Apple's Supply Chain Diversification Hitting Samsung's Chip Business Hard

[MacRumors]

Apple has been expanding its supply chain, bringing in companies like Taiwan Semiconductor Manufacturing to produce components for its iPhone and iPad devices. This supply chain diversification may benefit Apple, but it is having a negative effect on rival Samsung's chip manufacturing business, reports The Wall Street Journal.

Since 2007, Samsung has enjoyed the coveted position of being the only manufacturer of Apple's Ax series of processors and their predecessors. But after several years of negotiations and technical work as the popularity of Apple's iOS devices has soared, Apple has brought TSMC on board to produce A-series chips for the next generation of devices. This transition away from Samsung as the sole supplier of the main chip for iOS devices is cutting into the Korean company's logic chip business.

"Sales and profitability from System LSI (logic chip business) worsened as demand from main customers continued to decline," Robert Yi, Samsung's head of investor relations said last week.

Samsung's logic chip division struggled in the just-ended quarter, and the outlook for the business is equally bleak with Samsung acknowledging the continued low demand from customers will remain an issue going forward.

The sharp turnaround has led to analysts such as IBK Securities' Lee Seung-woo predicting losses of approximately 877 billion won ($848.5 million) for the division in 2014, compared to operating profits of 203 billion won ($196.3 million) in 2013 and 1 trillion won ($967.8 million) in 2012.

Article Link: Apple's Supply Chain Diversification Hitting Samsung's Chip Business Hard

 

[barkmonster]

I'm sure their eventual plan is to not give Samsung one cent for anything and bring as much of their component needs in house as possible to maximise profit.

 

[keysofanxiety]

Oh no, poor Samsung ...

...

 

[sammaffei]

Well,…

They bit the hand that fed them. Actually, they gnarled on it until it was a bloody stump. So, in the immortal words of Nelson, "Ha-Ha!"

https://www.youtube.com/watch?v=rX7wtNOkuHo

 

[macduke]

Anybody else enjoying this recent downfall of Samsung? Missing earnings estimates, being knocked off the top in China by Xiaomi, and now this. Karma!

To be clear, I don't wish Samsung to go out of business. They do a good job making certain hardware components like displays and SSDs. I just want them to be put in their place for all of their shameless copying. Punishment to fit the crime. Now continue along like a good little OEM.

 

[AppleFan115]

Although this diversification initiative is larger than a "grudge", I'm sure it didn't help that Samsung continuously bashes Apple in the press. Don't bite the hand that feeds you.

 

[GeneralChang]

Diversifying their supply chain is just good business. But I think we can all agree that there's an element of "if you're selling so many Galaxy's, this shouldn't be a problem, right?" in there as well. Is Apple showboating a little with moves like this? Probably. And they'd be crazy not to, I think.

 

[keysofanxiety]

Anybody else enjoying this recent downfall of Samsung? Missing earnings estimates, being knocked off the top in China by Xiaomi, and now this. Karma!

I'm loving it. It's not just for Apple's sake either. They've shamelessly copied pretty much everybody in the industry -- Kodak, Dyson, Sony, the lot -- then slow down the legal proceedings with constant counter-suing and mistrials until they've made enough profit from the copied tech that they don't need to worry any more.

I hope their lousy business/innovation morals come back to bite them hard.

 

[smithrh]

I'm sure their eventual plan is to not give Samsung one cent for anything

Likely, up to a point.

and bring as much of their component needs in house as possible to maximise profit.

Very unlikely.

A big part of what might bite Samsung in the behind is being vertically integrated.

 

[jrswizzle]

Apple is doomed...

Oh, wait - sorry. That was reflex.

Man, coupled with the fact that Samsung was the only major smartphone OEM to both lose marketshare AND take a drop in sales, things don't look all that positive for the Korean giant.

Could we perhaps be moving past the Samsung "fad"?

 

[Centris 650]

Wether Apple is trying to punish Samsung or not (and they most probably are) it's smart to diversify the building of components across multiple vendors. Back in the 90s there was a ram shortage due to a fire in the only plant that made the resin for ram. Ram sky rocketed and hit the budding home computer sales hard. Diversification just makes sense.

 

[blackcrayon]

Although this diversification initiative is larger than a "grudge", I'm sure it didn't help that Samsung continuously bashes Apple in the press. Don't bite the hand that feeds you.

