Last November, Samsung blamed the South Korean Fair Trade Commission (FTC) for killing a deal it was putting together to build a $3.8 billion flash memory fab venture with Apple, according to a Korea Times online report. The two companies had planned to construct a wafer fab in South Korea to supply NAND flash for the iPod, but Apple pulled out after hearing the FTC might investigate Samsung over the artificially low pricing of flash memory, according to reports.
Samsung's MP3 player unit isn't the only vendor in Apple's shadow. Earlier this month, Singapore's Creative Technology Ltd. projected an operating loss of approximately $55 million to $65 million on revenue of approximately $220 million to $230 million for the third quarter of its 2006 fiscal year, ended March 31. The company blames the memory problems related to the MP3 market. "The operating loss is primarily attributable to a drop in flash memory prices in the quarter, with a particularly drastic drop in flash memory prices at the end of the quarter," Creative said in a statement.
Apple currently has three lines of music players: the Shuffle, the Nano and the iPod with Video. It is expected to "refresh" the Nano line in the second half, while also rolling out the long-awaited full-screen video iPod product, according to Harry Blount, an analyst with Lehman Brothers. It remains to be seen whether or not Samsung won the coveted MP3 processor design for this next-generation iPod with Video, said Caso, the Friedman, Billings, Ramsey analyst.
Broadcom Corp. (Irvine, Calif.) provides the video coprocessor in Apple's current iPod with Video, while PortalPlayer's PP5024 chip supports the audio decoder and control functions.
"What is less clear is the design for the next version of the iPod [with] Video, which is coming out in the second half of 2006," Caso said. "Broadcom appears to be in the running for [its] audio processor, since they have been saying that they will design an ARM core into their next-generation video processor."
Samsung is also in the running. Given the Nano design win, "it would appear that they would have a significant chance of getting in the video iPod as well," Caso said. "We aren't sure whether a decision has yet been made about the new iPod video design."
In one possible scenario, Broadcom has an edge and PortalPlayer is given the cold shoulder. "We think there is a significant chance that Broadcom will take this [iPod with Video] socket," Caso said. "Broadcom is already in the current iPod video with their video processor. That would naturally offer integration advantages, as compared to having separate audio and video processors." Several analysts said Broadcom is trying to muscle its way into a wider array of video-enabled iPods by virtue of its AlphaMosaic acquisition last year, which gave Broadcom a low-power-consumption video decoder.
In another scenario, Apple may choose to keep both Broadcom and PortalPlayer as the key chip vendors for the next-generation video iPod, said Arnab Chanda, an analyst with Lehman Brothers. But he too said that there is "speculation that Samsung won that business."
Still, it's unclear whether the Samsung silicon--which is based on an ARM controller--will support the video playback function that most analysts expect will become a standard feature on future models of the iPod Nano. Also, with mobile television beginning to attract attention, Samsung, Broadcom or some other supplier will need to provide Apple with mobile-TV functionality for the iPod.