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Korean FTC May Investigate Apple/Samsung 148

Posted by Zonk
from the should-have-thought-that-through dept.
freaktheclown writes "Samsung may have sold Apple flash memory chips at below-market prices, possibly violating the country's competition laws. From the article: 'According to a report by Yonhap News, Korean Fair Trade Commission (FTC) Chairman Kang Chul-kyu said that his agency could look into allegations that Samsung sold the memory chips to Apple at below-market rates. Apple reportedly grabbed a significant share of Samsung's flash capacity in order to introduce its new iPod Nano. Analysts also speculate the computer maker got a significant discount from Samsung in order to hit the Nano's $199 and $249 prices.'" Adds a new layer to a previous story, eh?
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Korean FTC May Investigate Apple/Samsung

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  • Pretty iffy (Score:5, Insightful)

    by Silvrmane (773720) on Monday October 10, 2005 @01:44AM (#13754737) Homepage
    The "article" on the blog this story points to is full of "may" "could have" "possibly" and other weasle-word disclaimers. Nothing to see here.
    • Re:Pretty iffy (Score:5, Insightful)

      by digitalunity (19107) <digitalunityNO@SPAMyahoo.com> on Monday October 10, 2005 @02:12AM (#13754817) Homepage
      Obviously, I haven't RTFA yet... but I hope the article summary is a typo. Wouldn't it make more sense for FTC regulators to get involved when someone sells something below production-cost instead of market value? I mean, selling for something cheaper than your competitor is part of being in a free market. I'd be more concerned if it was being sold at a loss because that is anti-competitive.
      • How would you feel if you were an IT technician, and a big corporation started supplying IT services in your home town for $5 an hour.. then after you were driven into bankruptcy, started raising its prices back to industry norms?

        Firms are required not to subsidise their products as allowing goods to be sold below cost gives the big industry players a chance to bankrupt their competitors: You know, like what Microsoft did to Netscape....
        • umm thats exactly what he said, production cost == cost != market value.

          selling below cost is not allowed most of the time i would hope
          and selling below market value but above cost is perfectly ok and that is compitition and part of a free market.
        • How would you feel if you were an IT technician, and a big corporation started supplying IT services in your home town for $5 an hour.. then after you were driven into bankruptcy, started raising its prices back to industry norms?

          Er. This is pretty much how Home Depot operates. They build a super-store with super-low prices, wait until all the neihgbourhood hardware stores have gone under and then raise the prices again. Happened in my area. Pretty pissed off at them since their products are almost uniforml
          • They build a super-store with super-low prices, wait until all the neihgbourhood hardware stores have gone under and then raise the prices again. Happened in my area.

            We've got a Home Depot where I live. Prices fluxuate, but generally they are about the same as prices at Menards (sometimes they cost more).

            The low prices is not the result of them selling below cost. As with Wal-Mart, it's the fact that big chains have more buying power to force lower wholesale prices out of suppliers.

            The quality of their st
            • There is a big difference between a 8' pine 2x5 from Home Depot vs the lumberyard. The lumberyard version is straight, and is dry enough that it won't warp after you build the house. (If you go to a good lumber yard) In addition the salesperson knows your voice when you call on your NexTel phone, and knows if you order 1/2 inch plywood that you really mean 7/16th OSB. He also ships it right to your job site so you can get the job done.

              Oh, your are not a contractor building several houses a month?

            • "an 8' pine 2x4 is an 8' pine 2x4"

              I'll just take that as a sign of a lack of familiarity with building materials.
        • How would you feel if you were an IT technician, and a big corporation started supplying IT services in your home town for $5 an hour.. then after you were driven into bankruptcy, started raising its prices back to industry norms?

          And how is this different from K-Mart, Walgrens, McDonalds, Taco Bell, Circuit City, Kroger, Ace Hardware, 7-Eleven, Costco, Smart & Final, ... ?

          Been to a little mom-and-pop store lately?

          When was the last time you got your latest home computer from a little guy who assembled it
          • As I recall, those mom and pop stores charged much more, were only open during business hours (when I was at work!), and didn't give good service. We went there because they were the only choice, and put up with the bad service.

            WalMart may not be great, but they are open 24 hours a day, cheap, and they make their help smile and pretend to care.

