Samsung Electronics, which manufactures Apple-designed chips for iPads and iPhones exclusively at its Austin, Texas facility, has reportedly hit the iPhone maker with a material 20 percent price hike. Unsurprisingly, per an unnamed person allegedly familiar with negotiations between the two companies, this price increase is only aimed at Apple and not other Samsung clients. Apple up until recently used to account for as much as 8.8 percent of Samsung’s revenue. It’s been estimated that Apple ordered 130 million iPhone and iPad chips from Samsung Electronics in 2011 and more than 200 million units this year. The two frenemies have allegedly started to reflect the new supply price recently…
MarketWatch relays a report from Korean newspaper Chosun Ilbo that Samsung Electronics has a long-term contract to supply chips to Apple until 2014.
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.
The 200 million units of processors for iPhones and iPads in 2012 multiplied by an estimated $20+ in the per-chip cost pegs Samsung Electronics’s biz with Apple at about $4 billion annually. We knew back in August that Samsung wanted to invest $4 billion towards upgrading the Austin facility.
With Samsung losing a high-stake Apple v. Samsung trial in the United States to the tune of $1+ billion in damages, and with news that Apple has been poaching Samsung’s chip experts and rumors of order stoppage for chips and TSMC prepping to produce Apple chips, no wonder Samsung is now trying to squeeze as much revenue out of the iPhone maker as possible.
“Samsung gets caught stealing Apple’s designs, so they raise the price of the chips by 20 percent”, writes Jim Dalrymple of The Loop.
Samsung knows all too well that its chip biz with Apple is slowly but surely winding down. Come 2014, its rival TSMC will get the lucrative contract to produce chips powering iOS devices in 2014 and going forward.
Is Apple right to move chip production away from Samsung?