Samsung Hits Apple With A 20% Price Hike

[SunnyD]

Apple: You owe us $1 billion. Pay up.
Samsung: Yeah, about that... we need to charge you 20% more for your chips.
Apple: Um, what? No.
Samsung: Okay, taking my toys and going home. We'll write you a check eventually.
...
Apple: Ugh. Fine.
Samsung: Thanks. Oh, by the way... we'll give you a $1 billion discount if you make that judgement go away.

[aaksheytalwar]

Originally Posted by SunnyD

Apple: You owe us $1 billion. Pay up.
Samsung: Yeah, about that... we need to charge you 20% more for your chips.
Apple: Um, what? No.
Samsung: Okay, taking my toys and going home. We'll write you a check eventually.
...
Apple: Ugh. Fine.
Samsung: Thanks. Oh, by the way... we'll give you a $1 billion discount if you make that judgement go away.

Apple needs to be taught a lesson. Like mid cycle Samsung asking for 75% profit sharing else no deal. Will put apple in its place.

[zerocool84]

Originally Posted by Kenmitch

What's a 20% increase equate to? $4-5's? Would think the Apple tax would cover it.

Yes but every dollar you lose is millions less by the end of it seeing as how many devices Apple sells.

[Kenmitch]

Originally Posted by zerocool84

Yes but every dollar you lose is millions less by the end of it seeing as how many devices Apple sells.

The Apple tax on idevices is pretty steep from what I see. I doubt it will hurt them too much. If you or others are worried about it then support them during the holidays by purchasing some mode icrap

I wouldn't worry about Samsungs fab keeping busy at all. I'd think that when/if Apple goes others will fill the void with most likely better profits for Samsung. Could turn out to be the best thing for Samsung....Time will tell.

[Topweasel]

Originally Posted by Kenmitch

The Apple tax on idevices is pretty steep from what I see. I doubt it will hurt them too much. If you or others are worried about it then support them during the holidays by purchasing some mode icrap

I wouldn't worry about Samsungs fab keeping busy at all. I'd think that when/if Apple goes others will fill the void with most likely better profits for Samsung. Could turn out to be the best thing for Samsung....Time will tell.

But still 5 dollars lets for say 50 million devices (Ipad, Iphone, Ipod Touch, Apple TV) is still 250 Million in increased production costs. Even if the Apple Tax can cover it, that is still a hefty chunk of change to eat.

[TuxDave]

Originally Posted by aaksheytalwar

Apple needs to be taught a lesson. Like mid cycle Samsung asking for 75% profit sharing else no deal. Will put apple in its place.

And Samsung to its grave with a contract breach like that.

[vshah]

Originally Posted by Topweasel

But still 5 dollars lets for say 50 million devices (Ipad, Iphone, Ipod Touch, Apple TV) is still 250 Million in increased production costs. Even if the Apple Tax can cover it, that is still a hefty chunk of change to eat.

apple nets tens of billions a year. 250 million isn't going to make or break the company.

[quest55720]

Originally Posted by boomhower

I can see Apple buying a fab before it's all said and done with. They tried once and failed but I can see them looking for another.

I would say apple got lucky to avoid the FAB business. It is very costly and has a high chance of turning out very badly. It is just not the 1 time cost of buying a FAB. It is spending a ton of money on R&D and upgrades to keep up with the latest process. If apple owned the FAB and they fell behind schedule which seems to happen to most it could be a disaster in delays or inferior products. Apple is smart to spend more money on chips and let someone else assume the risk making the chip.

[Kenmitch]

Originally Posted by Topweasel

But still 5 dollars lets for say 50 million devices (Ipad, Iphone, Ipod Touch, Apple TV) is still 250 Million in increased production costs. Even if the Apple Tax can cover it, that is still a hefty chunk of change to eat.

Buy more idevices if your worried about Apples demise.

It's funny how Apple getting trolled(allegedly) into paying a $380m plus judgement is just lunch money to them, but paying a couple bucks more a SOC is unfair....Go figure.

