“Samsung Electronics Co is looking to supply chips to more Chinese and other emerging smartphone makers, the head of its system chip business said, to counter any fall-off in demand from Apple Inc, which is weaning itself off Samsung chips used in its iPhones and iPads,” Miyoung Kim reports for Reuters.
“As Apple looks to be less reliant on its rival for parts for its gadgets – it is already buying fewer Samsung memory chips and display screens as the two have gone to war over patents – concerns have grown that Samsung may see its processor revenues tumble,” Kim reports. “Supplying processors for Apple products has been the mainstay of Samsung’s system chips business.”
Kim reports, “Goldman Sachs estimates Samsung’s AP chip sales to Apple will rise to 9.3 trillion won ($8.8 billion) this year, or nearly 80 percent of Apple’s spending on Samsung processing chips, memory chips and flat screens. But that could tumble to just 2.5 trillion won next year, as Apple will shift 30 percent of its AP business from Samsung and eventually 80 percent by 2017, according to Goldman.”
Read more in the full article here.
MacDailyNews Take: By SteveJack
80% by 2017? Sheesh. Who can move more glacially, the legal systems of the world or Apple Inc.?
Apple should’ve seen this coming and prepared a lot sooner than they did. Samsung’s been blatantly ripping them off since early 2008, at least. Yes, chip and display fabs are expensive, but Apple has had billions upon billions at their disposal for many, many years now. If friggin’ Shamelessdung can figure it out, certainly Apple could have assembled the talent and the resources in order to gain leverage, protect themselves, and properly diversify their suppliers long ago.
As I’ve always maintained, Tim Cook boxed Apple in here royally. It’s his biggest mistake, making Apple so damn beholden to Samsung. No, he couldn’t have anticipated the level of IP theft Samsung was willing to commit, but once April 2008 rolled around, Cook should have begun working to get Apple free from Samsung – certainly faster than still being stuck sourcing 20% of their mobile chips from them in 2017. 2017!
I can’t help but think that, instead of doing what they’re finally doing now, Apple sat around for 2 or 3 years saying to themselves, “We can’t believe they’re doing this. Maybe we can talk to them and get them to stop.”
Total waste of time.
Current worldwide smartphone market share should be 75% for Apple’s iOS, instead it’s 14.9%. Android has 75%. Even though, if you’ll remember, ’twas Apple who reinvented the phone, not Google.
Apple blew this big time: First by trusting Eric T. Mole on the BoD, then leaving him there for far too long, then giving Android oxygen by clinging to AT&T exclusively – again for too long, then by allowing Samsung to run roughshod over Apple’s intellectual property because Apple had no leverage (I can almost hear Samsung saying, “Well, what are you going to do about it? Where are you going to go? Do you want your chips and screens or what? Because without us you’ll have neither!”) Yet again, Apple waited too long to make the move. Every move Apple has made in this whole Android/Samsung knock off debacle has been late and taken too long.
Yes, I know, market share isn’t everything and Apple dominates in the more important profit share metric, but giving away what’s rightfully yours or sitting around with your thumb up your ass while it’s taken from you in broad daylight simply isn’t a smart move, no matter how you slice it.
Ah, well, better late than never, I guess. Maybe Apple can expedite the process and make up for at least some of the precious lost time.
SteveJack is a long-time Macintosh user, web designer, multimedia producer and a regular contributor to the MacDailyNews Opinion section who pretty much predicted the iPhone 4 years before Steve Jobs pulled it out of the pocket of his blue jeans.
My guess is that this can’t rest alone at Mr Cook’s feet. I suspect the course of action was muddled by the unfortunate passing of Mr Jobs. That event was likely more disruptive than anyone knows. No business could remain razor sharp during a period like that. Not just the passing, but the build up to it as well.
The real challenge is how well Mr. Cook will be able to recover from the disruption. Certainly it took several years to reach it’s peak disruption. I’d venture it’ll take several more to recover.
Apple’s got a solid team and I suspect they’ll wether the storm better than anyone else could have. At least Steve tried to prepare them for that….
I very much disagree with your take MDN.
Samsung is the foremost manufacturer of the types of chips that Apple needed. TSMC and others did not have the technology, money or experience to transform their plants into something that could do the job of Samsung. Not back in 2008. In fact no plant could, not with the degree of volume and successful yields that Samsung did. Are you aware of how long it takes to transform a plant to do what Samsung has done for years? It take more than just money.
