“Samsung Electronics recently asked Apple for a significant price raise in (the mobile processor known as) application processor,” the person was quoted as saying in the report. “Apple first disapproved it, but finding no replacement supplier, it accepted the (increase.)”

Samsung gets caught stealing Apple’s designs, so they raise the price of the chips by 20 percent.

http://twitter.com/deangray Dean Gray

Exactly the reason that Apple wants to be in the chip business.

studuncan

Anyone want to guess what Apple will be spending a bit of their $125 B on next?

Apple did announce that it wasn’t sure what to do with its stacks of liquid capital. I guess the industry has responded with a new roadmap for them.

studuncan

They’ve probably been planning it since before the first Samsung lawsuit.

KRONOS

Ha- wouldn’t it be sweet revenge if Apple did end up going into actual chip fabbing/manufacturing (they already have been doing major chip designing for their iOS devices) and took away ALL of Shamdung’s chip customers?

http://twitter.com/forty2j Jim McPherson

I guess if Apple wants to own the supply chain, they’re going to have to actually own the supply chain.

http://www.johncblandii.com John C. Bland II

Weak sauce. If they did it across all customers, I’d be fine with it (increases happen) but just to Apple? That’s weak.

studuncan

Actually, it’s good business from Samsung’s point of view. Where is Apple going to go? For now, nowhere. If Samsung keeps prices lower, will that keep Apple as a customer once they have the opportunity to leave? No way in hell. So, make money while you still can.

http://www.johncblandii.com John C. Bland II

“Good” is relative. It makes profit sense but is a petty, personal move by Samsung due to legal problems.

Good business is changing the process across the board. The only time I’d say otherwise if it was contractually impossible for them to do it to other customers but they will once their contracts are up.

studuncan

There is no other ‘good business’ besides profit. Samsung won’t get it long term from Apple, so they have to get it short term if they want to get it at all.

http://www.johncblandii.com John C. Bland II

Not true. If my customers knew I was overcharging them and not others, they’d kick rocks. Those who were undercharged will lose confidence in me as I could do the same to them later and would question my estimates.

I’ve done it for 12 years and experienced both sides of the coin. It isn’t good business to just get profit. Satisfied customers is better business as it brings on more business.

A short term win is not always the best choice for long term success.

studuncan

I think you forget that we’re talking about Apple vs Samsung here. Everyone else is small potatoes.

Apple will never be a satisfied customer, seeing as they believe they’re Samsung’s (unpaid) R&D arm. That’s not news to anyone, so it’s not the same for other customers.

Everyone knows Apple will leave as soon as possible, so Samsung’s only option is to make the best of it while they can.

http://www.johncblandii.com John C. Bland II

I don’t disagree with you on the options just saying it isn’t “good” business.

They aren’t happy w/ Samsung on the device side but in this vein they are pleased; the chips have been a success.

studuncan

Given their options, what would you consider good business then? Letting profits leave, or pushing them on to other customers? Those seem like the only outcomes.

http://twitter.com/forty2j Jim McPherson

Samsung is maximizing short term profit over long term profit. Soon, they will have neither. This will only accelerate Apple’s plan to find an alternative supplier.

studuncan

How are they going to get long term profit by keeping prices down on Apple’s chips?

Apple has been contemplating/planning on moving away from Samsung since before the first lawsuit.

http://twitter.com/forty2j Jim McPherson

They would get long term profit by keeping Apple as a customer for longer. Before this event, I suspect Apple was content to wait for a competitor to be ready, which didn’t seem to be happening anytime soon. Now they’d be much more willing to do a significant investment in or outright buy a fab to move away from Samsung more quickly.

studuncan

You don’t think Apple has been planning on moving away from Samsung since before the first lawsuit?

That $125B is burning a hole in their pocket.

http://twitter.com/forty2j Jim McPherson

I think Apple has been happy to move to alternative suppliers that have been readily available, and biding their time with Samsung otherwise. I believe this move by Samsung makes it more likely they’d consider investing in or buying a fab. They’re not going to spend their cash reserves if they don’t need to.

studuncan

Fair point. Apple looks at all of this from a pragmatic point of view, and will move when it makes real sense.

But I do believe they’ve been planning this for a long time so they can make the move quickly when needed.

http://twitter.com/shycophante Shyco Phante

I’m sure Apple would have already invested significantly in some other option if it would get them away from Samsung quicker. The problem is Samsung is such a major player in this space it’s going to be difficult for them to fully escape their clutches for a long, long, time. And the more Apple grows unit sales, the harder it gets to move away.

Steven Fisher

There was a price, represented in both dollars and inconvenience, that Apple was willing to spend to move away from Samsung before this price hike.

There is now an updated price, both in increased dollars and in increased inconvenience, that Apple is willing to spend to move away from Samsung.

