“The twist reflects a love-hate dynamic that is one of the more unusual relationships in business. While each company vies to get consumers to buy its gadgets, Samsung’s giant components operation also stands to make billions of dollars supplying screens and memory chips for the highest-end new iPhone—parts that Apple relies on for its most important product,” Martin and Mickle report. “Indeed, an analysis conducted by Counterpoint Technology Market Research for The Wall Street Journal finds Samsung is likely to earn about $4 billion more in revenue making parts for the iPhone X than from the parts it makes for its own flagship Galaxy S8 handset in the 20 months after the new iPhones go on sale Nov. 3. The majority of sales for a new smartphone occur in the first 20 months after its debut.”
“Counterpoint expects Apple will sell 130 million iPhone X units, earning Samsung $110 on each through the summer of 2019, while Galaxy S8’s global sales are expected to be 50 million, earning Samsung $202 each from components such as displays and chips in its first 20 months of sales, according to estimates based on a projected bill of materials,” Martin and Mickle report. “Samsung needs Apple’s orders to fuel a component business that delivered about 35% of the South Korean firm’s total revenue of about $195 billion last year.”
“Samsung employees often refer to Apple with code names. One of the most popular is ‘LO,’ short for ‘Lovely Opponent,’ people familiar with the matter said. Apple’s descriptor for Samsung, meanwhile, is Samsung, according to people with knowledge of the situation,” Martin and Mickle report. “Apple will look to reduce its supply-chain reliance on Samsung, according to industry analysts, and is working to diversify OLED production by 2019 at the latest.”
Read more in the full article here.
MacDailyNews Take: In May, it was reported that LG Display was planning to invest about $3.56 billion to build a new factory to pump out 6th generation flexible OLED displays. Apple will pay Samsung more than that over the next 20 months.
You want to know what’s really unbelievable? That, after half a decade, at least, of Samsung’s slavish copying, Apple continues to do billions of dollars of business with Samsung. Apple, which has enough money to build or bankroll anything they want, like a chip fab, or a touch screen display factory, or anything they could ever need.
Something just does not compute here. If you get mugged, do you buy the leather for a new wallet from your mugger while pressing charges? If you’re Tim Cook, you do.
Apple could have – and should have – dropped Samsung like a bad habit years ago. Not one red cent should be going from Apple to Samsung today. It’s a travesty. It’s poor planning. And it’s bad business. The only conclusion we can draw is that Tim Cook, operations genius, boxed Apple in and is now stuck; beholden to a den of thieves. That sort of “decision making” doesn’t bode well for Apple’s future. It really doesn’t.
It’s a good thing Steve Jobs left Apple’s management a gravy train with a built-up full head of steam. It gives them plenty of time to wise up.
Samsung’s profit may top Apple’s for the first time ever – thanks to Apple – July 27, 2017
Apple turns to Samsung for more 3D NAND chip supplies for upcoming iPhones – July 6, 2017
LG Display to invest $3.56 billion in flexible OLED plant – May 30, 2017