Second of all, Apple would have loved to switched screen manufacturers, but again who can create the amount of volume and yield that Samsung can? Not too many.
Lastly, who are you really blaming? Steve Jobs, that’s who.
Blame Steve for trusting in Eric. Blame Steve for wanting to sit down with Eric at Starbucks instead of punching him in the head. Blame Steve for getting cancer again, and the executive team has to sort through this stuff while the CEO is sick and may be gone at anytime.
Luckily, word on the street is that Apple HAS put billions into supporting Sharp so that they can manufacture the screens. Mind you they had financial problems of their own, and it’s not a small deal to help someone pay off their debts.
Here, here. Bang on. MDN used to think things through so well. That was a pathetically embarrassing, poorly thought out take. Just close down this site and switch it to Android already. Sheesh.
Hear hear – as in hear this.
I agree. Basic must have for Apple is quality. Turning to lower quality producers could have destroyed the brand. Also, the colossal ineptitude of the legal system to deal with obvious ip theft has been an eye opener to me.
Totally agree. It is just not capability but capacity and yield.
MDN were not around when Apple’s shenanigans with Motorola and IBM processors. The company couldn’t sell jack in the high end market because the chips were backlogged.
Cook is smart not to switch supplier until they are sure they can meet demand. To make millions of units you need to have supply of all components and cannot take risks like MDN are suggesting.
I agree with Wil, but really appreciate MDN’s link to the Steve Jack piece. Very interesting. I didn’t predict like Steve did, but I remember wishing that Apple would make sense of the awful state of affairs with phones and PDAs back then.
Will,
I agree. Seeing the future is not only hard, its impossible. And many things in manufacturing and technology take years .. at a minimum.
Stevejack said. “Yes, I know, market share isn’t everything and Apple dominates in the more important profit share metric, but giving away what’s rightfully yours or sitting around with your thumb up your ass while it’s taken from you in broad daylight simply isn’t a smart move, no matter how you slice it.
Ah, well, better late than never, I guess. Maybe Apple can expedite the process and make up for at least some of the precious lost time.”
OK, we all need to rant once in a while, but Stevejack usually has a cool objective head on his shoulders. I think he is just ranting here so I will let it go. Afterall, Steve Jobs should have invented anti-gravity and just put Apple on top of the world in the first place… LOL.
Just a thought.
en
SteveJack is such an Apple sycophant. 😉
He occasionally seems bipolar to me.
Not a bad diagnosis, as one who suffers delusions of grandeur fits bipolar symptoms nicely. This ‘gentleman’s’ assessment of decisions largely put in motion by S. Jobs indicates he considers his understanding and insight superior to S. Jobs. Though it can be amusing to hear people sitting on the fence critique the true players in the arena. My money, though, was on Jobs, with a preponderance of wins over losses.
+10
I believe Steve Jobs was CEO and COB when most of the events described happened. In many cases there was no alternative bu Samsung. TSM was capacity constrained. Not enough memory available SRAM RAM suppliers. SS had the display expertise So, if Apple would have canned Samsung earlier, they would have sold many fewer iPhones and had much less cash than they do now. At some point maybe payback will come. SS selling to the Chinese will create more chaos.
Even with these missteps, Apple is still doing better in the smartphone/tablet markets than they did in the personal computer market. Android/Samsung are not Microsoft/PC assemblers. Apple is in a much better position now to kill them off than they were a couple of years ago.
I still love Apple and will only buy Apple tech but they have given me a lot of reasons to have doubt.
Gee, I am indecisive on this but then again maybe not.
Well, at least now Samsung won’t have to adhere to Apple’s strict quality control standards.
Also, Apple was never going and is not going to produce chips itself. To have this business profitable, they have to gather much more orders than their own needs (despite the fact that those need are big).
Theoretically, Apple could invent their own technology process and use subcontractors to produce chips — similarly how they do with cases and screens, among other things.
Apple uses custom-designed Apple A5, A5X, A6, and A6X SoCs in their iOS products. No other companies use these SoCs.
They design the chips, yes, but they don’t manufacture them.
Never said they did.
