IPhone 5 Chip Overloads Samsung Production Capacity
infosyncworld.com
infosyncworld.com
I wonder how the Apple execs feel about this - it should make them a little uncomfortable knowing that their production line depends on a distributor who has a vested interest in a competing platform.
On the other hand, my impression is that Samsung is in the business of selling hardware for a profit. To them, it doesn't matter if they sell more hardware in the form of Galaxies or iPhones - as long as they're pushing out cpus/memory/lcds they don't care where it goes.
It all roses for Samsung - they have their hands in both pots.
1) In terms of their revenues, their telecom business is now bigger than their semiconductor business, though from a profit perspective the semiconductor business is about 30% bigger.
2) Year-on-Year growth is slightly higher in the telecom division.
3) Telecom division expects higher than market growth rate mostly fueled by smartphone sets.
4) Telecom has mainly seen very strong growth in their 'strategic' handset models - 40% growth over previous years. Their strategic models are all Android based (5 models in total). Their telecom division is relying on newer revs of these models to drive higher than market returns in 2011.
My (very simplistic) reading of this: Apple needs to diversify away from Samsung and create more options (duh). If the Galaxy series turns out to do better than expected next year, it gives Samsung more leverage to raise prices / cut production quotas on Apple's chips.
This is categorically untrue. The iPhone 3GS was a world above virtually every Android phone at the time. The iPhone 4, when released, didn't have quite as large of a lead, but it still led the competition on virtually every spec.
And those specs didn't go unnoticed. From screen brightness to color range to processor speed to GPU performance, this is one of the reasons it was considered the #1 device. It led the spec sheet.
The iPhone 5 of course has its work cut out for it, because the competition is much more refined now and they're really in the game. But I am pretty certain that Apple is going to try their damndest to lead the spec comparisons again.
I'd be shocked if Samsung kept their promise and kept the Galaxy Tab updated once it's not the "hot product" any more. I wouldn't call this a conflict of interest because if anything I would say that Samsung playing such a large part in Android's success only damages peoples perception of Android as a platform, and as an Android fan it saddens me.
Somewhat relevant, I actually got to play with a Galaxy over the weekend and was really impressed with it (I thought the form factor might be weird, but realized it's very close to a Kindle/Paperback book in size).
Samsung was a co-developer of the A4 chip, which they derived for their Hummingbird platform. You could as easily say that Apple knew what Samsung was up to.
Far better to realize that Samsung, TSMC et al. will be able to have better pricing, since they can keep their fabs busy with multiple customers, with no sunk costs.
And one of the first things he did when back at apple was... get it out of fab altogether. A job which was in fact given to Tim Cook (widely considered to have done a stellar job at it).
2. Intel might decide not to be such a good friend if Apple get into fabrication.
Apple has the money, and if they can use the capacity the marginal cost of production should be lower for them, since there's not a third party taking a cut. Apple's also paying for the treadmill-running through their suppliers (unless they're getting chips at a loss, which I doubt). This is assuming Apple's internal demand is high enough to use the capacity of a whole fab.
>>2. Intel might decide not to be such a good friend if Apple get into fabrication.
If that's the case then Apple can threaten to tell on them. Intel has been down that road before, and I don't think they want to go there again. Also I think that, in the long term, Apple is trying to move away from Intel.
Yes, but Apple does not bear the entire economic cost of the treadmill, only a portion of it. The rest is borne by other customers of Intel, TMSC, Samsung and the like.
The fact is that Apple can almost certainly get a better deal from being fabless than trying to vertically integrate a cost centre that will be as large as their entire current cash flow. That's the beauty of gains from trade.
> Also I think that, in the long term, Apple is trying to move away from Intel.
Maybe. Maybe not. They moved to Intel in the first place because IBM weren't interested in their business any more. The fab runs for Macs were too small and Apple wasn't enjoying the economies of scale that Intel could offer because it sells chips to many companies.
Most investors want share price growth, not dividends, because in general taxes on capital gains are lower than those on income. Stockpiling cash has a positive or neutral effect on share prices. Paying it out in dividends merely annoys those who would prefer the price to go up.
For Apple's needs they are perfectly capable of relying on the market to provide most of their components. Apple has no expertise outside of hardware design, system integration, and software, they are best left to concentrate on where their expertise lies rather than trying to cannibalize the entire supply chain.
No, last time I checked, Freescale's fabs were up and running. Yes, there they are...
Edit: Silicon, not livestrong bracelet material.
Anyhow, no such discussion can go without the obligatory posting of a link to the Apple Product Cycle: http://www.misterbg.org/AppleProductCycle/