            There were exceptions to the above. Small stores that gave great service. They are still around though.

      • Re:Pretty iffy (Score:2, Insightful)

        by tabbser (560130)
        Then, before posting, why don't you actually go ahead and RTFA, maybe you could answer your own questions.
        This place is full of too many armchair econmists, armchair politicians, armchair etc...

        Not aiming at you individually, but I do wish people would actually read the fucking article before talking about it.
        • Honestly, I couldn't care less what the article itself says, and that's not what I was talking about. What I would like is for story titles and article summaries to be accurate. I know, I know... that's a lot to ask for around here. Also, while you assume the majority of persons here are 'armchair etc.' or whatever, I think that you might be partially correct but also there are a lot of qualified people who have things to say that don't fit in with groupthink.

          Instead of calling me an 'armchair economist', w
      • Re:Pretty iffy (Score:3, Insightful)

        by xgamer04 (248962)
        I would suggest familiarizing yourself with Korean business law before making such a statement...
      • From having lived/worked and done business in Korea for the last 15+ years, you need to understand the very different attitude in business and competition they have. For example the concept of owning a product from ore to showroom which in the US for example is a form of monopoly, in Korea is standard business method. It's possible to live in a home built by one of the major chaebol's (Samsung Hyundai Daewoo Lotte etc) wear clothes manufactured by them, eat food packaged and processed by them, all of y
    • "The "article" on the blog this story points to is full of "may" "could have" "possibly" and other weasle-word disclaimers. Nothing to see here."/i.

      Yeah. It's too bad this story wasn't about Microsoft. We'd have so much more to talk about!
    • Meh it really doesn't matter. Everyone knows that in Korea only old people use flash memory.
  • by Anonymous Coward on Monday October 10, 2005 @01:45AM (#13754739)
    > Analysts also speculate the computer maker got a significant discount from Samsung in order to hit the Nano's $199 and $249 prices.'"

    They can speculate that all they like, but the $199 2GB nano has Toshiba chips, not samsung.

    Try again.
  • Does this imply the memory chips are being sold at an inflated rate?
    Price supports for memory chips in Korea?
    • by Tezkah (771144)
      Price supports for memory chips in Korea?

      In Korea, only old people understand your comment!
    • Re:Market value (Score:3, Informative)

      by gl4ss (559668)
      it wouldn't be unheard of if they were actually dumping it on apple at or below production cost for the moment.

      why? to ensure that they get at least something and that they get a huge cut of the market while still being able to run the factories while losing the least amount of money(what's the point in running a factory like that? to keep it in business so you can reap the rewards later when competition is less fierce and product cheaper to make, same thing happening with flat panels now).

      of course this w
      • Dumping is illegal. IMHO, rightly so, because it can easily be used as a means for a well-funded operation to stifle their competition.
        "Selling under market price" OTOH is what the free market is all about: if Samsung can produce more cheaply, they should be allowed to sell for less, too. It wouldn't be their fault if their competitors where too expensive.

        The thing here is, these articles about Samsungs competitors' complaining have been going round almost since the launch of the Nano. And never did they c

        • that kind of depends on if they're selling at inflated prices or if they're selling already at very low margin and thus know that either apple or samsung is taking a beating in the price to get the market. like if they got a quote for the price from samsung(and other manufacturers) for the 4g chips and it was more than what 4gb nano is selling at..

          samsung is a very large corp and could easily do that kind of thing if it wanted.
  • Bulk purchases? (Score:5, Insightful)

    by lightyear4 (852813) on Monday October 10, 2005 @01:46AM (#13754746) Homepage
    Don't most - indeed, if not all - electronics suppliers give substantial volume discounts? I'd say buying up 40% of stock would qualify for a discount. IANAL, but I don't see why that is an issue.
    • Re:Bulk purchases? (Score:4, Insightful)

      by sam_paris (919837) on Monday October 10, 2005 @01:50AM (#13754757)
      Yeah it seems that apple is the only MP3 player manufacturer that is buying in such large quantities. Thus it makes sense that they should get the biggest discounts.

