By Cho Mu-hyun
The deepening patent row between Apple and Samsung is raising questions as to whether it will impact on the latter supplying parts to the former.
But the bigger question is who stands to lose more from the fallout?
Samsung seems poised to move on without its long time client as the electronics giant will not be supplying parts for its American counterpart’s upcoming iPhone 5, unveiled in the United States Wednesday (local time), according to industry sources.
Apple spokesman Steve Park didn’t answer repeated phone calls while Samsung spokesman Ken Noh said “Samsung doesn’t discuss client issues,” and declined to comment further.
Industry analysts here say the impact will be minimal on the Suwon-based company.
“Samsung Electronics was Apple’s main memory chip supplier but has been selling less to Apple since mid-2011,” said Seo Won-suk, an analyst at Korea Investment & Securities. “Last year during the second quarter, the portion of Samsung’s revenue from Apple for DRAM (dynamic random access memory) shrunk to around 5 percent, and around 15 percent for NAND flash chips.”
Other analysts contacted by The Korea Times noted that while Apple may find other suppliers, they won’t be able to match Samsung’s ability to guarantee quality and quantity.
Samsung’s System LSI division, which makes memory chips, earns 11 trillion won annually, and 60 percent comes from application processors that go into mobile devices.
“Samsung is versatile and powerful. Though there would be some revenue decline in the short term by ending its relationship with Apple, it has more than enough business to handle the situation in the long term,” said a Seoul-based industry analyst who declined to be named. “Samsung earns its main revenue from handsets, and the sales of its Galaxy S3 are stronger than ever.” He estimated a revenue decline of less than 12 percent if the Suwon-based firm stopped selling components to Apple.
Samsung announced last week that global sales of its Galaxy S3 have topped 20 million 100 days after its launch. Following a record operating profit of 6.7 trillion won in the second quarter, Korean financial companies, including KDB Securities, forecast 7 trillion won for the third.
There have also been strong protests from other parts suppliers about Apple’s price policy for chips. A top executive of a domestic information technology company, who spoke on condition of anonymity, confirmed that prices demanded by Apple were too low but hoped the situation would improve.
“Supply and demand changes the price, but let us consider the long run. The industry will make a strategic choice through negotiations that will look at the issue for long-term benefits,” he said.
“It is usually the supplier of chips that has the upper hand in setting the general conditions of a supply contract,” said another industry official who declined to be named. “But Apple is not just any buyer and it has been using its superiority in the market place to set low prices that force chipmakers into a frustrating competition among themselves.”
Though the two technology giants, the only ones that seem immune to the global recession, are bitter rivals in court and the global smartphone market, they have enjoying a close partnership as buyer and supplier. Apple is the biggest buyer of Samsung’s parts, with the California-based company having agreed to buy $11 billion worth of LCD screens, memory chips and other components through 2012.
The tension between the two is escalating following a recent win by Apple in a San Jose court that saw a jury order the Korean firm to pay $1.05 billion in damages for “slavishly” copying Apple designs.