[Kenmitch]

Originally Posted by aaksheytalwar

Apple needs to be taught a lesson. Like mid cycle Samsung asking for 75% profit sharing else no deal. Will put apple in its place.

Pretty sure they can't do that at this time. Next negotiation round they can up the price per SOC if wanted or just say buy to Apple all together.

[aaksheytalwar]

Then how can they increase the price of the soc by 20%?

[cl-scott]

I know people like to see something sinister in these kinds of things, but companies the size of Apple and Samsung have many different relationships with one another. The ongoing court battles will not have any real impact on relationships such as the one where Samsung sells components to Apple.

I worked as an ACMT once upon a time, at a national retailer. Apple would have a different bug up its arse every week as far as the service side of things went, and there were at least a couple of times they threatened to yank the authorization to repair their stuff -- probably deserved, since my former employer treated contracts the same way as Apple, in that the obligations to the other party are more like suggestions, and then only if they can be arsed. At no point, however, did they ever once threaten to not sell any of their products to the chain. So the chain had a relationship with Apple as an AASP, and as a reseller. Never did the two meet for all intents and purposes.

[iGas]

Originally Posted by sjwaste

If Apple wanted to get into the fab business, they should have bought AMD before they spun off the foundry business. I wonder what the asking price on Global Foundries is now?

Apple didn't have the cash to buy AMD then, and don't have chip design or running a foundry expertise. And, a 2 front wars vs. MS and Intel would be a disastrous outcome.

AMD foundry spun off was in early 2009, therefore Apple must have cash in hand at the very least by early 2007 possibly early 2006 to contemplate the purchase of AMD and its foundry.

[Mopetar]

Originally Posted by aaksheytalwar

Then how can they increase the price of the soc by 20%?

Perhaps Apple wanted to buy additional production capacity. If they negotiated X million units for cost Y, but later realize that they need an additional Z units to meet demand, there's no reason why Samsung has to agree to sell them at the old cost.

Or perhaps the old contract expired and it was time to renegotiate.

[Kenmitch]

Originally Posted by aaksheytalwar

Then how can they increase the price of the soc by 20%?

I'm no expert but I'd think there is a clause in the contract which allows for reasonable increases. 75% wouldn't be reasonable.

Samsungs fab so they pay for R&D, upgrades, maintenance costs, etc....Why not pass the buck!

[Mopetar]

Originally Posted by cl-scott

I know people like to see something sinister in these kinds of things, but companies the size of Apple and Samsung have many different relationships with one another. The ongoing court battles will not have any real impact on relationships such as the one where Samsung sells components to Apple.

I think that it's moreso the tech press that wants to see something sinister in this. These kinds of things probably happen all the time as you suggest, but this one can be turned into a story that makes for good click bait.

[iGas]

Originally Posted by Mopetar

Perhaps Apple wanted to buy additional production capacity. If they negotiated X million units for cost Y, but later realize that they need an additional Z units to meet demand, there's no reason why Samsung has to agree to sell them at the old cost.

Or perhaps the old contract expired and it was time to renegotiate.

Samsung is obligated to supply Apple SOC till 2014, therefore it is more likely that the price hike is for additional volume on top of the old agreement.

[golem]

Originally Posted by iGas

Samsung is obligated to supply Apple SOC till 2014, therefore it is more likely that the price hike is for additional volume on top of the old agreement.

So this is probably a good thing for both companies, then. Apples selling more than they expected and Samsung getting more per chip, and a larger order than expected.

[lothar]

Originally Posted by sjwaste

If Apple wanted to get into the fab business, they should have bought AMD before they spun off the foundry business. I wonder what the asking price on Global Foundries is now?

Global Foundries is owned by the Saudi oil sheikhs.
I doubt they'd want to sell to Apple(or anyone else) anytime soon.

[lothar]

Originally Posted by Jodell88

TSMC being a sole supplier for Apple might not be good for other companies that rely on them to produce their own chips.

TSMC won't be good for Apple as a sole supplier. They trip over and fall on almost every single die shrink they go to. Look at AMD and Nvidia cards the past 4-5 years for evidence.

