Samsung Reportedly Hits Apple with 20% Price Increase for iOS Device Chips

Apple moving away from samsung, away from google, away from other OEM manufacturers.... right as the market is starting to show signs that Apple's stale offerings arent "wowing" anyone anymore.

It seems like all of these moves are just going to keep increasing apple's overhead by doing everything in-house, rather than contracted as-needed. In this climate, I can realistically see a bloated apple, hemorrhaging money in about 5 years.

Just weird... their current plan is working GREAT, better than it has worked for anyone, EVER.... so they're going to change it (?!). The risk vs reward of doing all this just is bad biz.

I'm a complete Apple fan/user. But my TV's are Samsung. But if you guys think that Apple moving a chip away will destroy Samsung you need to jump on a plane and fly to Asia. Samsung is massive. Everywhere you go even throughout the Philippines is Samsung advertisements. Losing Apple will be a small dent in one department of a massive company.

tbrinkma said:

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Your point being, what? Only one person is ever 'allowed' to correct you when you're wrong about something?

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Kind of a waste of bandwidth and everyone's time just because you feel the need to feel superior, no?

And I corrected myself as well as someone else correcting me.

But sure - go ahead and waste the time and those reading the thread on something that was discussed and settled a few pages back. Wouldn't be the first time LOL

I just tool a massive apple

You know they say don't fix what's not broken. I think Apple is making a big mistake if they try to move their chip production over to Taiwan Semiconductor Manufacturing Co. instead of sticking with Samsung.

We've all loved our iPhones and iPads of every generation and the chips that ran them were ALL made by Samsung. They've done good work for Apple and we've all been the benefactors of their quality.

Now changing vendors is a big risk and doing so just because you're trying to hurt your "competitor" can be a double-edged sword. Just look at the Apple Maps fiasco with Google. Who came out looking good and who has lost 20% of their stock price or US$140 BILLION off their market cap?

Apple would need to win 139 more lawsuits against Samsung to make up for this loss.

What's worse is that like getting rid of Google Maps, Apple is showing it cares less about the user experience and providing the best quality and services for their customers, and more about their bottom line.

This isn't the Apple that people connected so strongly with and which let it become the biggest and most valuable company in the world. That Apple bit its lip and worked with competitors if it meant providing the best product for its customers, even if it meant less profits.

Samsung is the best chip manufacturer in the world. That's why everyone uses them, and that's why Apple used them. It was about the quality. Now it's a big unknown.

The sad thing is Apple and Samsung in the past have always been able to separate that client-vendor manufacturing relationship and the consumer electronics competitor relationship.

A company like Samsung is so big that those divisions probably have very little to do with each other. If anything, the Samsung manufacturing division probably treats that Samsung consumer electronics division as just another "client".

The fact is, in technology, you HAVE to be able to work with your competitors. That's how to get the best quality and that's how you get the lowest costs.

Apple seems to be experiencing the classic case of getting "too big for your britches" and it's going to hurt them in the long run.

Another tragedy in all this is that Samsung actually has a manufacturing plant in TEXAS. That's right. The chips it made for Apple were largely MADE IN THE USA. How's that for irony?

Give that Apple outsources all the assembly of its products to CHINA, having Samsung make their chips was actually one of the few ways AMERICAN WORKERS actually benefited by Apple's success. Apple giving Samsung their chip business meant AMERICAN JOBS.

It was always nice to know that Americans were involved in the manufacture of Apple products even though they were hired by an overseas ASIAN company.

Now with Apple using TSMC instead, all those AMERICAN JOBS will now be SHIPPED OVER to ASIA along with all the assembling jobs that are in CHINA.

Overall, this is worrying news for Apple consumers, not knowing if the quality of Apple products will take a hit, and even WORSE NEWS for American workers.

Vitrum said:

Sure buddy apple marketshare is growing.

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Oh, good. Someone who doesn't understand the difference between market *share* and market *size* when reading and responding to a post which *explicitly* makes a point of distinguishing between the two.