      I get the feeling that this is simply due to all the other MP3 makers shouting "unfair" and putting pressure on the government to carry out this investigation. And this is basically due to sour grapes as every other company that makes MP3 players is wishing they were Apple or at least had as good products as Apple does.
    • IANAL, but I don't see why that is an issue.

      More importantly, YANAKL (you are not a Korean lawyer). This is happening in Korea, and if you're like me, you don't know anything about Korean law at all.
    • Volume discounts are OK because the producer still sells the product for more than the cost of producing it. Big sells often results in less fluctuation in factory output, and thus leads to lower production costs (less overtime work, more efficient machinery) The problem is when producers "dump" (sells with losses over time) their products on the market to strangle competitors.
  • New layer? (Score:4, Insightful)

    by ceeam (39911) on Monday October 10, 2005 @01:46AM (#13754747)
    I may be stupid, but how does it "add a new layer"? If Apple is to buy a very substantial amount of Samsung flash chips (40%?) then what's in it for Samsung to sell it at "below-market prices"?

    Also - WTF is "below-market prices"? I believe that does not mean that Samsung is gonna sell it at below the cost to produce, no?
  • well the analysts (Score:4, Informative)

    by shrewd (830067) on Monday October 10, 2005 @01:48AM (#13754751)
    have gotten at leas one thing wrong

    "Analysts also speculate the computer maker got a significant discount from Samsung in order to hit the Nano's $199 and $249 prices"

    the $199 model uses flash chips from toshiba (2* 1gb) whereas the $249 model uses flash from samsung (2* 2gb)
  • When the ipod first came out they used their buying clout/muscle to ensure they were the only ones able to buy Hitachi's supply of 1.8 inch hard drives. Sure there were other companies that could have made products to compete with the ipod. There's a reason Apple was the only one to put out a small/sleek player when everyone else was still putting out clunky nightmares and its not becuase Apple is the only company to employ competent engineers -- no one else simply had access to Hitachi's hard drives to m
    • by cthellis (733202) on Monday October 10, 2005 @02:02AM (#13754790)
      If Mac OS had become the dominant platform back in the day instead of Windows, you'd all be talking about Microsoft's superior engineering and decrying Apples anti-competetive tactics.

      You got that right. ;-) But I wouldn't put too much behind a statement like "There's a reason Apple was the only one to put out a small/sleek player when everyone else was still putting out clunky nightmares"... The original iPods still looked, felt, and functioned much better than the competition, and after those 1.8" drives hit wider availability said competition STILL hadn't whipped up anything much that's par, let alone a few swings under.

      Those talking about Apple's superior engineering and aesthetics still have quite the point. ;-)
    • by Forbman (794277) on Monday October 10, 2005 @02:10AM (#13754814)
      Dirty? About as dirty as any restaurant that only sells Coke or Pepsi products.

      Apple got Hitachi to sole-source the HDs it used in the iPod. Big woop. Not necessarily dirty. Others had their chances at a slice of the 1.8" drive, too.

      And Apple agreed to buy a big-ass load of NAND chips for the Nano to very favorable terms. Again, big woop.

      If you are selling a commodity product, and someone comes along and says, "Hey, I'll buy all of your production for the next 18 months," and you still make money on it, you tend to bite on it.

      Since we don't know what pricing level the KTC is looking into, it could be that Apple just committed to a magnitude larger memory buy than other buyers had done up until that point. Instead of selling several lots of 1 million SKUs, maybe, at varying price points over time, Apple says, "Hey, we'll buy 10 million SKUs over the next year at $5.00/10000 (when "the market price" tends to be $5.5/1000, or whatever) with half of the total up-front, and the rest delivered monthly upon delivery...", which is guaranteed money for Samsung (and pissing off AMD, Intel, Xylinx et al).

      Again, not a big deal.

      Want to buy a couple of animals from a farmer, but it'll take a week or two? OK. But if someone comes along and offers to buy everything he has for sale a couple of days after you talk to him, too bad!

      • I take it you don't know that coke and pepsi supply fridges to cafes ect. The deal is we give you a fridge and you don't put our competitors products in it.

        it's like the myth of a pub being a free house in the uk. yes the brewery doesn't own the pub but quite often they do help finance a mortgage to allow the owner to buy the pub usually with a proviso that so much beer is bought from the brewery.

        these are cases which are supplier controlled.

        on the otherhand supermarkets usually control the deal they get f
      • Worse than that, when I lived in Vienna, Austria, McDonalds had some kind of exclusive agreement with the government (national or local, I don't know) that no other American fast food chains could operate there.

