In August 2014, Apple CEO Tim Cook agreed to begin winding down the patent suits with Samsung, and the two companies are teaming up again on new products. Photo: Bloomberg
The technology industry’s greatest rivalry may be turning into an unstoppable collaboration.
Relations between Apple Inc. and Samsung Electronics Co. Ltd appear to be thawing since the war waged by Steve Jobs forced these one-time corporate comrades to end lucrative supply contracts and engage in costly legal battles.
From this alliance, Apple gets access to one of the biggest, most sophisticated chip manufacturing operations in the world to help it continue outselling the competition.
On 29 April, Samsung reported first-quarter earnings showing growth in every one of its component businesses.
Meanwhile, TSMC, which made the main chip for previous versions of the iPhone, cut its spending plans.
“Samsung has come back with a vengeance into the chip market,” says Betsy Van Hees, an analyst at Wedbush Securities. “When you look at all the capacity they’re going to put online, it’s an amazing amount of money that they’re investing.”
SanDisk cited lower prices, product delays, and the loss of customers. Apple is believed to be one of those customers, having turned to Samsung for the flash drives used in many newer Mac models, according to analysts. “Playing against Samsung is never easy,” says Daniel Amir, an analyst at Ladenburg Thalmann. “They took away SanDisk’s business at Apple.”
Apple was SanDisk’s biggest customer by far, contributing 19% of the chip maker’s revenue, according to data compiled by Bloomberg.
As recently as June 2014, Samsung’s mobile phone division was providing more than 60% of the company’s operating profit. That slipped to 37% by the end of last year, with the semiconductor division picking up the slack to account for more than half.
Samsung and Apple account for 17% of worldwide chip purchases, according to research firm Gartner. And they make up 40% of the smartphone market by units, according to researcher IDC. In other words, you can’t avoid them. As if the prospect of losing Apple’s business weren’t enough, chip makers have to worry about Samsung building more of the components for its own devices in-house.
The latest Galaxy phones use Samsung-made processors, storage chips, modems, and image processors, whereas previous models farmed out some of the work to other companies.
Samsung had long promised not to favour its own components if it could get a better deal elsewhere. That no longer seems to be the case. After Apple, SanDisk’s biggest customer is Samsung, according to data compiled by Bloomberg.
When asked on 28 April what it could do to lure Samsung back, Jacobs suggested Qualcomm might be moving its production to the Korean company’s superior factories.
Although Samsung’s newest phones don’t use Qualcomm chips, perhaps Jacobs and his colleagues should root for the products to succeed.
If Samsung again proves a threat to Apple in smartphones, Cook may be less keen to look past the rivalry. Bloomberg