Apple's market is increasing. They are continuing to sell more iPhones each year. Their market *share* is decreasing as other vendors enter the market and vendors who used to sell significantly fewer units are starting to hit competitive numbers. Meanwhile, the absolute *size* of the total market is increasing fast enough that virtually every vendor (even some of those who are dropping huge chunks of market share) are still selling more units than they did 6 years ago.

Again, there's a difference between market *size* and market *share*.

tbrinkma said:

Oh, good. Someone who doesn't understand the difference between market *share* and market *size* when reading and responding to a post which *explicitly* makes a point of distinguishing between the two.

Apple's market is increasing. They are continuing to sell more iPhones each year. Their market *share* is decreasing as other vendors enter the market and vendors who used to sell significantly fewer units are starting to hit competitive numbers. Meanwhile, the absolute *size* of the total market is increasing fast enough that virtually every vendor (even some of those who are dropping huge chunks of market share) are still selling more units than they did 6 years ago.

Again, there's a difference between market *size* and market *share*.

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Oh good- a redundant post from one page back.

MacCurry said:

You hit the nail on the head!

The A6 is a 28nm chip, and the next generation A7 is a 20nm chip that Apple will have to pay TSMC or some other company big money for. Like bailing out Sharp Electronics with $2 billion for display panels. Samsung can make 22nm chips today like cookies and getting to 20nm will be as easy as pie. Even with higher prices, Samsung will still be cheaper than TSMC and others who make SoCs. Additionally, Samsung fabricates these SoCs in the US, where the others don't. So expect bad publicity for Apple to ship jobs overseas in this weak economy.

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tbrinkma said:

I must have missed the post where someone claimed Samsung makes "such ***** quality parts". I saw the word "average" used, but that's not an insult. Samsung has the infrastructure to provide average-good quality parts, in large quantities, at a decent price. That's why vendors who need large quantities of parts use them as suppliers.

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MacCurry is right.

People should understand that 28nm is not an average quality part, it is a premium part. There are very few companies that have either the capability or infrastructure to provide 20 or 22nm as hose foundries cost about $4-5billion a pop. Essentially you have Intel, TMSC, Samsung and then a few consortia which include the likes of IBM, Toshiba and Philips. And most of those are not consistent with Apples architectures and will not supply phone chips.

Also, there are economies of scale, performance and cost when you drop feature size because you get more off a wafer and the chip is faster and uses less energy. So if you can get a process to 22nm, it's all win, win, win. The problem is that the foundry is increasingly expensive and complicated, which is why Samsung holds the cards, not Apple.

MacRumors said:

A bill of materials estimate for the iPhone 5 pegged the cost of the A6 chip at approximately $17.50, meaning that a 20% increase in price would translate to roughly $3.50 in increased costs per unit for Apple.

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Comments are tl;dr but I hope I'm not the first to point out how flawed the reasoning in this quote is. The isuppli estimate referenced is based on what a 3rd party expects parts to cost, they have no inside knowledge on a proprietary part like the A6 would cost Apple so you can take 20% price bump rumor and blindly apply it to that estimate. It's just as likely (ie 50/50) that the isuppli estimate was already 20% higher than Apple's true cost and this just brings costs up to what was expected.

BuckusToothnail said:

The fact is, in technology, you HAVE to be able to work with your competitors. That's how to get the best quality and that's how you get the lowest costs.

Apple seems to be experiencing the classic case of getting "too big for your britches" and it's going to hurt them in the long run.

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This is an excellent point too. Apple piggybacked on the open platforms and patent sharing that was the norm in the semi-conductor industry - so they got access to what they needed to launch the first iPhone. A lot of the industry didn't expect them to amount to much because they thought other things mattered back then, like leading edge capabilities, relationships etc...

