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Businesses Iphone Apple

Samsung Hits Apple With 20% Price Increase 447

Posted by samzenpus
from the pay-up dept.
EthanV2 writes "The Wall Street Journal cites a report which quotes a 'person familiar with negotiations between the two tech giants,' apparently confirming this special price hike for Apple. The source said: 'Samsung Electronics recently asked Apple for a significant price raise in (the mobile processor known as) application processor. Apple first disapproved it, but finding no replacement supplier, it accepted the [increase].'"
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Samsung Hits Apple With 20% Price Increase

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  • one word (Score:5, Funny)

    by magsol (1406749) on Monday November 12, 2012 @12:41PM (#41957357) Homepage Journal
    pwnd
    • Re:one word (Score:5, Funny)

      by michelcolman (1208008) on Monday November 12, 2012 @12:54PM (#41957539)

      Apple has quite a few patents on overcharging for products, I wouldn't be surprised if Samsung were violating one of them. This isn't over...

      • by dintech (998802)
        I wonder if the price hike equates to about a billion dollars...
        • Re:one word (Score:5, Interesting)

          by WindBourne (631190) on Monday November 12, 2012 @01:56PM (#41958299) Journal
          Roughly 200 million units this year will be sold. You can guess that next year, it will be around 250-300 million. And around 300-350 for 2014 (last year of the contract).

          So, it is around 15 Billion, give or take.

          So far, Tim Cook is making QUITE the splash.
          • Re:one word (Score:5, Insightful)

            by Xest (935314) on Monday November 12, 2012 @02:48PM (#41958851)

            Yeah, I guess he's learning though. I mean, he's just learnt the basic principle of business that if a company has a sudden increase in costs of doing business, like say, a flawed $1.05bn patent verdict against them, then they have to up their prices to make up for it.

            Don't worry Tim, soon you'll get to learn about other business things like redundancy terms, but at least being in the position you're in you'll probably also get to learn all about golden parachutes too which will be nice for you.

          • Re:one word (Score:5, Informative)

            by thoughtlover (83833) on Monday November 12, 2012 @03:41PM (#41959371)

            So far, Tim Cook is making QUITE the splash.

            IIRC, Tim Cook was the guy that thought ahead to procure large inventories of flash memory. That kept the cost low and ensured they could meet consumer demand --something Apple has famously struggled with. This patent spat was initiated by Jobs, not Cook (remember Jobs saying he'd use the last cent of the company to sue any other company using 'their' ideas??). Cook has the option to make peace and get back to making computers, not enemies.

            • Just to reiterate my feelings as how different Jobs and Cook are..... I just read an older story that Cook was as relieved as HTC's CEO to end their patent dispute. I highly doubt Jobs would have taken the path that Cook did.
            • by mjwx (966435)

              So far, Tim Cook is making QUITE the splash.

              IIRC, Tim Cook was the guy that thought ahead to procure large inventories of flash memory. That kept the cost low and ensured they could meet consumer demand --something Apple has famously struggled with. This patent spat was initiated by Jobs, not Cook (remember Jobs saying he'd use the last cent of the company to sue any other company using 'their' ideas??). Cook has the option to make peace and get back to making computers, not enemies.

              Cook had every opportunity to end it.

              They could have bought Samsung to the table. With the way the case was going (Read: how biased Judge Koh was) they would have jumped at the chance. Cook could have dismissed their claims agianst Samsung without predjudice...

              But Cook didn't. He's cut from the same cloth as Jobs.

          • Re:one word (Score:5, Funny)

            by sl4shd0rk (755837) on Monday November 12, 2012 @05:05PM (#41960047)

            So far, Tim Cook is making QUITE the splash.

            Yes, like that of a commode.

      • by chinton (151403)
        Apple probably has quite a few patents for overcharging for products, too...
    • Re: (Score:2, Interesting)

      by Penguinisto (415985)

      Well, "pwnd" until another supplier shows up to provide the goods, or Apple funds a new one into existence.

      After that, Samsung loses the contract once and for all.

      There's a difference between doing business, and killing the golden goose out of childish motive.

      • Re:one word (Score:4, Insightful)

        by Anonymous Coward on Monday November 12, 2012 @01:03PM (#41957671)

        There's a difference between doing business, and killing the golden goose out of childish motive.

        That goose isn't quite so golden [benzinga.com] anymore. Samsung has the upper-hand; and the time to strike is while the iron is hot. Samsung is right to go for the kill.

      • Re:one word (Score:5, Informative)

        by gstoddart (321705) on Monday November 12, 2012 @01:09PM (#41957741) Homepage

        After that, Samsung loses the contract once and for all.

        I believe Samsung has already told Apple they'd be terminating the contract next year or so ... so it's not like they're at risk of losing a contract they've already decided they don't want any more.

        • Re:one word (Score:5, Informative)

          by 93 Escort Wagon (326346) on Monday November 12, 2012 @03:05PM (#41959035)

          I believe Samsung has already told Apple they'd be terminating the contract next year or so ... so it's not like they're at risk of losing a contract they've already decided they don't want any more.

