Apple rethinking Samsung chip partnership, say sources | Hacker News Reader

Apple rethinking Samsung chip partnership, say sources

news.cnet.com

20 pointsbootload17 comments

An implicit assumption here seems to be that Apple is the one dumping Samsung when the opposite might actually be the case. Given production requiring equal fab-space, Samsung may have higher margins on their finished consumer products (e.g. Android handsets) than on the commodity priced components it sells to Apple. Given sufficient demand for Samsung's finished consumer products, freeing up some of the fab space currently used to supply Apple could benefit Samsung's bottom line.

The truth may also lie somewhere in between the two extremes of Apple dumping Samsung or Samsung dumping Apple. Samsung might be looking to jack up the component prices Apple pays for the above (or other) reasons, so now Apple is looking for alternative suppliers.

It will be interesting to see how TSMC's (or Intel's) component prices compare to what Apple has been paying Samsung. There may be some price fluctuations in Apple products over the next couple of years.

This reminds me of Schiller's abandonment of Instagram after they ported to Android. Strange to see such an influential and successful company acting in such a childishly vindictive manner.

Vindictive it might be, but childish it is not. I really think Apple has to get away from the dependency on Samsung; it needs to partner with a company that doesn't have the potential of taking advantage of Apple's product roadmap.

I cannot believe that people don't talk between Samsung's mobile division and their semi-conductor fabrication business (regardless of NDAs). I think being Apple's supplier and themselves being in the business of making phones and tablets, has worked to Samsung's advantage.

That being said, I think Samsung is a really powerful company and they'll be able to hold their own (i.e. revenues from product sales etc.) without Apple's business.

Sorry but the only thing child-like is your idea that Apple would make such an important decision on a whim. These are multi-billion dollar decisions affecting the big cash cows of Apple's business.

These are multi-billion dollar decisions affecting the big cash cows of Apple's business.

But yammering about starting nuclear wars isn't child-like at all. Straight out of the Sloan School of Management, right?

Apple has been running completely open-loop for a long time now. When they can abuse customers, ignore market demands, remove or downgrade key features, and still sell out of a multi-million unit preorder on launch day, there is no incentive for them to even ask what their customers want, much less design for it.

We have the patent system to thank for this. If you want a smartphone that doesn't suck, you will have to give money to Apple, live with the product's shortcomings... and pray they don't alter the deal further when the next iOS version ships.

"We have the patent system to thank for this."

Are you claiming that other phones are shitty because Apple has patented all the good ideas?

Yes, because when the government grants monopoly power over abstract ideas -- something the current patent system isn't supposed to do but does anyway -- it puts its finger (if not its whole hand) on the scales of competition.

Patents don't exist to help the little guy; if they did, we'd have gotten rid of them a long time ago. An argument in defense of patents is inevitably an exercise in defending companies that make hundreds of millions in profits before they even begin to enforce those patents.

The profits should be enough.

This will be far far more damaging to Samsung than a $1 billion settlement from the patent settlement, as Apple has been buying several billion dollars worth of parts per year.

5% is the amount of business Apple provides is what I've heard. No idea how accurate, but if it is even close, I imagine some of the companies TSMC won't be able to handle due to contracts or just workload will flip to Samsung. So maybe not all that much of a loss to be rid of someone that is quite happy to stab them in the back whenever they have the chance.

Uh,

It's not like Apple's been just giving Samsung billions each year. I don't know Samsung's margin on the sales but it would seem they'd be looking at loosing several hundred million in profit if they can't find another buyer for the chips. But maybe they can make up for the lost demand so other way.

Agreed, but Samsung will not likely have any trouble moving those chips, even in today's market. Apple is rightly concerned about them.

At what margins though? You're spending billions of dollars on a fab these days, with the hope of getting maybe 30-40% gross margins (unless you're Intel), with far lower net margins.

The reality of operating a foundry is that merely breaking even takes a lot of skill and even a little luck.

Compared to that, a billion dollars in cash doesn't sound too bad.

TBH, I wouldn't be surprised if growth in the Android market completely makes up for any lost sales to Apple. I'd expect their manufacturing capacity to be fully utilized, but move sideways for a while with little to no growth.

Android handset manufacturers may see their total BOM fall faster than forecasted. Samsung could always use this opportunity to undercut the other Android handset manufacturers (HTC, Motorola, etc) on price. They can just convert the tight margins with Apple into gaining Android marketshare.

Hope that in-house chips work out better than in-house maps.

Apple has already been using in-house chips for the last three years or so.

Of course they are; they would be stupid if they did not.

If you buy a $1 soda, you think about it for about a millisecond. If you buy a $1000 laptop/phone/whatever, you think about it for at least a day. If you buy for $x billion of parts every year, you have a huge department that does nothing but rethinking the partnership. I bet Apple is rethinking its partnerships with Intel and Foxconn, too. If they can get better stuff and/or better conditions elsewhere, they will move.

Also, Samsung is both major part supplier and major competitor of Apple. Because of that, they will want to move because it would cost their competitor some economies of scale.

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