New iPad to strengthen Korean parts suppliers

Apple to buy Samsung parts worth $9 billion

By Kim Yoo-chul

The release of the new iPad looks good for all Apple’s Korean parts suppliers amid signs of improvement in demand for electronic devices.

``The new iPad is positive for investor sentiment and the stocks of its major Korean partners. It’s no surprise that the Koreans are improving their core parts considering the steadily increasing demand for Apple tablets,’’ said one executive from one of Apple’s partners in Korea.

According to the publicized document by Apple, Samsung Electronics is included among its supply-chain management (SCM) structure, LG Display, LG Chem, LG Innotek, SK-Hynix Samsung Electro-Mechanics are other Korean suppliers.

Samsung is expected to be both victim and beneficiary of the new iPad that will be pitted against its Galaxy Tab.

``We are still in the process of separating component and finished-goods units to effectively handle our overseas customers, among whom Apple is the VIP,’’ said a Samsung executive, requesting anonymity.

Record buying from Apple

``In order to respond faster to Apple’s orders, we are streamlining our business structure,’’ Jun Dong-soo, president of memory chip business at Samsung Electronics’ device solutions unit, told The Korea Times.

This year, Apple is expected to buy over $9 billion worth of Samsung memory chips and flat screens from $7.8 billion last year, according to officials from Apple’s Korean parts suppliers and market analysts.

The Korean firm’s chips and mobile application processors (APs) like the A4 and A5 chips are already found in the iPhone and iPad, as are its flash memory chips and LCDs.

``This is a record amount for Apple. It is reluctant to suddenly change its partnership especially in chips and LCDs. Because Samsung components are highly-competitive, Apple will order more from it this year,’’ said another official.

Samsung is extending its output capacity for mobile APs at its U.S. plant in Austin, Texas, to ship more customized chips to Apple, while flat-screen shipments for Apple’s new iPad are also increasing, in addition to NAND flash memories.

``When we talk about the Apple effect, Samsung’s solid state drives (SSDs) are being used more to Apple’s MacBook Air than SSDs provided by Japan’s Toshiba. End users are buying MacBook Airs using Samsung SSDs. That’s the technology,’’ said Jun.

SK-Hynix is also upbeat about the new Apple tablet. It is supplying its mobile DRAMs and NAND flash memory chips to Apple.

An SK-Hynix spokesman declined to comment as it’s not company policy to talk about big clients but the firm is investing more for its NAND chips aimed at selling more to Apple.

According to several industry sources, who are very familiar with Apple-related issues, contacted by The Korea Times, top decision makers of SK-Hynix have reached a broad consensus to invest more for its chip-making factory in Wuxi, Jiangsu Province, China, to boost output for chips used in Apple products.

The Apple announcement is also widely seen to boost the bottom lines of some LG Group’s LG Display, LG Innotek and LG Chem.

LG Display spokesman Jason Kim declined to give any details. But LG is known to have switched some of its LCD lines for televisions in Gumi to tablet-only lines in an attempt to increase its panel output for the new Apple tablet, according to industry executives.

Apple has been LG Display’s biggest LCD customer for the past few years. Its flat screens are found in Apple’s iPhone 3GS to the latest iPhone 4G, as well as the iPad and iPad 2.

LG Innotek is supplying its camera modules to the new iPad, while LG Chem is providing lithium-ion batteries to the California-based electronics giant, said officials from the companies, asking not to be named.

Spokesmen from LG Innotek and LG Chem declined to comment, as did Apple’s representative for South Korea Steve Park.

``This year, Korean parts suppliers will enjoy increased orders from Apple. The reason is simple. More people are buying Web-connected portable devices. The new iPad will lift the bottom line of the Korean suppliers, while the upcoming new iPhone will fuel more momentum,’’ said one industry executive.