So Apple took off and then started to wall off IP, and now they're battling everyone who had an R&D division in the 90s an won through relationships. In fact the guys they still play with are newer players that didn't historically have much in the way of R&D and weren't really big alliance partners.

jb510 said:

Comments are tl;dr but I hope I'm not the first to point out how flawed the reasoning in this quote is. The isuppli estimate referenced is based on what a 3rd party expects parts to cost, they have no inside knowledge on a proprietary part like the A6 would cost Apple so you can take 20% price bump rumor and blindly apply it to that estimate. It's just as likely (ie 50/50) that the isuppli estimate was already 20% higher than Apple's true cost and this just brings costs up to what was expected.

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To be fair - they set up a premise and just carried it out. They never said that the part actually costs that. Just that if you believe X to be true, then they are now paying X+20% and offered the amount.

starbird said:

They don't have to be able to do it cheaper. They have to be able to do it for the same.

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Even if the "alternative" was able to replace Samsung for "just a little bit more" costly than Samsung, then Apple would gladly embrace the alternative supplier and dump Samsung.

The problem for Apple is short-term (perhaps less than 1 year) where they have to pay for Samsung's blackmail price. But once that passes, Apple's moved on to different (and less-nastier, less-hostile) suppliers and Samsung is then out of the picture (with regards to the supplier issues).

The 1 billion is a drop in the bucket for either company. Its the principal that drives Apple.
So what should Apple do if they feel one of their key suppliers
is ripping them off by copying their products?
Its irrelevant what you or I think its what Apple believes.
So should they just turn the other way? No! They are standing behind their
morality and even if it cost Apple Money its the principal that at least they have
the courage to stand by!! In other words they are not the money horrors some
would have you believe. They are willing to stand up for what they believe in!
Even Google was aware in case you forgot that Samsung was blatantly copying apple read for your self http://www.thetechstorm.com/2012/08/google-warned-samsung-not-to-copy-the-ipad/

I just wish more Americans would stand up for our country and support our own companies!! Do you know why Samsung and Korea are thriving? Have any of you been to Seoul? They have one of the most modern infrastructures of any city in the world. How can they afford such infrastructure? Who protects them militarily so they don't have to spend the % of dollars on defense like we do here. Bottom line is we spend billions of $$ to protect them. Yet they have no problem stealing our intellectual property in order to provide you with a cheaper product!! While in our own country roads and infrastructure are falling apart because so much money is directed to our military so we can protect countries like Korea Just saying

ArtOfWarfare said:

It's like Samsung is sitting there wondering "How can we piss our partner off more? How can we make them want to jump ship to a rival even quicker?"

It seems someone at Samsung is clueless how to operate in a global economy.

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Samsung sees the writing on the wall. They know Apple is entertaining other fabricators. They also know that other companies will not be able to meet the demand at this time.

TI is exiting the mobile fabrication market and TSMC has not only tons of other customers but also capacity and yield issues themselves.

1080p said:

From What I understand, Apple and Samsung have a contract for chips until 2014. Wouldn't prices be negotiated and set before signing any long term contracts? Calling BS on this article!

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Agreed. Sounds like rumors spread to manipulate stock prices before the Q1 earnings call is what this is. Buy low before the holidays.

There is no way Samsung would legally be able to just raise prices. Apple has long term purchase contracts.

samcraig said:

Yes. Because everything in your world is so black and white. Good luck with that.

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Actually, the world really is quite black and white, only marketers and politicians would have you think otherwise. (sorry for the redundancy there) Although those words have become poor metaphors to use. How about we switch to binary: World = 0 and 1.

For instance, in this story, Apple and Samsung have been manufacturing partners, and the future is?:
1=still partners
0=not partners
There is no availability of a 3rd option.

Answer: 1

The fact that we have to keep asking questions such as these does not blur the answer, it simply means things can change between 0 & 1.

Limboistik said:

Agreed. Sounds like rumors spread to manipulate stock prices before the Q1 earnings call is what this is. Buy low before the holidays.

There is no way Samsung would legally be able to just raise prices. Apple has long term purchase contracts.

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Do you know the details of the contract and any riders. Do you know how change in the market and cost factors are handled within the contract. Are you aware of the pricing structures discussed in the contract.

