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back to article Samsung turns screws on Apple, hikes A6 processor price 20%

Samsung has hiked the price of processors used in Apple's iDevices by 20 per cent and the fruity firm has had to suck it up, Korean newspaper Chosun Ilbo said. A source told the paper that Samsung said it wanted more moolah for its application processors and Apple has had to accept this because no one else can fulfil the …

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Wonder how much that price hike brought in?

$1bn, by any chance?

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Re: Wonder how much that price hike brought in?

They got off lightly. I'd have doubled the price. That would sicken the fuckers.

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Re: Wonder how much that price hike brought in?

Quick back-of-the-envelope stuff:

Apple quarterly sales 17 million iPad + 26 million iPhone* = approx 172mil iDevice / year

Wholesale processor cost - $13**

20% increase per processor = $2.60

by 172 million devices = $447.2 million, or approx $1/2 billion.

Considering that due to supply contracts, existing designs, no alternative supplier etc that Apple is probably stuck with Samsung-built processors for at least a couple of years, the $1bn total is pretty spot on!!

*source - engadget.com

**source - isuppli.com

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WTF?

Another fine example of quality journalism

"Apple has been the one losing out in the UK, forced to post a statement in newspapers and on its website stating that Samsung's Galaxy Tab 10.1 does not copy its iPad."

1. Apple's 'loss' applies to the whole of the EU, not just the UK.

2. The iPad had nothing to do with the Court case as the Judges were at pains to point out.

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Trollface

@bolccg "Wonder how much that price hike brought in?" Oh, I imagine Cupertino are'nt....

....that worried given that they will almost certainly be expecting a particular section of their enthusiastic fan-base to cover the costs - after all that particular section of their customer base have been cheering the Cupertino Posse "onwards and upwards" throughout all of this have they not? It would only be just if they had to pay Sammy's legal costs through the price of their next shiney.

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Anonymous Coward

Re: Wonder how much that price hike brought in?

Short term gain - long term loss. How many other manufacturers will be ramping up production now - Samsung better make hay while the sun shines as they say. Losing the Apple contract for everything else must have stung regardless and now they have guaranteed they will lose the CPU deal - sooner if not later.

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Anonymous Coward

Re: Wonder how much that price hike brought in?

I think you overestimate how many fabs are about these days that can actually handle such large scale orders at a decent process size.

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Re: Wonder how much that price hike brought in?

TSMC, Global Foundries and IBM could all do it. Apple will probably have TSMC making them next year. TSMC and GF work on half nodes, so Apple will be able to get a 28nm process from them they can't from Samsung.

Intel could make them also, far better than anyone else, though they are only just now dipping their toes into foundry services and probably don't want to take on a customer as large as Apple just yet, if ever.

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Re: Wonder how much that price hike brought in?

Indeed.

If I were in Apple's position, and had a choice of vendor for ooooh say the memory, screens and processors I needed to make my products - I might have selected alternates before I sued..

Bluntly, if the two companies just severed all-ties, Samsung takes a hit on the balance sheet, Apple loses the ability to ship product.

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Anonymous Coward

Re: Wonder how much that price hike brought in?

Could they? Did you ask them? And assuming (safe enough, I think) that none of them are sitting on enough capacity to keep crapple going, how insane would a firm have to be to turn away *any* other paying customer to deal with them?

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Happy

Re: Wonder how much that price hike brought in?

So, indirectly, Apple will be paying part of Samsung's legal fees in their ongoing court cases? But when Apple passes on the processors' extra costs to Apple customers, then ...iPhone buyers, at least indirectly, will be funding Samsung to make Galaxy phones even better. Thank you. Pleasant twinge of schadenfreude I'm feeling.

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Re: Wonder how much that price hike brought in?

@DougS

"TSMC, Global Foundries and IBM could all do it. Apple will probably have TSMC making them next year. TSMC and GF work on half nodes, so Apple will be able to get a 28nm process from them they can't from Samsung."

Maybe, but perhaps there's a more fundamental reason why they can't. It's well known that Apple's first CPUs where essentially Samsung designs. Xray pictures of their first one and a standard Samsung ARM were remarkably similar. So perhaps the A6 still has a lot of Samsung IP in it that Apple can't take away to TSMC or GF or IBM. The patent dispute between them has been going on for plenty long enough for Apple to have sealed a deal with another fab but so far they haven't...

Even if Apple go elsewhere Samsung would probably be able to use the spare capacity themselves for their own Android phones. And I'm sure the likes of Qualcomm wouldn't mind another fab for their highly popular range of chips.

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Happy

Re: Wonder how much that price hike brought in?

It probably would not matter who GREEDY APPLE deal with because they have a tendancy to bite the hand that feed's it. I hope any company that deal's with CRAFTY APPLE thing's long and hard what they are getting themself's into because that GREEDY APPLE can't be trusted.