Global Foundries would even be worse than TSMC, so Apple shouldn't even thing about going to them exclusively. Look at where AMD cpu's are now compared to Intel for evidence. Intel is almost 1.5-2 generations ahead in die shrinks compared to AMD.

Intel? They doesn't manufacture for their competitors(that means no to ARM processors and non-X86 CPUs of any kind)

UMC and everyone else that is not Intel, Samsung, or TSMC? Not enough volume for Apple and will only lead to fragmentation of their products.

[Reliant]

Originally Posted by aaksheytalwar

Apple needs to be taught a lesson. Like mid cycle Samsung asking for 75% profit sharing else no deal. Will put apple in its place.

That would be a breach of contract. Samsung supplies for a lot of other people and that would sour those relations too. Contracts give wiggle room for prices, but Samsung cant up and charge more to that magnitude cause they are upset.

[Mopetar]

Originally Posted by lothar

TSMC won't be good for Apple as a sole supplier. They trip over and fall on almost every single die shrink they go to. Look at AMD and Nvidia cards the past 4-5 years for evidence.

It might not be as bad as you think. Normally the problem that AMD and Nvidia run into is trying to make their huge dies on bleeding edge technology. SoCs aren't going to have the same yield problem as they're smaller (even though Apple's are quite large, they're still nowhere near as large as the big GPU dies.) and if Apple waits for the process to mature it will be even less of a problem.

Also, even though TSMC always seems to have problems when they move to a new node, they've generally been the first one there of all the non-Intel fabs. There's definitely an advantage of be had by going with TSMC.

The biggest problem is that it's a question of whether or not TSMC could supply all of Apple's needs while still supplying their other customers (AMD, Nvidia, Qualcomm, et al.) at the same time. For a new process, my guess is not and I don't think Apple would want to match the price Nvidia and AMD will pay to get their new GPUs out on that process. Then again, they may be willing to wait until more capacity becomes available and some of the kinks get worked out.

[dagamer34]

Bottom line, regardless of whatever spat apple and Samsung have with each other, Apple needs Samsung more than Samung needs Apple. No other fab can reliably fab chips at the scale Apple needs on the latest fab process available, and I doubt TSMC is even ready to pump out the 100-200 million chips per year Apple would need in order to completely dump Samsung (and Both parties know it).

As such, if the prices were totally outrageous, Apple could certainly build a fab on their own, but that would require dropping at least $10-15 billion and hiring hundreds of engineers all because they won't pay Samsung a little bit more money. That's not a smart use of Apple's cash on hand.

[Mopetar]

Originally Posted by dagamer34

As such, if the prices were totally outrageous, Apple could certainly build a fab on their own, but that would require dropping at least $10-15 billion and hiring hundreds of engineers all because they won't pay Samsung a little bit more money. That's not a smart use of Apple's cash on hand.

It really depends. If their volume gets to a certain point, eventually building their own fab becomes more cost effective than using someone else's. All of the other fabs obviously make enough money to continue the upgrade cycle, so it's not as though they're only making pennies from Apple and everyone else using the fab.

However, they're way better off dropping several billion up front to pay for a company like TSMC to expand their capacity. They've done it before with screen manufacturers, so I don't see why they couldn't do it in this case either. If they really wanted to switch to some other fab, they could easily front the cash necessary to make that happen.

[dagamer34]

Originally Posted by Mopetar

It really depends. If their volume gets to a certain point, eventually building their own fab becomes more cost effective than using someone else's. All of the other fabs obviously make enough money to continue the upgrade cycle, so it's not as though they're only making pennies from Apple and everyone else using the fab.

However, they're way better off dropping several billion up front to pay for a company like TSMC to expand their capacity. They've done it before with screen manufacturers, so I don't see why they couldn't do it in this case either. If they really wanted to switch to some other fab, they could easily front the cash necessary to make that happen.

Though TSMC has no interest in VIP access. Both Qualcomm and Apple have asked but got shot down.