        It did eventually change, but McDonalds got more than a little bit of a head start on their competition.
    • Toshiba... (Score:4, Informative)

      by YesIAmAScript (886271) on Monday October 10, 2005 @02:33AM (#13754878)
      It's Toshiba, not Hitachi.

      Apple has never used Hitachi 1.8" drives in iPods. Rio did, in the Karma.

      And there were no other drives available because Apple was buying them as fast as they could be made. That's the only reason. The drives were available before the iPod came out (in 2.5 and 5 gig configurations), so anyone could have got them. And anyone perhaps could have gone for an exclusive. But they didn't, Apple did. Toshiba could have made an mp3 player of their before Apple made the iPod (they made one later instead).

      You're off your rocker. Even if Apple is the only one who could get these drives, that's not even Apple's fault. Any company would like an exclusive. It's Toshiba's fault for granting them one.

      Apple innovated a lot with the iPod. A company that was there before Apple like Creative or Archos could have made a device with the 1.8" drive before the iPod even came out. They didn't. That's the Apple difference.

      Anyway, I thought this horse got beat to death when Apple killed Mac clones. Is there really anything left to be said about Apple's willingness to compete as a commodity after that?
    • by diamondsw (685967) on Monday October 10, 2005 @02:37AM (#13754893)
      Nevermind the Toshiba (not IBM/Hitachi) 1.8-inch hard drives had existed for quite some time [toshiba.co.jp] before Apple made the iPod. Hell, IBM/Hitachi's Microdrive (later used in the Mini) had been out for years [pocketpcfaq.com]. No one else saw their potential, so prior to the iPod the best you could get was a Nomad, which used 2.5-inch hard drives. After all, capacity was everything [slashdot.org], right? Apple took a huge risk on a completely new and unproven product and bought their remaining stock. What is "anti-competitive" here?

      As for your last paragraph, Microsoft's "superior engineering"? Nevermind that Apple's entire history back to the Apple II [apple2history.org] (and the Wozniak-designed controllers) has been about superior engineering, and Microsoft's has always been about purchasing/licensing/controlling other software and making it "good enough", all the way back to Microsoft BASIC [wikipedia.org].
      • As for your last paragraph, Microsoft's "superior engineering"?

        I do believe he's just making wry commentary on the likelihood of their positions swapping in ALL cases. And there's certainly something to be said for that, as an unchallengable market leader tends to stagnate while the up-and-coming try to compete on whatever grounds they can.
    • They're a monopolist with a 3-5% market share? It may come as a surprise to you, but a company in that position cannot be a monopolist. Legally. Unfair trade practices? Yes, that could be. If Samsung sold below cost to sink a competitor? Unfair. Dumping, or something like that. If Apple somehow dictated the price to Samsung, that might be wrong. If Apple, say, threatened Samsung with being excluded from future iPods, that could be wrong. None of which is, as lawyers say, "in evidence" here. As for Apple b
      • As for Apple being "just the same," well, it may come as a surprise to you, but Apple is a corporation, not an order of monks. Without profitable computers and software, they're gone. So, yeah, the computer business is very tough.

        You wouldn't know it from the way people here talk about them. Apple gets so much rabid adulation it's not even funny.

      • They have a 3-5% share of the desktop computer market NOW. But before MS came along? They were making the only desktop computers back then. And wasn't it recently proven that OSX will run on a unix-type computer but they had deliberating programmed it not to? I don't have a link now but the news isn't even 3 weeks old, google it. So doesn't that seem like they were trying to establish a sort of OS and hardware monopoly back in those days? God knows they felt they could charge whatever they wanted as the onl

      • So the iPod only has a 3-5% market share? Funny, I thought it was more successful than that.

