Samsung grabs Sharp shard, brings pain to Apple supply chain
Samsung has shipped up in Apple's pitch by taking a three per cent stake in cash-strapped component supplier Sharp for ¥10.4bn ($111m). Instead of top iDevice manufacturer Foxconn nabbing a bit of Sharp, an idea that had previously been floated, the fruity firm will see Sammy screens being made side by side with its own …
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And presumably...
Sammy can get a line put in to a Sharp production site to make stuff to their QA standards while leaving the Apple display lines to do whatever. Plus presumably they'll get access to sensor-in-pixel manufacturing tech if they don't already have it.
$111M sounds like a bargain for that, plus it's probably its own return on the investment for work Sammy will put through Sharp.
Wait for Sharp's share price to tumble further once Apple drop them as a supplier.
Where to go?
Who do they go to thou?
As everyone is making Android devices these days, Apple have no choice but to either go with a cheapo Chinese manufacturer, or make their own, or buy from someone more interested in making their own phones.
A genius move from Samsung, as if Apple didn't have enough headaches, with that mountain of unsold iPhone 5s.....
And Apple would get their precious components where, exactly?
The way I see it, Apple is tossing its' cash towards "IP" litigation, while Samsung is buying up production capacity and (minority) control of production companies. Sooner or later Apples' opinion on the matter is moot, because "Samsung" will control all the relevant production capacity available, directly or indirectly, and dictate the hoops Apple has to jump through to produce *anything*.
Never forget that asians have a different social structure and are very good at playing Corporate Games.
Re: Where to go?
Given Cook's background in production and how he's quietly started using North American components where he could, ... IIRC the glass for the iPhone is now made in Texas. Hm, just thinking out loud here.
Re: quietly started using North American components where he could
While I'd love that if it were true, the unfortunate facts on the ground are that any attempts at manufacturing in the US are pretty much doomed before they start because of union issues.
R.I.P Twinkies
3% is hardly going to give them all that much 'control' and it's actually now in their interest to keep their major customers (Apple) happy.
Just because I buy some BP or Shell shares does not mean they will give me cheaper fuel or stop selling fuel to my neighbour. If they had bought 30-50% it would be interesting.
Re: quietly started using North American components where he could
That depends on where the factory is located - Right-To-Work states would be fine, union states not so much.
Re: quietly started using North American components where he could
Unionization is much more complex than that. Don't oversimplify the issue.
wait until apple pull the plug
it matters not to sharp as they'll be losing nothing but a customer, remember that Samsung was the last supplier that Apple pulled the plug on, seems not to have hurt them too much.
Also 3% can lead to an aggressive takeover, apple cant "buy the other 97%" as business shares are not like walking in to costco, they have to satisfy the relevant countries laws.
once the speculatory "Apple V Samsung" idiots finish their venting we'll maybe see some intelligent guesses as to why they are doing it
Re: Where to go?
Apple made their bed, now they have to lie on it.
Re: quietly started using North American components where he could
That would be why Kia and Mercedes don't manufacture in America, then?
Re: quietly started using North American components where he could
Ribosome, Mercedes DOES have two manufacturing plants in the USA. In fact so does KIA.
Think before you spout your anti american crap.
http://www.mbusi.com/
www.kia.com/kmmg/
Re: quietly started using North American components where he could
That was Ribosome's point.
Although you two are comparing apples to cars. The import costs on cars are for more significant then on consumer electronics.
Re: Where to go?
Apple invest in their own screen production plant using some of the small change from their stash of cash and make their own. Sharp and Samsung lose 30% of their screen income.
Not that would be a story.
Re: quietly started using North American components where he could
Whoosh? Why did I single out those manufacturers?
Think twice before you get the word 'irony'. My point was that the existence of unions didn't stop Kia and Mercedes.
Re: Where to go?
And licence whos technology for screen fabs? Or do they invent their own? Fabs don't come cheap either. Ask amd what happened there. Apple would have been better buying sharp for cash ensuring domination.
Re: quietly started using North American components where he could
What I am stating is that certain morons should just stop with the automatic american bashing. Ribosomes post did not have one thing to do with "unions" . The fact is that the US CAN and does manufacture products with all of the quality and efficiency of other locations in the world. And they don't use child labor or make people work in literal prisons.
Ribosome did not have any point besides making a jab at the US. I was not comparing apples to anything, I was answering was a completely misguided and incorrect statement that needed correcting.
It's a three per cent stake. They won't get a seat on the board for that, surely.
Sharp will still make screen for whoever will give them business, I imagine.
That's 3% for now.
Who knows what might happen in the future. In the meantime, it is certainly enough to have friendly conversations to protect their investment.
Re: That's 3% for now.
Believe it or not 3pct makes the the 5th largest shareholder so it might do.
Buying a share in a sinking ship or perhaps Samsung want to get a closer eye on what Apple are doing next?
Being a shareholder does not get you any privileged information into what a company is doing.