          The idea that Samsung "told Apple they'd be terminating the contract" is silly.

          The contract runs through 2014. All contracts have end dates, and, while a company can attempt to renegotiate (and usually the contract contains language regarding under what circumstances a contract can be renegotiated), they are legally binding for the time period defined in the contract. There's no "we don't like you anymore, so we're ending it early".

          For that matter, there's no "we don't like you anymore, so we're going to start charging you more just because" in a contract. Samsung would have to justify the price increase according to terms defined in the contract. Also, given the language of the story, it's likely Apple had an opt-out clause that kicked in under those circumstances - but, being unable to find another supplier, they had to agree to the increase.

          Heck, given the vague nature of this story - it's possible this was a NEW contract, and Samsung said "we need to charge you more money for this part if we're going to keep making them for you". But then you have the problem of Samsung signing a new contract with Apple, which goes against the prevailing narrative in this discussion.

          Now Samsung could tell Apple they're unwilling to renew an existing contract after its termination date, but that would be a different situation entirely. And, if you claimed that, you'd really need to provide at least a tiny bit of evidence to back up your statement... well, anywhere but Slashdot anyway.

          • by AmiMoJo (196126) *

            Usually the contract will state that Samsung may review pricing whenever they like, during to changing circumstances. Apple may continue the contract at the new price, or walk away from it. It appears that Samsung looked around, noticed no-one else was in a position to manufacture these parts for Apple, and decided to turn the screw a bit.

            Samsung is probably assuming that Apple won't renew the contract anyway, so there is no point trying to generate any good will or future business. Screwing them as much as

            • Re:one word (Score:4, Interesting)

              by hazydave (96747) on Tuesday November 13, 2012 @01:15PM (#41969461)

              Supposedly, Apple tried to buy TSMC's entire output of 28nm chips... and was denied. Which makes perfect sense -- they have a better position supporting all sorts of companies, particularly given how big the fabless companies (Broadcom, Qualcomm, AMD, nVidia, etc) are getting. It's certain Apple wants to find alternate fabs, now that they're no longer dependent on Samsung to design the A-series SOCs for them. But they may be too large to jump entirely to a single alternate, even in 2014.

              Samsung, on the other hand, is already the world's largest semiconductor company in volume if not market cap (that's Intel, of course, with Samsung at #2), and given the rise of the ARM, they'll have plenty of other folks to build chips for in the future. Assuming they don't scare them all away -- the PC industry might have evolved differently if Intel had jumped into retail PCs in the early days.

      • Re:one word (Score:5, Informative)

        by oxdas (2447598) on Monday November 12, 2012 @01:34PM (#41958041)

        All of Apple's contracts combined (display, processor, memory, etc) only account for about 3% of Samsung's annual revenue and probably less than 1% of their profits (components are typically low margin). While Apple is a big customer, they aren't really a "golden goose" for Samsung.

        • by rsborg (111459)

          All of Apple's contracts combined (display, processor, memory, etc) only account for about 3% of Samsung's annual revenue and probably less than 1% of their profits (components are typically low margin). While Apple is a big customer, they aren't really a "golden goose" for Samsung.

          How much of the rest of the company's semiconductor profits are due to the economies of scale that Apple brings? Yes, they're the top dog now, but they don't own Android, and users can be fickle from one year to the next.

          I don't think Samsung can that easily dispose of Apple's business.

          • by oxdas (2447598)

            $220 billion in revenue last year. $7 billion of it from Apple (and low margin at that). The semiconductor business makes very little profit Samsung. Last quarter, 69% of Samsung Electronics profits came from their own branded phones and 14% came from their mobile display business (Apple orders had fallen from more than 10 million last year to only 1.5 million last quarter). Even with processors, your economies of scale do not increase linearly. Samsung sold more than 60 million branded mobile smart d

      • Re:one word (Score:5, Interesting)

        by maeglin (23145) on Monday November 12, 2012 @01:47PM (#41958199)

        There's a difference between doing business, and killing the golden goose out of childish motive.

        I think Samsung probably has enough other sources of income to weather any ill effects. But, really, I am curious why you think it's a bad policy to consider more than profit motive when making business decisions? If I can't trust my partner not to sue me why should I trust that they are entering contracts on good faith? I see a lot of this sort of "business is sterile" thinking on the internet and I'm not sure that it's right. Maybe it is, but it seems wrong to me.

        Two other similar concepts to yours:

        1. "They have no choice! They have to grind up babies for extra profits otherwise their share holders will sue them." If that's really a concern you put "without grinding up babies" in your mission statement -- or, something about "ethics and social responsibility". The mission statement is on page 1 of the annual report so no one can claim it's not there. Granted, not all mission statements mention ethics but many do, and even more declare customer satisfaction as a goal, or something lofty like the betterment of the human condition.