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Devil

Re: Wonder how much that price hike brought in?

I'd think it would need to be at least double that. They'll have to pay taxes to get the money into the US before they can pay the fine.

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@bazza

The 3gs is the last that used a Samsung SoC. For the A4 and A5 Apple designed their own SoC, using a standard ARM core just like Samsung does. It is quite possible or even likely there was some Samsung IP in those, especially since they were designed to be fabbed on Samsung's process and thus would have had tweaking from Samsung's fab guys as is done by all foundries.

However, the A6 uses a fully custom Apple-designed core, not a standard ARM designed core like all of Samsung's SoCs use. It would not have been designed specifically for Samsung's process since it would have been started after the Apple/Samsung legal battle heated up. If there are some other components in the SoC such as memory controllers that are Samsung IP, it's not that difficult to replace them with licensed bits from others (much like Apple licenses the Imagination GPU in the A4/5/6) or design their own.

There were rumors a few months ago about Apple doing some test runs with TSMC, so they are probably already working with them on the next generation A7 - though they may be hedging their bets by working with someone else like Global Foundries as well. I'd be willing to bet big money that Apple will not be using Samsung to fab their SoC on the next generation of any of their products. Samsung's 20% cost increase might even make it cost effective for Apple to spend the money on the engineering effort required to ditch Samsung even on the older products where Apple would typically not want to change anything.

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I'd love to have been a fly on the wall at Apple...

[after the trial]

Guy 1 : WOO, we won $1 billion, let's all go and get laid, whose turn is it to pay?

Guy 2: yours!

[today]

Guy 1 : Umm, Samsung have just upped their prices 20%

Guy 2: Shoot, how much extra is that going to cost us?

Guy 1: bout.... $1 billion a year....

Guy 2: Crap, lets find another supplier.... QUICK!!

Guy 1 : There isn't another supplier who can meet our demands!

Guy 2 : Oh, bugger.

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Joke

..Guy 1: That's the second time we've been screwed and it wasn't as much fun this time.

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Anonymous Coward

Very witty

You should be a comedy writer or something...

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Re: Very witty

Actually, with my strong creative streak I was thinking of becoming an accountant for Starbucks.....

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Re: " I was thinking of becoming an accountant for Starbucks.." Thumbs up for sneaking......

....a highly entertaining political joke onto the thread. On topic, well no - but funny all the same. Besides I imagine that Cupertino make sure that they pay even less tax than Starbucks do. :)

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Happy

another supplier.

Instead of Guy 1 saying " there isn't another supplier who could meet our demand's" it should have been there isn't another supplier who want's to deal with us because of our previoues track record of being crafty, gready and biting the habnd that feed's us, so therfore no right minded comapny will deal with lowlife scum like us. Your post was very amusing, hahaha.

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Black Helicopters

Could this be another hoax?

I seem to recall the recent claims that Samsung were going to stop selling screens to Apple turned out to be false (although I can't seem to find any links to it anywhere). I wonder if this will also turn out to be false?

Given how widely the screen thing was reported I wonder if this could be some deliberate attempt to kick Apple square in the share price?

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Only if you can find there was a first hoax and prove this is another

I have no evidence that Samsung threatened Apple with a lack of LCDs. What I saw were rumours that Apple were planning to reduce orders of Samsung LCDs:

http://www.idownloadblog.com/2012/11/07/apple-sharp-2b-investment/

At this rate, the only people who will trade with Apple are the ones who are really desperate.

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Rob
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Re: Only if you can find there was a first hoax and prove this is another

Hence why Sharp are now the main preferred supplier of screens as they are unbelievably desperate.

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Anonymous Coward

Re: Only if you can find there was a first hoax and prove this is another

What did happen is that MBP with retina screen started shipping with both Samsung & LG screens, and the LG screens had ghosting issues - so no reduction in Samsung screens if the replacements were rubbish.

Another barrel over which Samsung have Apple

http://www.macrumors.com/2012/09/17/retina-macbook-pro-users-still-complaining-of-image-persistence/

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Re: Only if you can find there was a first hoax and prove this is another

Sammy to buy Sharp.

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Anonymous Coward

Re: Only if you can find there was a first hoax and prove this is another

You're just looking at it wrong?

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Anonymous Coward

Re: Only if you can find there was a first hoax and prove this is another

Re: Sammy to buy Sharp.

No - Apple to buy Sharp.

And then Apple to continue buying Samsung screens until Sharp can address their quality issues.

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Re: Could this be another hoax?

Yep, another hoax: http://www.thestreet.com/story/11766909/1/apple-investors-can-relax-a-little-bit.html

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Mushroom

$25 Android pad coming soon...

<- Kaboom Icon *estimates* what might happen to Apple...

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Pint

Re: $25 Android pad coming soon...

"Under* estimates, of course.

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Re: $25 Android pad coming soon...