That is likely to accelerate Apple’s move from Samsung, and judging from history, it’s likely to be a greater acceleration than Samsung anticipates.

tylernol

You are kidding me. It is terrible business on Samsung’s behalf. It shows, or at least at minimum, it implies that they cannot keep their semiconductor business separate from their consumer electronic business and any customer of theirs should fear being screwed over. If they can screw over Apple, they can screw anyone else over.

I used to work for Lucent Microelectronics a long time ago, and this was always a big issue — why would Cisco or Nortel buy from us and become dependent upon our networking SOC’s when we could glean competitive information from them, or gouge them on price when they have us designed in, or cut them off completely? Hence one major reason to spin the chip division off and cut ties from the parent corp.

If Samsung wants to salvage their semiconductor fab business’s rep, they better consider doing a spin-off as soon as possible, or they will lose all their business to more neutral fabs like TSMC.

studuncan

Samsung is the only fab in the world that can supply Apple with enough chips right now.

Apple hates Samsung; they are leaving. Once they can. Everyone knows this.

So Samsung is doing what they can to make more money in the mean time.

What else would you have them do? Watch Apple walk out the door without making any extra profits while they still have that ability?

tylernol

if they want anyone else to fill that production hole left by Apple’s departure, yes. If I were an exec at Qualcomm, I would be very wary of sending any business over to Samsung.

studuncan

Are you saying the Qualcomm exec wouldn’t understand the same thing?

tylernol

any company that makes chips for a market that a Samsung division competes with should be wary of giving Samsung Micro their fab business.

studuncan

Any company that has a combative relationship with its customers should have wary customers.

Samsung is well down that road already. There’s no going back. This is just the latest salvo.

http://www.thegraphicmac.com/ JimD

I’m actually surprised it took Shitsung this long to do it.

hrpanjwani

Guess someone’s going to be in the market for a new chip fab soon.

http://twitter.com/Moeskido Moeskido

Is Samsung the only current supplier to Apple for these components?

http://pulse.yahoo.com/_MGKMDABPUEAIAYIL5RC6WGE3AY Schuyler

Just more quarter-to-quarter thinking from Samsung. All they’re doing is accelerating the date at which Apple manages to wriggle out from under them as a supplier altogether. Where will they be then?

Peter

This is no dick move but rather a good business decision. If you could make 20% more on a service it seems silly not to. If Apple is allowed to enjoy large profit margins why not Samsung on their superior chip fab business?

Tvaddic

This is the first time that they raised the price since the iPhone was released, give them a break, Samsung has to make money.

KRONOS

Excuse me? Did you just crawl out from under your rock, troll? Fact is that Shamdung has been making $$ hand over asshole from ripping off Apple’s IP and R&D, and has to make back their $1B+ somehow, that they will be paying to Apple after being on the losing end of their lawsuit.

jwoodgett

Perspective…. This increase is about $3.50 per device and is almost trivial when compared to currency fluctuations/carrier subsidies, etc. It’s likely offset by other components reducing in price (and no longer a need to ship by air). Samsung knows that Apple is boiling oceans in an effort to find alternative suppliers. Samsung is legally entitled to increase prices. Apple is legally entitled to seek its business elsewhere.

studuncan

Very good point.

According to Toms Hardware, the A6 costs apple $17.50. 20% increase makes it still only 2/3 of the price of Qualcomm chips. And it’s still only the 4th most costly part of the iPhone 5.

If Apple is willing to pay the increased price Samsung is commanding of them, that’s not a dick move – that’s good business sense from Samsung. There’s no real point in Samsung working to protect a business relationship that Apple is openly working to bring to an end asap.

http://www.facebook.com/dave.maclachlan.3 Dave MacLachlan

If Samsung is doing this with all of their customers, fine; if they’re only doing this to Apple, yup – pretty much a dick move.

Junio Anthes-Moody

You don’t sue your business partners and expect to keep everything else hunky-dory. Apple had to expect this, and decided that it was worthwhile to go ahead with its lawsuits anyway. In my business, we don’t work with people who have sued us – ever. They’re lucky Samsung is continuing to supply products to them at all.

http://pulse.yahoo.com/_MGKMDABPUEAIAYIL5RC6WGE3AY Schuyler

“They’re lucky Samsung is continuing to supply products to them at all.”

I think it’s safe to say that Samsung needs Apple more than Apple needs Samsung.

KRONOS

Yeah, and in my business we don’t work with thieves who blatantly rip off our IP and slavishly copy our design/R&D work.

http://fookhar.dk Marcus Mattsson

This smells fishy. How is stuff like this not discussed in the contracts? I mean, Apple is notorious for asserting control over their supply chain, and you want me to believe they didn’t think of this? This was probably just a contractually-permissible increase.