"Being a shareholder does not get you any privileged information into what a company is doing."
Maybe not for your run of the mill secondary market dupe. In this case the 3% stake sounds modest, but there's two important considerations. First is that corporate and business culture are rather different in Asia from the UK & US, and cross-shareholdings are not unusual ways of cementing operational partnerships. And second, the exact terms aren't easy to find (on the basis of two minutes Googling, I 'fess), but it seems probable this isn't just a secondary market purchase, but newly minted equity, in which case this is a cash injection of $110m to Sharp, who are having a bad time at the moment.
Either way, Sharp aren't in much condition to dictate terms, and Samsung perhaps need access to Sharp's IGZO technology - certainly unverified web comment has lately suggested that Samsung have been blowing a bit cooler on their AMOLED tech.
In this market $110m is chump change - Apple could buy the other 97% for about $3.5-4bn and still have oh £130bn in the bank.
"Being a shareholder does not get you any privileged information into what a company is doing."
Yes, but when Samsung "lends" money to a sinking ship, Sharp, they do it for other reasons than future dividends, for sure.
Business speak
When I read this "competition paradigm changed" I have to dig up my anti-nausea medication.
Does this guy mean that the moves of some players on the market have totally changed the way the economic principle of competition is viewed.... or did that moron just mean that the "competition situation in the market changed" or something similar!?!!?
Glad I got that off my chest.
and..
..meanwhile Apple buy shares in Etch-a Sketch for their revolutionary screen technology.
It also means that Apple's sales may actually help Samsung get more value from their investment.
Until Apple pull the plug and buy from another supplier - then the share price drops as they lose a huge customer.
From Bloomberg:
"“Sharp was the first supplier that was cut out when iPhone demand started to slow,” said Amir Anvarzadeh, Singapore-based manager for Asia equity sales at BGC Partners Inc. (BGCP) “Chances for Sharp to revive as a standalone company are zero unless becoming part of a big group like Samsung or Foxconn.”"
So, that would seem to have happened.
Samsung may be trying to get a foot in the door to access something else of interest in Sharp should a fire-sale or "white knight" of some form be required.
3% is a lot...
3% may well get you a seat on a board, you do not need to have 51% of a company to get them to do what you want, 15% or even 10% may well be enough to control what Sharp do.
I think it is a great idea from Samsung, Apple can't walk away that easily, there are only so many companies that make the sort of quality screen Apple want and you don't set up a new fab plant overnight. The more Samsung owns of the supply chain, the more they can dictate what happens. An army marches on its stomach, Apple lives on getting units unto the shops at the right time, if they are no longer at the front of the queue, Apple will suffer financially.
Sometimes Apple is really, really smart, like when they brought up a large chunk of flash memory five years in advance and sometimes they're really, really dumb, like when they sued World+Dog over any IP infringement they could dream up.
I see Apple wining battle after battle but losing the war.
Re: 3% is a lot...
Apple may not walk away - chances are Apple have already invested their cash (as they do) by buying production lines / capacity / equipment at their suppliers. However, they will also be contracts in place to ensure access to supply so I think it unlikely Samsung could have much negative impact on any supply Apple may need.
Apple ditched Samsung (or are int he process of) and they are still shipping bucket loads of product - iPad sales up around 50% in the last quarter compared to the quarter before. The issues they had were getting them assembled and not with the supplies of the components.
Re: 3% is a lot...
I see Samsung buying up more and more production capacity - in effect they are their own largest customer now. All in time for people to stop buying Samsung phones. There are plenty of other very good Android phones by a multitude of other makers and Samsung are just another one.
Nexus 4 - good phone and cheaper than a Galaxy 3. HTC One X, Motorola Razr-i, Huawei Ascend P1 and many more from Sony and others.
Can anyone (who does not work for Samsung) genuinely say they would DEFINITELY buy a Samsung S4 or S5 next time - thought not,
Re: Maths
"If ¥10.4bn is $111m, how come ¥9.9bn is $121m?"
Inflation. The dollar is devaluing even as you type!
To make it clear, Samsung provided desperately needed money to Sharp.
One of the things they got in return was relatively small number of shares, something that Sharp had to report. There are almost certainly other terms and benefits to Samsung that don't need to be immediately reported.
This is far different than buying 3% of the company's shares on a stock exchange. That would have gotten Samsung almost no control or goodwill, nor would it have eased Sharp's tight finances.
As far as Apple just going out and building a display factory rather than investing in Sharp... yes, it would be cheaper. If they started now, they might have a working production line by 2015, and make industry leading displays by 2016 or 2017. If they didn't care about the cost, they might be able do it a year faster. In the meantime they still require displays, and every potential new supplier can see their future.
There is one other possiblity not mentioned...
Sharp, as I understand it, was having some production quality control issues...
a 3% steak in Sharp could very easily allow Sharp to purchase Samsung displays and resell them to Apple.. with a "handling fee added, of course.
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