        2. "Corporations are comprised of many people and therefore can't have an 'MO'." Umm yeah, there are only two ways that I've seen someone leave a partnership with Microsoft unscathed: they never entered into a partnership Microsoft or they were the largest technology corporation on the planet -- wait, no, even IBM got screwed. Just because they've destroyed all previous partnering firms that doesn't mean that they'll do it again, right?

      • There's a difference between doing business, and killing the golden goose out of childish motive.

        Are you referring to Samsung's supply contract with Apple, or Apple deciding to sue their supplier over the shape of their devices? Which one is more childish?

    • Re: (Score:3, Insightful)

      by t0rkm3 (666910)

      I prefer to call this, "Don't shit where you eat."

    • Re:one word (Score:5, Informative)

      by slashmydots (2189826) on Monday November 12, 2012 @01:46PM (#41958179)
      In the gaming world, we'd refer to it more as "self-pwned" actually since it was entirely their fault. You know, like blowing yourself up with your own grenade or rocket launcher or driving your vehicle off a cliff, lol. I'd give a "glass houses" reference but they're way past that. Them suing Samsung was more like riding down a river on a Samsung wooden raft and then lighting it on fire while they're still on it. Did the execs honestly go from "let's sue our competition out of existence because they're selling far more smartphones than us!" to "Ohhhh crap, they make half the stuff we use" without anyone pointing that out ahead of time?!
  • by Anonymous Coward on Monday November 12, 2012 @12:43PM (#41957399)

    Or is it the removal of a special price break?

    If farmers told the supermarket chains to go eff themselves and that they can pay the same price as any other wholesaler, then this would be opined by those supermarkets as "a price hike".

    Whereas it is instad the removal of a special price.

    (cf removing temporary tax cuts becomes a tax hike to those affected...)

    • by MightyYar (622222)

      Isn't that just semantics? At the end of the day, if you have to pay more from one day to the next - that's a price increase.

  • Global Thermonuclear Warfare. Looks to me like escalation has begun. Loser will be end users. Buy stock in both Apple as well as Samsung as higher prices mean higher profit margins.
    • by Fwipp (1473271)

      I'm not really sure what kind of crazy logic you're using. Companies spending money infighting = higher costs = lower profit margins. Otherwise this would be a *good* thing for them (and they would negotiate to pay the highest possible price).

      • by Zeromous (668365)

        No way! I'm getting rich on Rubber Boot futures!

    • Re: (Score:3, Interesting)

      by tgd (2822)

      Global Thermonuclear Warfare.

      Looks to me like escalation has begun. Loser will be end users. Buy stock in both Apple as well as Samsung as higher prices mean higher profit margins.

      Its probably best for Apple's users, anyway. They've all got Stockholm syndrome at the moment, but once they're freed from that incarceration, they can start the long road to recovery.

  • So it's what, a $4 increase in a BOM that totals out around $200? This is news?

    • Are you joking? This will decrease Apple's profit margins from $300 to $296 per unit! The horror! They will have to lay off some of their Chinese workers, of course. No way they can afford them now.
    • by Sassinak (150422)

      Actually remember, Samsung holds patents on several parts apple is using..
      So the actual cost may not be 4 dollars.. might be closer to 10.. (just on the iphone).. what about the ipad(s), laptops, desktops, appleTV.. etc...

      So net increase to apple (Across the product portfolio) may be something like 50 dollars.. PER device made.. (doesn't matter if its sold or not).. and don't forget.. rejects/faulty devices still require the increase.

      Its certainly not putting anyone our of business.. but its a healthy chunk

  • by Sassinak (150422) <sassinakNO@SPAMsdf.lonestar.org> on Monday November 12, 2012 @12:59PM (#41957607) Homepage

    Come on.. why would you sue and attempt to bully one of the worlds largest manufacturer chips/screens/etc... and especially those used in your own device. Its akin to me suing my employer while I still work for them.. You know there are going to be repercussions.. Its not a lot (most likely because anything higher than 20% could get them sued (ie: retaliatory business practices).

    Sucks that its all going to get pushed down to the consumer. (with a suitable markup).. of course, this could be what Samsung wants.. (gets apple to price themselves out of the market).. because the carriers are not going to absorb that cost.. Apple sure as heck won't take it..

    (Glad I'm an Android / Hackintosh guy).

    • by timeOday (582209)

      Sucks that its all going to get pushed down to the consumer. (with a suitable markup)..

      That's not true, unless the price increase also hits Apple's competitors. The price for Apple products is in no way directly tied to the cost of producing them. Look at their profit margins.

  • by roc97007 (608802) on Monday November 12, 2012 @01:04PM (#41957673) Journal

    will be paid on the installment plan.

  • by Nyder (754090) on Monday November 12, 2012 @06:37PM (#41961057) Journal

    Due to our rising legal fees, we need to increase the price of the products we sell you by 20%.

    Thank you for understanding,

    Samsung.

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