Samsung and Apple are lovers again and the outcome could spell the end of Sharp’s display business while creating big problems for LG and SanDisk who are reeling after being dumped by Apple late last year.
The reality is that the next iPhone will be more about Samsung Components and how they perform than the overall design.
Not only will Samsung manufacture the main chip for the next iPhone, as well as the display which has been made by both LG and Sharp they will also invest over $14Billion building out new manufacturing plants to facilite Apple growth. They will also supply the memory for Apple products a move that has already got analysts speculating that Samsung is set to buy SanDisk in an effort to use the US brand in the consumer memory market.
SanDisk which makes memory chips for the iPhone, iPad, and Mac, released a forecast on April 15 that fell short of analyst estimates.
The memory Company that is seriously price gouging Australian consumers 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 percent of the chipmaker’s revenue, according to data compiled by Bloomberg.
SanDisk’s dependence on Apple and the ensuing fallout could make it a canary in the manufacturing plant for companies in the industry that have similar relationships with the tech giant from the USA.
Micron Technology, SK Hynix, AU Optronics, and TSMC all count Apple among their top three clients, and each competes directly with Samsung in their respective markets.
Bloomberg said that relations between Apple and Samsung Electronics appear to be thawing since the war waged by Steve Jobs forced these onetime corporate comrades to end lucrative supply contracts and engage in costly legal battles.
In August 2014, Apple Chief Executive Officer Tim Cook agreed to begin winding down the patent suits with Samsung, and the two companies are teaming up again on new products.
As part of the new alliance Apple gets access to one of the biggest, most sophisticated chip manufacturing operations in the world to help it continue outselling the competition.
Samsung gets crucial new orders for its core chip making group to make up for stagnating profit in mobile phones. Just about all other companies in the industry will suffer, starting with Taiwan Semiconductor Manufacturing and SanDisk.
On April 29, 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.”
While Samsung has been losing market share to Apple in high-end smartphones, the South Korean company remained the world’s largest consumer of electronic components at the end of 2014. Apple was second. The two account for 17 percent of worldwide chip purchases, according to research firm Gartner. And they make up 40 percent 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, chipmakers 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. Qualcomm, the world’s largest designer of phone chips and maker of the iPhone’s cellular modem, counts Samsung and Apple among its biggest customers.
Samsung ditched Qualcomm components for its Galaxy S6 and S6 Edge, and the chipmaker says Samsung will also forgo its processors in the next Galaxy Note phones.
The company failed to win the Galaxy orders partly because its chips were made using a slightly older manufacturing process at TSMC factories, which limited improvements to performance and battery life. When asked on April 28 what it could do to lure Samsung back, Qualcomm Chairman Paul Jacobs suggested Qualcomm might be moving its production to the Korean company’s superior factories.
