Samsung hits Apple with 20% price hike: report | Hacker News Reader

Samsung hits Apple with 20% price hike: report

marketwatch.com

65 pointsbane53 comments

Link to original report without the bias: http://www.marketwatch.com/story/samsung-hits-apple-with-20-...

Attention-grabbing version: Samsung reacts to recent patent battles by increasing prices to screw Apple.

Likely reality: 20% increase clause was already in the contract (which doesn't run out till 2014) or this 'report' is simply false. Surely Samsung can't just arbitrarily raise the price because they feel like it.

EDIT: I see the moderators have altered the source now, was originally linked to some Android blog.

> Samsung Electronics has a long-term contract to supply APs to Apple until 2014

But Samsung was able to raise the price in the middle of the contract? Is this typical?

That is what I thought. Samsung must have had a stipulation saying if outside suppliers raised their prices they could pass along the cost. I highly doubt this was just Samsung looking for more profit. It would also explain Apples willingness to agree to the deal, if they believed that the cost of unobtanium went 20% up. Does not matter if they go with chip manufacturer X or Y, The supply cost will remain constant (if not more with the little guy, since he cant buy in the bulk Samsung can)

Must be a term in the contract to allow Samsung to do so. My guess: likely that Apple is ending the contract early, and the term is the way for Samsung to cover its investment in the chip plant.

Hasn't Apple been pumping huge amounts of money to allow their manufacturers to make these plants though? Surely the investment is from both sides? I'm trying to angle for a reason why they would go ahead an trigger a clause when they easily have enough money to do whatever.

Aside: I am always surprised with the other comments. Do people really think there aren't a bunch of terms on a multi-billion dollar contract limiting what you can do?

It might just be Apple invoking an early out clause.

I think that's more likely, considering all the rumors that Apple is planning on opening their own chip fabs.

Pretty fair, for every $ that Apple steals from Samsung in patent BS, Samsung raises their rates to charge Apple for chips.

Do you believe Samsung has benefited from Apple's R&D?

A better question might be to flip that around, has Apple benefited from Samsung's R&D?

Yes. The difference is that Apple is paying Samsung for that benefit.

Supposing the answer is yes (and I'm sure it is), Apple is paying Samsung for their R&D advances by buying Samsung's chips, LCD panels, etc. Does Samsung pay any royalties to Apple for copying elements of the iPhone's design?

This game is boring and pointless. Does Apple pay for the elements of iOS they copied from Samsung/Motorola or Google?

I know they do pay Xerox a ton for Icons. The scrollbar settlement was huge as well.

Did Samsung buy Xerox???

(I'm kidding :])

The question is whether or not you should have to pay another company for using design elements that are similar when there's no brand confusion on the part of consumers.

It's better than passing along the costs to consumers of Samsung products.

> for every $ that Apple steals in patent BS

A billion for aping Apple's design IP doesn't sound like much when Apple has to pay $370M over the claim that Facetime violates the use of a domain-name service to set up virtual private networks.

http://www.apple.com/uk/legal-judgement/

Samsung sees the writing on the wall: Apple is going to ditch them in the next few years and start building chips themselves. Since the bridge is already burnt, why not make some extra money off them in the meantime?

Apple has only invested in chip design capabilities, not manufacturing. I haven't seen any indication that they're interested in fabricating their own chips. It's a fully mature commodity market, why would they?

That's completely false, chip manufacturing is as high tech as design and improving rapidly every year.

If fabs were commodities, we wouldn't have the current situation where Intel continues to be far away the leader in foundry technology.

because other customers are watching?

Samsung wants their Billion Dollars Back (ROFL)

This reminds me off the time when IBM got all the money they lost in a case against their union, by reducing the salary of all the employees involved in the case.

Well played samsung

Based on what I've heard from friends at Samsung Austin Semiconductor, Apple has already moved to swap to TSMC once Samsung's supply contract is done.

What is interesting here is that if Samsung loses the Apple contract, it will have likely huge negative impacts on Samsung. Apple's huge parts purchasing has effectively bankrolled the R&D and overhead costs of Samsung's mobile operations for quite a while now. Thus, Samsung is able to use the same factories and parts in their own products cheaper than anyone else can because Apple's massive investments make it possible.

