its entire supply line is not a bad idea in my opinion. They already make their own cpu, why not the screens and other components too. I think they (Apple) are certainly big enough now to do it and do it right.
  • Reply 18 of 40
    Huh? Exactly what is a "sub-pixel" referenced in the original story? As in "Galaxy II...has 50% more subpixels."



    Is the author trying to describe a fuzzy, outa' shape pixel?
  • Reply 19 of 40
    Samsung is cashing in on the great job that Apple has done in building up its brand name.



    Fact is that companies sell competing products under different names all the time. You think you're looking at competing products but dig deeper and you discover that, for example, A,T and T is also Vtec.



    It's a way of capturing a larger percentage of the market and, really, Samsung has nothing to gain from trying to cut off Apple. All Apple would do is seek out other suppliers and probably not have a problem doing as much. Apple's iPad is not a huge success because of any outstanding properties associated with any one component, unless you consider software as a component. It's design, brand recognition, best-in-class software. Samsung can't compete in any of those areas but if it makes money off every unit Apple sells, why would that be a problem?



    Certainly Samsung could have tried shutting Apple out, causing them to not be able to offer the iPad at such a low initial price. But then again, some other supplier might well have stepped up to fill the void and even if that hadn't happened, if Samsung had tried to hit a home run the magnitude of the iPad it would have failed miserably. So economies of scale would not have kicked in.



    Apple has the reputation and software expertise to pull off a successful product launch whereas Samsung does not. So Samsung did the next best thing and cut a deal to make a lot of money off of Apple's success.



    Now Samsung is hoping that the category that Apple has successfully launched - well beyond anyone's expecations - is one that it can make money off of with its own offerings. If Apple hadn't paved the way, there would be no tablet market today so this can end up being a win all around.
  • Reply 20 of 40
    xsuxsu Posts: 401member
    Quote:
    Originally Posted by lkrupp View Post


    Apple owning its entire supply line is not a bad idea in my opinion. They already make their own cpu, why not the screens and other components too. I think they (Apple) are certainly big enough now to do it and do it right.



    Not really. Apple currently doesn't make anything of significance by themselves. They do their own design work, but most if not all manufacturings are contracted out. A4 is at join design prodct with Samsung, and made by Samsung.



    I think one of the key to Apple's resurgence has been their completely shedding manufacturing to contract vendors. This allows them to concentrate on design and marketing which they excel at, and leave the low profit and high risk manufacturing to someone else.
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