        You know, at the time they were ruled as a monopoly, Microsoft only had 3-5% of the PDA market, so how could they be a monopoly? For that matter, IBM has always had a 0% share of the home video game console market, yet they operated under an anti-trust decree for many years. I wonder why that is? Oh, right, because a monopoly is decided on a per-market basis! It may come as a surprise to you, but I think that a com

    • by jcr (53032) <jcrNO@SPAMmac.com> on Monday October 10, 2005 @03:24AM (#13754999) Journal
      Dirty? Hell yeah.

      Hell, no. Apple made a deal to buy all the drives they could make. They placed a big enough order that Toshiba brought up a second factory just for those drives. Nobody put a gun to Toshiba's head, and if someone else wanted to buy those drives, so what? Every deal has two sides, and if Toshiba would rather deal with a single customer for the first year (or more), that's their prerogative.

      That while every other large coorperation will lie, cheat, and steal to get ahead -- Apple is somehow different.

      Show me an example of Apple lying, cheating or stealing, cause this isn't it.

      -jcr
      • by Cyberllama (113628) on Monday October 10, 2005 @04:53AM (#13755204)
        First of all, I was incorrect. It was toshiba. It wasn't until hitachi started making 1.8 drives that someone was ABLE To compete with apple. My appologies for that mix up.

        Second of all, my point isn't that this was some awful thing that Apple did. This is how business is played. It's not nice and friendly, its down and dirty, and Apple plays the same game as everyone else.

        If Microsoft had used their clout to buy up all of Toshibas drive to make a slim mp3 player that took the market by storm, and companies like Apple were uanble to get any 1.8 drives to make players with your collective outrage would know no bounds. You would bitch and moan to no end that Microsoft was not playing fair. While I fully expected my original post to be unfairly moderated down (my karma can take the hit), it surprises me that so many of you could be so hypocritical.

        I don't take issue, really, with how Apple condudcts itself, simply with the ultra-unrealistic impression that many of you seem to have about it. Apple is not some peace-loving commune where flower children lovingly hand-craft gadgets for your enjoyment. It's a business and it's run just like every other business.

        Everytime they're accused of breaking the rules (as businesses will often do), there's a torrent of people anxious to rush to Apple's defense to tell us why it was "totally ok" for Apple to cheat. It's not ok for ANYONE, no matter how sexy their latest toy may be, to cheat wether it's Microsoft, Apple, or anyone else.
        • your collective outrage would know no bounds.

          Not being a collective, the only outrage I have ever experienced has been individual outrage.

          You would bitch and moan to no end that Microsoft was not playing fair.

          Don't try to tell me what I would do in a hypothetical situation. I bash MS when they commit crimes, not when they merely pursue legal business strategies.

          -jcr
        • Microsoft is a monopoly, Apple isn't. Pure and simple. There are different sets of rules for a monopoly, and for good reason.
  • by hobotron (891379) on Monday October 10, 2005 @01:58AM (#13754779)

    Is just as out of touch and unlikeable as the other FTC
  • by JoeGrind (324053) on Monday October 10, 2005 @02:14AM (#13754825)
    Can someone explain to me how this is reflects badly upon Apple? I'm asking sincerely. When I go shopping I look to find the cheapest price. Seems as if Apple was just doing the same. If they can negotiate a better rate from Samsung, I'd consider it foolish not to. It more sounds as if Samsung might have broken some Korean law, no?
  • by Swift2001 (874553) on Monday October 10, 2005 @02:21AM (#13754845)
    Aside from Apple's competitors complaining, where exactly is the monopoly behavior, or the unfair business practice? I'm no expert on Korean antitrust law -- I know zero -- but if it's like our monopoly law, then nothing wrong happened. A successful maker of mp3 players went to the maker of a new kind of memory -- or at least, very good memory -- and asked for a huge purchase. Samsung sold it at a discount, by which I infer there were competitors to whom Apple could also have gone, and they wanted the big sale. Samsung will make more of this memory, and I imagine the other 60% of the stock is also for sale to the other companies. So, what's the monopolistic practice? MS was nabbed because they told computer makers, install our OS and you must also take IE and keep Netscape, etc., off of your computers, or we will stop giving you a price break on Windows. This is using market power to compel another company to exclude your competitor. Apple buys a heck of a lot of memory and will no doubt be back for more, because the nano is selling like, er, nanos. Did they say, "And don't you dare sell any to Creative?" Another instance of possible monopolistic practice is what AMD alleges: that Intel forces Dell and other makers to sell only Intel-based computers, or lose their discount. See? Less competition. Unfair practices. But unless there's some secret coercion involved, and it's not obvious here, then Apple and Samsung have just committed capitalism. The company at the top of sales bought up a sizable number of chips. They had the money to plunk down, and the maker of the chips said, here, thank you. Competitors are upset, I suspect, because they can't keep up with the big dog. Boo-hoo.
    • Well, I am not investigating the case, nor do I have any special knowledge about it. Of course by the sound of your post neither do you. I would, however, like to point out a possible scenario where there could be legitimate anti-trust concerns from the point of the South Korean government.