If Apple had HTC or LG making all of their parts, it would be much easier for LG and HTC to compete. Eventually, as Apple moves away from Samsung it will be interesting to see if Samsung can keep up with Apple as Apple's huge contract no longer pays for the massive production overhead and R&D costs for mobile tech.

My guess is over a 10 year period Samsung will lose a lot of its profitability advantage over other Android phone makers unless it can replace Apple's purchase volume their own sales.

"over a 10 year period" is an eternity in this space.

Does HTC do components? My understanding was that they were a top level handset vendor, as opposed to doing anything w/ components...I assumed they probably subcontracted with companies in hsinchu or elsewhere for that.

HTC mostly uses Qualcomm silicon, which I believe is often produced by TSMC.

A few months ago Samsung lost $10B in market value when it was rumored Apple was sourcing parts to a competitor:

http://www.reuters.com/article/2012/05/16/us-samsung-chips-i...

Seems to me Apple will either just suck it up and deal with this, or will look to internalize their SOC production. Is this something that could have been possible with their PA Semi purchase?

PA Semi was about chip design; Samsung does chip manufacturing. Apple has been spending enormous CapEx recently (cf. Asymco), so I wouldn't be surprised to see an Apple/GloFo 22 nm fab come on line before 2014.

Samsung also makes other components, notably the flash memory, but it's not like they're the only game in town.

Does the author not know how to write quotations? The use of parentheses instead of square brackets to denote the alteration of the quotation is confusing and painful.

Something Samsung should've done from the moment Apple started suing them, so they can pay for all the frivolous lawsuits.

There is a significant risk to Samsung that Apple will abandon them as a supplier which would do horrible things to Samsung's bottom line.

According to the MarketWatch article, Apple tried and couldn't do so.

So it's very likely that Samsung did actually ask for the price hike as soon as they were sued, and Apple has spent the past few months looking for a new supplier.

The bridge between Apple and Samsung is on fire, but given that Apple set fire to it, they probably have an alternative in the pipeline.

Samsung are just adding fuel to the fire; they know Apple's going to drop them anyway, why wouldn't they make as much profit as they're contractually able to?

We already know Apple plans to move to TSMC in the near future, from several reports. Obviously, Samsung will know about this, too. And this is probably just a way for them to squeeze the most money out of Apple by the time that happens.

Do you want to be the one to report to your shareholders that you lost Apple as a customer and, as a result, quarterly profits are going to be absolutely destroyed?

Samsung profits very little from Apple, maybe they will profit more now, but as it stands, i would like to be the one to report shareholders that we lost the biggest customer, but we have record profits because of that, selling smartphones is way more profitable for Samsung (they are close to Apple profits) than selling chips to Apple will ever be.

Lets see the figures on this please.

Except that if was stated there more than once, division making chips is completely separate from division making phones then chips maker won't have much to brag about.

Samsung is a Chaebol and largely controlled by one family.

There interests are thus less subject to the quarterly forcasts of Wall Street analysts than those of Apple.

This left me wondering

http://www.samsung.com/us/aboutsamsung/ir/corporategovernanc...

Seems that 'only' 15.29% is owned by the "family". I'm not an expert on this things.

That's typically enough to control a company. You don't have absolute control, but organizations with as little as 5% have an outsized influence. I'm not really sure why that is, but back when I was doing mutual funds the fund managers would say companies were "controlled by" as stockholder with a relatively small number of shares.

Sometimes it really is enough for absolute control, since not all shares are voting shares. The NYT is a good example of this.

Thanks

Profit or revenue? Reminds me of the company that stops selling to Walmart and their revenue drops significantly but their profit doesn't go down much at all.

I haven't followed the lawsuits at all, but thought Apple won some of them. Surely you can't win a frivolous lawsuit?

apparently this is about a $3 price increase and about a 1% increase in total cost of materials for an iphone.

http://www.asymco.com/2012/02/26/iphone-sine-qua-non/

That's rather strange for Apple then, to cut the branch they sit on.

Now is the time for Intel to step in.

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