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].'"
Is it a special price hike? (Score:4, Interesting)
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...)
Re:one word (Score:2, Interesting)
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:This is known as (Score:3, Interesting)
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.
Re:one word (Score:4, Interesting)
And, if I remind well, Samsung is/was also a major supplier for LCD screens for Apple... Which are much more expensive than the processor...
And LG (one of the Apple suppliers) is not feeling well...
Re:Inevitable (Score:5, Interesting)
The Galaxy S3 (their biggest seller) is selling slightly faster than Apple's biggest seller (the iPhone 4s), in terms of units. I don't know what the respective profit margins are. However, both companies have many other products, not the least of which are the tablets. Losing Apple as a customer would hurt, not just because Apple is their largest - it would also indicate that their competition has gotten good enough and large enough to play with the big boys. Any of their customers would then have the luxury of shopping around, not just Apple.
I suspect that Samsung knows what they are doing, but the stakes are quite high if they misjudge.
Re:Inevitable (Score:5, Interesting)
I sit in the cube across from one of the purchasing guys. He gets on that phone 9 hours a day to negotiate the most trivial amounts of money on parts. And this at a company where we only sell somewhere in the neighborhood of 10,000 machines per year. He can pay for his cost to the company for the year by saving perhaps $150 per machine. If he worked at Apple, he'd only need to save something less than a penny to justify his position. Hiking a single part from approximately $28 to over $33 is going to give their purchasing guys a conniption fit.
Re:one word (Score:5, Interesting)
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?
Re:one word (Score:5, Interesting)
So, it is around 15 Billion, give or take.
So far, Tim Cook is making QUITE the splash.
Re:Inevitable (Score:5, Interesting)
Yep... I just ditched an iPhone for an SIII this round. The hardest part was leaving behind the apps, etc. that I can't use any more, or have to re-purchase an Android version.
Thing is, now that I'm on Android, I have a lot more choice for the next upgrade, and even if I don't get another Samsung, the chance that I'll go back to an iPhone is next to nothing. I think a lot of people keep getting iPhones because that's really the only upgrade path where you don't lose everything. Having switched, Android is much better than iOS, IMO, and once you break out of the lock-in, there's little reason to go back.
So every person that Samsung knocks away from Apple, is likely a permanent loss for Apple.
Re:Inevitable (Score:4, Interesting)
What does it matter "where" they made that money? They booked about $4 billion in profit to their phone sales last quarter. Apple booked about $5.3 billion in profits to their phones last quarter. Both companies are making money hand over fist on phones. Apple's margins are certainly higher as they made more profits on less than half the smartphones shipped compared to Samsung last quarter (57 million to 27 million smartphones). That said, insinuating that Samsung isn't making a tremendous profit on its phones doesn't reflect reality.
People just forget obvious examples (Score:4, Interesting)
Steve Jobs vowed to destroy Android, Steve Ballmer did the same with Google and threw chairs. THAT is what corporations are like, they aren't run by a hive mind or a robot, they are run by people who we wouldn't like to be with.
Re:one word (Score:4, Interesting)
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.