      South Korea just happens to be the place where the iPod has the smallest share of the DAP market, mainly because so many of the competing products are made there. Now imagine a meeting between several people at Apple wh

    • MS was nabbed because they told computer makers, install our OS and you must also take IE and keep Netscape, etc., off of your computers, or we will stop giving you a price break on Windows.

      that's actually not the worst part of it... that's just the most widely known and understood complaint in the antitrust suits...

      MS also forbid computer manufacturers from bundling or selling another OS as an alternative, or even in addition to windows. The fucked up part of that, was that in the contract that allowed Del
  • Remember, everything looks different in the eyes of a Korean. Literally. They see everything in 16:9, as opposed to 4:3.
  • by melted (227442) on Monday October 10, 2005 @02:36AM (#13754891) Homepage
    It's the market economics for you, as simple as that. SJ probably called up Samsung and said, OK folks, I'm ready to buy a shitload of 2GB chips, and I do mean A SHITLOAD (ten million), what's the price you can offer to me so that I don't go to Toshiba. And they made an offer SJ could not refuse.

    Now imagine Cowon audio (BTW, what's up with their company name? "Cowon"? Hello?) calls up and says, we're ready to buy ten thousand chips. Of course there will be a different price than for ten million chips! And it of course will be a lot higher, because 10K chips is like a single batch, whereas 10M chips is two years of non-stop production.
  • by Ulrich Hobelmann (861309) on Monday October 10, 2005 @02:41AM (#13754905) Journal
    Samsung sold lots of chips to Apple. If it was price-dumping, they lost lots of money.

    Nobody else was willing to sell chips at that cut-throat price, so nobody else should care.

    Lots of people bought an iPod for a good price. They are happy now.

    If any company should in the future sell chips for another price, where's the problem? It's not that the sale by Samsung will forever result in Samsung having a monopoly or anything. Seriously, maybe they even LOST money...
  • by YesIAmAScript (886271) on Monday October 10, 2005 @02:45AM (#13754912)
    Not below cost, "below market prices"?

    If selling below market prices is illegal, how do market prices ever fall?
    • I live in Korea.
      The Electronics Market here is the biggest in the world.
      The prices are all fixed.
      There will be 10 stores right next to each other, all selling the same brand of the same item.
      Not a single one will be 1 Won less (1/10th of a cent).
      Hell, the price for any specfic electronic item at any store is the same ALL THROUGOUT THE COUNTRY.
      Some of them might be more, or may quote me a higher price, as I am a foreigner, BUT will NEVER be lower than the set price.
      How does competition work here? Who knows!
      • Amazing!

        Do the shop owners expect to haggle about the price?

        "No! No!" exclaimed the merchant. "You'd be crazy to pay that much! You have to haggle! You see, here's how it works. (Whispering:) I state a ridiculous price and you say 'no way' and offer me, let's say 2 dinars, and then....." Red grew impatient as the haggling lesson continued for another minute or so.

        • You can haggle with street vendors- I usually get great deals on clothing that way. No haggling on electronics. Period. Appliances, maybe, but electronics, NO WAY! Thant being said, you can get cables here real cheap- like $2 for an optical SPDIF cable and $.20c for a 1/4" to 1/8" headphone adapter. I hooked up my entire home theater, projector, 6.1 surround sound, DVD, satellite, and VCR for like $60. I think electronics price fixing is much the same all over Asia. Souveniers, clothes, jewellery, etc. c
  • I was actually wondering about this. If you look around, you'll find that the 4G Nano is amazingly cheap--cheaper than 2G flash players from manufacturers that are usually much cheaper than Apple.