Funny, during all of the Apple v. Samsung litigation, a lot of forum jockeys were insisting that Apple was biting the hand that fed them. As if Apple couldn't survive without Samsung's generous manufacturing relationship. Of course they are a competent supplier that makes some good stuff, but...

 

[keysofanxiety]

Funny, during all of the Apple v. Samsung litigation, a lot of forum jockeys were insisting that Apple was biting the hand that fed them. As if Apple couldn't survive without Samsung's generous manufacturing relationship. Of course they are a competent supplier that makes some good stuff, but...

Very true. It just goes to show how little a lot of 'Apple are doomed' pundits really are; time and time again, Apple prove them wrong. And although it's naive to say Apple won't ever run into any problems, I'd like to think they're certainly smarter than relying on only one supplier for everything, without having any other ideas in the pipeline.

 

[sanook997]

Nice! Couldn't happen to a company with less ethics.

 

[b0nd18t]

What a good portion of people here don't understand is that Samsung is good for us consumers. Being actual competition to Apple greatly benefits you and me. Why many of you are asking for less competition in the smartphone arena is beyond me.

 

[Noctilux.95]

I love good news in the morning

 

[pedromcm.pm]

Oh noes.

And this is where I have a big problem.

Samsung Mobile is an absolute pile of crap, and deserve to go down, but other divisions are very useful and do great things, from an engineering POV.

Look at what Samsung did with AMOLED. Look at how fundamental they were in releasing high PPI displays for everybody, great SSDs, etc.

Heck, even the Mobile division is responsible for putting big screens on mainstream phones.

Then again, they still make a lot of money per quarter. Yet Who here wants to bet that next year, the giant and all mighty Samsung Eletronics, will post "just" 2 billion $ of net profit, instead of the 6 or 7 they posted?

----------

What a good portion of people here don't understand is that Samsung is good for us consumers. Being actual competition to Apple greatly benefits you and me. Why many of you are asking for less competition in the smartphone arena is beyond me.

No. Samsung killed everything that Sony had, HTC, other companies. And it was never because they made better products.

Just cheap me too copies. It helps when you own the country.

 

[winston1236]

I can't imagine that Samsung would plan on being a sole provider forever, they had to have a backup plan. Don't want to end up obsolete like Intel.

 

[MartinAppleGuy]

Am I suppose to care? Boo hoo

 

[Shlooky]

I'm glad Samsung is getting a swift kick in the nads! They deserve it.

 

[kdarling]

Apple is a big buyer, but they're still only about 10% of TSMC's chip business, and less than that overall for Samsung chips overall (but bigger for APs).

Samsung's memory chip sales are up, but their AP (application processor) sales are down.

I think the latter is a combination of Apple switching some sourcing to TSMC as the article said, along with competition from other cpu makers like Qualcomm.

Moreover, Taiwan based MediaTek came up with their own combination AP / cell phone chips, that are being used by Chinese, Indian and other smartphone makers. (That's why even mom & pop operations can now build a cell phone.)

 

[Ryth]

Dear Samsung

That's what you get...for being a (insert rhyme).

-Apple

 

[Simplicated]

What a good portion of people here don't understand is that Samsung is good for us consumers. Being actual competition to Apple greatly benefits you and me. Why many of you are asking for less competition in the smartphone arena is beyond me.

I, for one, am not looking for less competition, but more competition from companies that play the game fairly. Using devious practices like blatant copying, spreading FUDs, and hiring shills is what Samsung excels at, and this should not be advocated.

 

[ValSalva]

Apple on one side and Chinese mobile phone makers on the other. Tough times for Samsung right now.

 

[Trapezoid]

Apple is doomed...

Oh, wait - sorry. That was reflex.

Man, coupled with the fact that Samsung was the only major smartphone OEM to both lose marketshare AND take a drop in sales, things don't look all that positive for the Korean giant.

Could we perhaps be moving past the Samsung "fad"?

Samsung had a great run on top. I really think the s5 signaled where they started to go wrong. Companies like htc and lg are now making phones that can compete hand in hand with the Galaxy series.

Once the iPhone 6 comes out it'll be another huge competitor that Samsung simply can't take on. Obviously they're not going out of business, but yeah the fad seems to be waning.

Oh and those stupid insufferable commercials of theirs don't help...