Samsung Hits Apple With 20% Price Increase 447
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].'"
Re:Inevitable (Score:5, Insightful)
Re:20% eh? (Score:2, Insightful)
No, because we're talking about $3.00 per device. Apple will eat it, and instead start building up other foundry companies to build the Ax SoC's and take the billion dollar business away from Samsung.
Typical case of small short term gain, big long term loss.
Re:one word (Score:5, Insightful)
If by 2014 (the time the current contract runs out), Apple doesn't find another supplier, manages to make their own or changes the product to no longer need them, Samsung could, indeed, prevent them from producing their product at all, by simply no longer selling them that processor. Of course that would also mean Samsung wouldn't get the revenues from selling it, which probably isn't in Samsung's interest.
This was expected.. (Score:4, Insightful)
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).
Re:20% eh? (Score:5, Insightful)
No, because we're talking about $3.00 per device. Apple will eat it, and instead start building up other foundry companies to build the Ax SoC's and take the billion dollar business away from Samsung.
Typical case of small short term gain, big long term loss.
Well... maybe, depends on whether Samsung are figuring that that's the route Apple is taking anyway (Apple have taken a few pieces of iPhone in-house recently to save costs) and are making hay while they still have a competitive advantage. If Samsung guess that Apple will eventually transition away from them as a supplier (and given the ongoing animosity, it's not a bad guess) then while they are they will want to squeeze their customer.
Re:one word (Score:4, Insightful)
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:Inevitable (Score:4, Insightful)
Suing a key supplier with no other substitute products is not a good business move.
It's a good point, but gouging your customers is probably also not a good business move. Apple is not exactly cash-poor, and I expect Samsung to face a very capable competitor in the near future (TSMC?). So sure, in the short term Samsung will make a quick buck and sting their chief smartphone competitor. In the long term, they may see their manufacturing advantage disappear - along with an enormous customer.
Re:one word (Score:5, Insightful)
Why? If Samsung can make money from iPhone sales, why would they want to stop the sales completely?
If Samsung caused the cessation of iPhone sales altogether, iPhone customers might move to a brand that doesn't use Samsung parts at all.
Re:one word (Score:5, Insightful)
I'm sure Samsung would be happy to continue manufacturing for Apple, as it is still income.
But maybe this is flexing some of their muscles to fire a warning shot over to Apple about Apple's recent lawsuit games. On the other hand, this is the first price rise for Apple in five years of manufacturing (where I imagine pricing is on a per-wafer or per-mm^2 basis - not clarified).
It's not hard to imagine that 32nm is more expensive, and that inflation over that time will have raised costs as well, that Samsung have merely invoked a five year price review clause in their contract with Apple to raise pricing to a reasonable level for the next five years.
Re:one word (Score:3, Insightful)
I prefer to call this, "Don't shit where you eat."
Re:Inevitable (Score:5, Insightful)
One might reasonably project that with the iPhone 6 or 5s or whatever it will be, Apple will drop Samsung altogether. Samsung might as well milk Apple while they can.
Comment removed (Score:2, Insightful)
Re:This is known as (Score:2, Insightful)
I'm sorry, but after years of Microsoft's half-assed or insecure offerings, Linux alternatives which would require jumping through all sorts of hoops to get only most of the functionality ... I'll take my iPad which worked straight out of the box on day 1, and has done so since.
I think you're confusing Stockholm syndrome with "bought a product they're happy with".
Despite all of the bile on Slashdot directed at Apple, outside of here, people with Apple products tend to be quite pleased with them.
Re:Inevitable (Score:4, Insightful)
Huh? Samsung doesn't make money off of the GS3? Then why are the most profitable Android device manufacturer?
Re:one word (Score:3, Insightful)
Apple better hope that Samsung is a more adult company than Apple is.
Re:Inevitable (Score:5, Insightful)
It's fair to make a statistical assumption (i.e. high likelihood) that the popularity of the iPad is tied to the iPhone. That is to say: who the hell buys a Nexus 4 and says, "I want an iPad so I can get all these fancy Android apps on a bigger screen!" iPhone, iOS, iApps, iPad; Android phone, Android, Android apps, Android tablet. Eroding the iPhone market could erode the iPad market, which is better than double-dipping: even if Samsung doesn't make an Android tablet, once Android tablets gain popularity they're suddenly cool and people will match the phone to the tablet (which further weakens the market for the iPhone) in a feedback loop started by getting people off the phone so they'd match the tablet to the phone.
High stakes sure,but it's a good attack plan. As I said, Apple is weak--the Galaxy S3 is single-handedly outselling the iPhone--and so this is the time for Samsung to strike. There is also word on the wind that Apple may be trying to get away from Samsung in a vertical integration scheme (Apple is the next Carnegie Steel) fabbing their own chips, so perhaps Samsung has very little to lose.
Re:one word (Score:5, Insightful)
I'm sure Samsung would be happy to continue manufacturing for Apple, as it is still income.
Indeed. Apple charges premium prices for its products. Samsung wants a cut. Nothing wrong with that.
Re:Inevitable (Score:4, Insightful)
It's a good point, but gouging your customers is probably also not a good business move
You mean like what Apple does to its customers?
Re:one word (Score:4, Insightful)
Well Apple is trying it's best to keep Samsung from competing against them in the mobile market. So why shouldn't Samsung try the same thing? If no more iPhones are sold, then more of the other kinds of phones likely will.
At the same time this might scare Apple into negotiating instead of suing over rectangular devices in the future.
Re:Inevitable (Score:4, Insightful)
Initially Samsung did some design work in cooperation with Apple on the processor design, but Apple has since moved it's design team totally in house. They don't need to initially hire someone, they already have the entire team in house as is.
Re:one word (Score:2, Insightful)
And the 1 billion verdict is probably going to be heavyly adjusted, once Samsung has worked it up the appeals chain.
Re:one word (Score:5, Insightful)
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:1, Insightful)
Re:one word (Score:1, Insightful)
Car analogy (Score:5, Insightful)
Re:one word (Score:4, Insightful)
Samsung is number 2 by a very large margin above number 3. If they can significantly hurt iPhone market share, they will be in a very strong position to basically define the smartphone market. For the same reason that nobody really cares if Samsung or Apple win whatever lawsuit, they won't really care why the iPhone 6 is so much more expensive. Samsung is overrepresented in the shop catalogs, so that is a good bet that they will get the most benefit from any failing on Apple side.
That is going to be interesting, as long as neither Samsung nor Apple manages a kill blow, that will be good for the customers (Apple will have to be quite innovating to offset the price hike. On the other hand, Samsung will have to drop the price to really hurt Apple). Even better if that little battle gives some oxygen to other players like MS and RIM and if Google manages to revive LG and HTC.
Anyway, this is a good example of why relying on your main competitor to build your product is not the best position to be in. (if anybody had any doubt why it was necessary for Apple to have their own Map application, or why Android makers shit their pants when Google bought Moto, or why OEM became pale when MS built Surface). Also that is no wonder that Apple was especially bitter against Samsung in their lawsuit, both companies are on a collision course.
Re:one word (Score:4, Insightful)
Samsung will never be Microsoft because
(a) Apple would never become the old Apple, NeXT, etc. again,
(b) Google shall keep Motorola running just fine, and
(c) Samsung is not an American company.
I'll personally support Samsung simply because they are not an American company and Korea lacks the political muscle to impose their companies' will around the world.
Also, I'm exceedingly happy with Samsung for making the Galaxy Note, which does double duty as a phone and table. Apple created a new market that basically doubled consumers gadget expenses, but Samsung reduced that price tag.