    However, Apple may have been able to get such a discount legitimately: usually, the price of chips like this falls because manufacturers need to recover their initial costs; if Apple's contract lets them do that through a sufficiently large initial volume, it may have made sense for them to go for it.

    Still, if App
  • Cost Of Materials (Score:3, Interesting)

    by putko (753330) on Monday October 10, 2005 @03:00AM (#13754942) Homepage Journal
    When you buy enough of the chips, you are essentially paying for the raw materials only, plus whatever wear and tear you've got on the factory. This is because another way to get the same thing would be to rent a factory for the time period, buy the raw materials, and run the equipment to produce the finished goods. If the price asked for diverges much from the alternative, you'd take the alternative -- e.g. you'd see Apple renting a factory for a few years, and renting staff and IP in order to produce the goods.

    However, I can't for the life of me figure out why the Korean FTC would have a problem with Samsung. I have to figure that Samsung peeved someone in the Korean govt. (or US govt.) and someone with a political beef with Samsung is making up some ridiculous charges. Because it boggles the mind why Samsung would do something so awful for business like selling crap below market.

    The only scenario like this that I can see is that having a guarantee of massive volume from Apple allowed Samsung to invest even more heavily into their production, putting them ahead of their competitors. So they figured, "even if we lose a bit on Apple, we'll get our costs per item lower so we'll survive the coming price war."
    • Actually, there may be something to what you wrote. I was reading in the paper (LA times... print edition, so I don't have a link) the other day that a lot of everyday Koreans are getting wary of Samsung because they have obscene amount of power there.

      The typical Korean household wakes up in Samsung furniture, cook breakfast on Samsung appliances, drive to work in Samsung cars (insured by Samsung insurance) to office buildings owned by Samsung, and use Samsung equipment to get work done. They may take va

  • In Korea, only old people use discounted iPods!
  • Economics 101 (Score:4, Insightful)

    by BenjyD (316700) on Monday October 10, 2005 @04:46AM (#13755190)
    "...allegations that Samsung sold the memory chips to Apple at below-market rates"

    Doesn't the fact that a company was prepared to sell 10 million chips at that price make that price the "market price" for 10 million chips? How else do you define a market price except as what a seller and a buyer agree on?

    Unless Steve Jobs used a focused Reality Distortion Field or blackmail to get the deal, I don't really see the problem. Unless (shock horror), CNet is misrepresenting the story again.
    • Maybe, maybe not. If Samsung (or whoever) opens their books and shows everyone that because of this deal they can make the chips at a profit, accounting for R&D and the cost of the factory (Remember that this contrat assures that they have so many chips that will be sold, so there is less risk of the chips going obsolete before those are paid for), that is end of story to me. If nobody else can do so at those prices, well too bad for them.

      If Samsung opens the books, and it turns out they are sellin

  • by tabbser (560130) on Monday October 10, 2005 @05:10AM (#13755241) Homepage Journal
    Perhaps the issue at heart here is not that Apple bought chips at below market levels (Yes, I've seen the Toshiba posts), but perhaps that some Korean company has complained (lobbied the government) that they now are having to buy chips at an increased rate and the christmas goodies are not in jeopardy.

    This seems more likely to me.
    I'm sure apple has bought futures on flash and can ride out any price differential, just like the smart airline companies (should) have done with jet fuel (not American, United, Southwest etc).

    I'd be surprised if apple does not have people that work global analysis of such purchases and buy up options.
    I know I would if I were buying up 40% stock of flash from some companies.

    If it were me (and I'm not a finance person) I'd buy up options on more than I needed and sell those options at many times the face value once the world realized (as we approach christmas) that there is a shortage of flash because "apple" is buying them all. I bet Apple is not only making $199 on your ipod nano purchase, but also a few extra bucks per nano on the futures market just because your ipod is sucking up flash.

    I wish I'd taken finance at school instead of dicking around with a liquid lunch and an irrational particle accelerator.