I'm guessing no. So you can't say that there's no way Samsung can legally raise prices because of their contract. You (and we) are all missing the important information. But feel free to speculate

Lol fanboys. Can't believe people are saying this is going to hurt Samsung more than Apple...no.

tbrinkma said:

Oh, good. Someone who doesn't understand the difference between market *share* and market *size* when reading and responding to a post which *explicitly* makes a point of distinguishing between the two.

Apple's market is increasing. They are continuing to sell more iPhones each year. Their market *share* is decreasing as other vendors enter the market and vendors who used to sell significantly fewer units are starting to hit competitive numbers. Meanwhile, the absolute *size* of the total market is increasing fast enough that virtually every vendor (even some of those who are dropping huge chunks of market share) are still selling more units than they did 6 years ago.

Again, there's a difference between market *size* and market *share*.

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There are different truths though aren't there? That's why it's not JUST black and white.

IE - is it illegal to steal a loaf of bread. Yes.

If you have a starving child and no money - while it may be illegal to steal that bread and a crime - there are clearly other "higher" ethics/morals that come into play before you can say whether it is RIGHT or WRONG to steal.

You can parity if it's legal. You can't really parity if it's right or wrong if you look beyond legality.

So while I agree that there are definitely black and white issues. The world is more complicated. Because not everything is defined clear cut.

JAT said:

Actually, the world really is quite black and white, only marketers and politicians would have you think otherwise. (sorry for the redundancy there) Although those words have become poor metaphors to use. How about we switch to binary: World = 0 and 1.

For instance, in this story, Apple and Samsung have been manufacturing partners, and the future is?:
1=still partners
0=not partners
There is no availability of a 3rd option.

Answer: 1

The fact that we have to keep asking questions such as these does not blur the answer, it simply means things can change between 0 & 1.

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echo44 said:

Yet they have no problem stealing our intellectual property in order to provide you with a cheaper product!!

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This is the usual US nonsense. When the Japanese started making tv's Americans went on about stealing intellectual property as Japanese TVs out paced American ones. And go figure, the Japanese had better technology.

In cars, same thing. Then everyone comes to find out that Japanese management practices destroyed US ones.

It's the same thing here. Samsung is outpacing Apple. It does more R&D. More manufacturing. More patenting. Apple's patenting is so rinky dinky, primarily wimpy design patents, that it's amazing they get judgments at all.

JAT said:

Actually, the world really is quite black and white, only marketers and politicians would have you think otherwise. (sorry for the redundancy there) Although those words have become poor metaphors to use. How about we switch to binary: World = 0 and 1.

For instance, in this story, Apple and Samsung have been manufacturing partners, and the future is?:
1=still partners
0=not partners
There is no availability of a 3rd option.

Answer: 1

The fact that we have to keep asking questions such as these does not blur the answer, it simply means things can change between 0 & 1.

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LOL you can't be serious. You don't really think every question can be reduced to binary, do you?

WardC said:

Maybe this will halfway reduce Apple's staggering mark-up prices on their iOS devices and make their already exorbitant prices somewhat more justifiable.

Apple is charging $400 for a device that costs them $150 to make. That is $250 in Apple's pocket for a device that only costs them $150 to make. That is high mark-up if you ask me!

It's even more staggering for their Macs. Their Retina MacBook Pro 15" machines cost them less than $1200 to make, and they are selling them for $2500+

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No these are COMPONENT costs, NOT the cost of the device to Apple. Component costs are not all these devices cost to make and sell.

Peppa said:

LOL you can't be serious. You don't really think every question can be reduced to binary, do you?

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Sadly I think he (and some others) do.

Which is why some post no matter what that Apple is right, Samsung is wrong. Or good/bad. Etc...

walie said:

Why would the president of AMD do that?

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What do you mean why?. Why not? For the same reason Samsung did it. Money. They are already a supplier of chips and have the manufacturing capability.

Only it would be better for apple because AMD and Intel are not competitors with apple. AMD and Intel are suppliers the same way intel provides the chips in the macs. They could supply the chips for IOS only using apples design.

This would be an incredibly easy way for Apple to kick Samsung to the curb relatively quickly.