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

Posted:
in General Discussion edited January 2014
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.

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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.
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Comments

  • Reply 1 of 81


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

  • Reply 2 of 81
    netroxnetrox Posts: 718member


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

  • Reply 3 of 81
    ajitmdajitmd Posts: 365member


    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.  

  • Reply 4 of 81
    bdkennedy1bdkennedy1 Posts: 1,459member
    As long as it doesn't look like Apple's firewall, I don't see a problem.
  • Reply 5 of 81
    iqatedoiqatedo Posts: 1,595member

    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!

  • Reply 6 of 81
    MacProMacPro Posts: 18,155member
    I truly hope Apple have alternative suppliers lined up to enable them to drop Sammy ASAP.
  • Reply 7 of 81
    ivladivlad Posts: 739member


    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.

  • Reply 8 of 81


    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.

  • Reply 9 of 81
    quadra 610quadra 610 Posts: 6,743member

    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:


     



     



     

  • Reply 10 of 81


    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.

  • Reply 11 of 81
    gqbgqb Posts: 1,934member

    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?

  • Reply 12 of 81
    bcodebcode Posts: 138member


    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.

  • Reply 13 of 81
    apple ][apple ][ Posts: 8,437member


    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! image


     


    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.

  • Reply 14 of 81
    bilbo63bilbo63 Posts: 285member


    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.

  • Reply 15 of 81
    galbigalbi Posts: 968member


    Samsung needs Apple and Apple needs Samsung. 


     


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

  • Reply 16 of 81

    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.

  • Reply 17 of 81
    al_bundyal_bundy Posts: 1,525member

    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

  • Reply 18 of 81


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  • Reply 19 of 81
    mrstepmrstep Posts: 446member


    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.

  • Reply 20 of 81

    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).

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