    • Of course this is what is happening. The idea that it is an "antitrust" violation for a large customer to negotiate a good price with a supplier is absurd. What happened is that the iRiver manufacturer complained that it was unfair and is trying to use the power of its government to intervene in the marketplace on its behalf. They even pulled the nationalism card, saying that Samsung shouldn't be giving such good prices to a non-Korean manufacturer. Samsung, rightly, responded like a corporation that ha
  • This story? [slashdot.org] The article contained within simply points out the fact that it still costs Apple only $90.18 to make the Nano. And I'm going to assume that this price is based on "analysts" cost review at "market" pricing.

    So now for "analysts" to speculate that Samsung sold Apple flash memory at a discount, couldn't they have speculated the converse -- that Apple reduced its profit margins to enter a different market that's held pretty well by iRiver's and other flash MP3 players?

    It makes room for one of two t
  • Is this news? (Score:3, Insightful)

    by PhunkySchtuff (208108) <kai@automatica.coDEBIANm.au minus distro> on Monday October 10, 2005 @07:06AM (#13755584) Homepage
    Article test:
    Korea's top antitrust regulator reportedly said on a local radio show that authorities there may look into whether Apple's purchase of flash memory from Samsung Electronics may have violated any of that country's competition laws.

    According to a report by Yonhap News, Korean Fair Trade Commission (FTC) Chairman Kang Chul-kyu said that his agency could look into allegations that Samsung sold the memory chips to Apple at below-market rates.

    Apple reportedly grabbed a significant share of Samsung's flash capacity in order to introduce its new iPod Nano. Analysts also speculate the computer maker got a significant discount from Samsung in order to hit the Nano's $199 and $249 prices.

    An Apple representative did not immediately have a comment on the report.
    Now, forgive me, but what is newsworthy about this? Not only is it heresy published on a blog, but it's not even saying anything definite.
    I (and I'm not alone here) would hope that Apple got a damn good break on the price for buying the flash in the kinds of quantities that they will need to satisfy demand for the Nano.
    • This is not a typing, spelling or grammar flame. It is just a post which expresses appreciation at the subtleties of language. This article is not, as you described it, "heresy", which means "belief or opinion contrary to orthodox religious doctrine." It is "hearsay", which is "information received from other people which can not be substantiated."

      Personally, I prefer to think that this whole thing was heresy.

  • My guess is that US based memory maker Micron filed a complaint because they lost the bid. They've done this in the past.

  • If buying flash memory at $10/GB is wrong, I don't want to be right!

    Chances are good that it's not Apple that's in trouble with the Korean FTC, it's Samsung. Chances are also good that it's not just this one deal, but this is one deal in many that show Samsung's anticompetitive (as defined by the Korean FTC, keep in mind) practices. And at this point, Apple probably doesn't (and shouldn't) care, other than to make appropiate second sourcing options available to prevent supply line issues. These shoul
  • First, you should know that the other companies, such as Cowon (never heard of?) or Iriver (maybe?) doesn't buy something like 10k flashes, they buy MILLIONS of them. Although that's still a lot less than Apple's product, that's still an awful lot of chips. You should know that iPod's market share in Korea is completely disappointing, http://www.cdfreaks.com/news/12253 [cdfreaks.com]
    and companies like iRiver still sells millions of players every year.

    The Korean manufacturers claim that Samsung never sell flash memory ch
    • You should know that iPod's market share in Korea is completely disappointing, and companies like iRiver still sells millions of players every year.

      While the iPod has yet to make a dent, you're still overestimating Korea's MP3 market. In 2002, 400k players sold (14% of worldwide sales), 1.1 million in 2003 (15%), 1.8 million in 2004 (7.5%). A good boost is estimated for 2005 - 3.5 million - but that's still only 7% of the estimated 50 million worldwide sales. The iRiver accounted for 1.1m of those Kor
    • Here is another theory:

      Get Apple to start buying flash memory first, then have the gov't to investigate to force Samsung to "raise" the price of flash memory!

      Apple could not switch entirely to another vendor because Samgsung has the 60% production capability of the flash memory in the world!

      This is when Samsung makes a killing off Apple. Take that, Steve!
  • All Samsung needs to do is create a new Bulk Purchase category. When you buy all our chips, you get this price!
  • they should merge, samsung had the yepp player out well before ipod which was actually more compact. apple is the great packager, while samsung is the woz. do it!

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