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Apple's Reliance On Samsung To Bring About Higher Build Costs...

by on30 April 2013 1325 times
tim cook 0115

Back when Apple first started their legal campaign against Samsung they (Apple) were also beginning to break away from Samsung. This was understandable as there were and still are rumors (unconfirmed) that the whole legal argument started over the pricing of parts. The rumors claimed that Apple approached Samsung looking for preferential pricing and threatened to seek legal remedies if Samsung did not go along. Now we know that at least part of this it true. Apple did go to Samsung about pricing and also brought up their concerns about Samsung’s push into the smartphone market. If the rest is true no one but Apple and Samsung know for certain, but Apple did file a big suit against Samsung and have also been gradually pulling away from their Samsung as a primary supply partner ever since.

One of the first things that Apple moved away from was Memory, they moved completely away from Samsung and to Micron and also Elpida. Interestingly Micron was looking to buy Elpida. From there Apple has been working to move away from anything that Samsung makes simply because their supply contracts were coming due soon and they knew that Samsung would raise their component prices in return for all of the trouble Apple has sent their way.

Apple’s next move was to try and get away from Samsung displays. They looked to their partner Foxconn and their ties to Sharp. Unfortunately, Sharp was not in the right position to meet the supply demands that Apple would put on them. So Apple reached out to others and now is partners with LG and others although they are still getting a few panels from Samsung.

Now Apple is working very hard to move processor manufacturing to TSMC in order to get away from their reliance on Samsung. The move is not going to be so easy though as TSMC is not ready to take on the Apple speed of production. TSMC is working on it, but even when they are ready it will only be for new processors which will leave older generation processors still in Samsung’s hands.

The upshot of this is that the price to build iPhones and iPads is going to go up at a time when Apple needs to consider lowering prices to compete with Samsung, LG, HTC and Motorola. This impact to revenue is coming at a time when Apple stocks are dropping and they may end up having to post a $300+ million dollar loss due to patent infringement. The good news (for Apple) is that they still have a ton of cash in the bank and can operate for a while without really feeling even remotely pinched, but things are not looking good for Apple and probably will not start looking up for at least a couple of years.

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Last modified on 30 April 2013
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