UK price £325 probably.

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Re: $25 Android pad coming soon...

They are $39 at my local electronics supermarket, no idea what they have reached on buy-china-stuff cheap.com

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hmm

Who didn't see this coming.

What I wonder though is the affect of the numerous apple patents which have been declared invalid, with adition to the rulings outside the US (basically every other country) that says either samsung didn't infringe.

I actually don't expect the second to have any baring at all, I mean god forbid the USA falls in line with the rest of the world, but how many of the recently invalidated patents were used in the original sammy / apple $1bn court case?

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WTF?

In other news

Unsubstantiated but someone in the office today was saying apple had been told to fork out for sammy's legal costs in the appleogy-gate proceeding because of their overly childish approach to it all...

Anyone else heard this?

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Re: In other news

It's on Groklaw:

http://www.groklaw.net/article.php?story=20121109130213229

Basically, "this sanction is the highest there is in the "loser pays" category, that Apple will have to pay for everything the lawyers cost Samsung, not just fees but parking, phone calls, and from day one" (according to an unspecified source describing the sanction imposed)

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Re: In other news

Ow.

That's Karma for ya.

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Anonymous Coward

Re: In other news

"As to the costs (lawyers' fees) to be awarded against Apple, we concluded that they should be on an indemnity basis. Such a basis (which is higher than the normal, "standard" basis) can be awarded as a mark of the court's disapproval of a party's conduct, particularly in relation to its respect for an order of the court. Apple's conduct warranted such an order. "

http://www.bailii.org/ew/cases/EWCA/Civ/2012/1430.html

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Happy

Schadenfreude ....

that's all

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This won't be related to the lawsuit

It's classic game theory.

When Apple were Samsung's biggest customer Samsung had to keep prices ultra-competitive to maintain that.

As soon as Apple (very sensibly) decided that relying on their biggest rival to make phone parts was a scary situation to be in it became only a matter of time until all of the business shifted elsewhere.

Now that Apple will clearly move away when they can regardless of cost considerations the 20% hike is Samsung milking as much profit as possible out of a now temporary relationship without pushing prices so high that their reputation suffers. Pushing up the cost of their key rival is a fringe benefit.

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Re: This won't be related to the lawsuit

Agreed, but unfortunately since Apple has over 50% margin on their products, they won't feel much impact at all.

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Re: This won't be related to the lawsuit

GREEDY APPLE won't feel it but i bet the iSHEEP WILL at the end it will cost the customer more.

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Anonymous Coward

Re: 50% margin on their products

Actually, 50% margin on source manufacturers isn't all that uncommon*. First the base cost if usually fairly low and you'll need to make enough to pay your workers plus have enough left for the shareholders. And, you need a price from which you can discount purchases to people making bulk purchases.

Where Apple make out is they are also last man in the chain, so the get to keep it all.

*My first real job was working at just such an OEM supplier. We made parts for a company name that appears frequently on these pages, but for a non-computer division of the company. Our initial markup was a literal 50%. Then they marked it up another 40% so they could discount it the same 40% to super large orders. For merely large orders you got a 20% discount. If you purchased through our direct channel you paid the full markup, but it still might be cheaper than it would have been if you bought it from the branded company. The only exception to that was if someone brought a specific design to us and asked us to make it for them. That would be done for actual parts plus labor.

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Devil

Revenge..

...is so delicious.

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Anonymous Coward

Re: Revenge..

Is a dish best served with sweet and sour Labrador *

*It's an old jasper carrot gag and no animals were harmed in the making of this (tasteless) joke.

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Re: Revenge... and space and time to do it...

Star Trek II: The Wrath of Khan: "Ah, Kirk, my old friend. Do you know of the old Klingon proverb that revenge is a dish best served cold? It is very cold in space.

(copied from google,which copied it from wikipedia, which copied it from.... Well, you get it, right? :-))

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Coat

Re: Revenge..

"Revenge..

"Is a dish best served with sweet and sour Labrador *

"*It's an old jasper carrot gag and no animals were harmed in the making of this (tasteless) joke."

Actually, I think it's quite tasty. I love sweet and sour.

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Devil

Inevitable when you keep shafting your supplier...

Let's say the A6 is costing Apple $20 each, and the A6X $30. Not unreasonable for a slightly larger than usual SoC on a 32nm process.

In that case, an extra 20% would bring in $4 per iPhone class device, and $6 per iPad class device. I can see this bringing in an extra $billion before Apple can move away to TSMC, etc.

Of course there is the chance that it is actually a cost issue for Samsung (due to yields, etc), and the overall additional profit from each sale isn't overly increased...

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Re: Inevitable when you keep shafting your supplier...

www.idownloadblog.com/2012/09/19/new-iphone-5-bom-200-bucks/

Cost for the a6 is here :-) Not sure if thats an educated guess on their behalf or not.

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