And the manufacturing part is the point. Apple does not do manufacturing itself for any product that requires incredibly huge volumes of orders for the plant to be profitable. Apple only does batteries for some of its products. But this manufacturing can be accurately scaled without risking losses — unlike chip and other types of manufacturing.
Worried? No, we’re not worried about Apple pulling out. Yes, we predict, em, increased sales from, from . . . from the Chinese. Yes, that’s it, the Chinese! They have LOTS of people there. Yes, we’ll go with that one. The Chinese.
Actually Samsung has already taken away 28nm chip production from TSMC and the fact is that unlike TSMC’s higher priced chip fabrication in more ways than one, have been waiting to unload Apple’s business.
Remember this when Apple shifts production to TSMC’s poor yielding Gate Last Process Technology. Which isn’t even close to finished and they are just now tooling up Fab Lines for limited test runs. The last time TSMC did this for another customer, they got fed up and went to Samsung!
That company is only one and being Qualcomm means they are the largest SoC processor customer in the business at 28nm. But Nvidia and Broadcom and many others are chomping at the bit to get into volume pricing Apple will leave behind. Besides the simple fact Apple Super Duper Fans are ignorant about:
Not only is Apple now paying greater price per chip now from Samsung, the biggest loss (and something competitors are chomping at the bit for) is Samsung’s now Yearly Top CiCi Award winning average of $4 Billion spent on expanding processors production in Austin Texas. Besides the simple fact that TSMC can never give Apple what Samsung furnishes customers in their Austin Texas FTZ!
Those benefits include Tax breaks from being the only parts Made in America and Duty Free Re-Entry into the US market (their largest) of parts assembled into finished products. We are about to see why Apple infamous excessive profits…. tumble!
Really easy to say what should be done when you have no idea what you’re talking about. Apple is far and away the biggest buyer of flash memory in the world, and extricating themselves from the biggest manufacturer of those parts is not as easy as you think it is.
I certainly believe Apple needs to produce its own chips, but meanwhile Nvidia says it’s going to put Apple out of business with the Tegra 4 processor that will supposedly run rings around every processor Apple currently has. And it’s supposedly going into $100 smartphones. That’s going to be hard for Apple to compete against.
We now know that Nvidia was full of shit regarding the Tegra 3. Why do you think anything will be different regarding the Tegra 4?
Yeah, the handwriting’s on the wall when, in “presentation-worthy” specs (i.e., nothing that’s been put in an actual product yet), the CLOSEST competitor to Nvidia’s quad core Tegra 4? The dual core A6x.
Considering how the A6x will be running an OS that’s optimized for it and the Tegra 4 won’t, real world performance is likely to be once again in Apple’s favor.
I completely agree with your editorial. Well said, SteveJack!
Stop licking Steve Assjacks stinking anal sphincter MDN. He is a assdumb idiot. Apple is diversifying as it should and in an orderly fashion, you dumb fsck.
It looks like you used your brain to the fullest extent for that comment. Now give those three brain cells a well deserved rest.
Boy, this SteveJack guy is brilliant. Maybe Apple could lure him from what he is doing and get him as CEO. If they had done that years ago, he would have no doubt fired Steve Jobs for the stupidity of allowing Eric Schmidt on the Board for so long. Obviously, this is a Jobs created problem, not Tim Cook. But if we could get SteveJack as CEO, he could do a turnaround on Apple and maybe save it from the doom it is facing.
Two facts:
Jobs did blow it with Eric Schmidt and SteveJack did describe the iPhone 4 years before Apple unveiled it.
Keep your friends close and your enemies closer…
Wonder what the effect of releasing a whole lot of top quality (samsung) chip manufacturing capacity on the market will be? Will Apple competitors benefit when they have access to a resource previously locked up by Apple?
Congratulations, MDN – this is the most infantile (as in stupid screaming baby), badly informed, factually inaccurate and utterly pointless take I’ve read here in seven years. SteveJack needs to go back to his Photoshop work and stop his delusions that he understands anything about supply chain management, or the leadership of the world’s largest tech company.
Apple negotiating with Samsung reminds me of Obama negotiating with the Republicans in congress. Even on his best day, they still stab him in the back at every turn, doing grave harm to the US economy. They care only about power and enriching themselves and their 1% masters, just like Samsung.