SAN JOSE, Calif. - Apple Inc. and Samsung Electronics Co. Ltd. were once close friends. Now, the two companies are having a falling out-a move that could take a bite out of Samsung's sales.
Piper Jaffray & Co. estimates that Apple was 17 percent of Samsung's semiconductor revenue in 2010. Apple buys a staggering amount of DRAM, NAND flash and other components from Samsung. And Samsung is making the Apple-designed A4 and A5 processors on a foundry basis for Apple.
In more recent times, however, Apple and Samsung have become fierce rivals in the PC, mobile phone and tablet PC markets.
''We believe the recent patent lawsuit between the two companies is further evidence to support our belief that Apple is moving its silicon needs elsewhere,'' said Gus Richard, an analyst with Piper Jaffray & Co., in a new report.
As reported, Apple recently filed a patent infringement suit against South Korea's Samsung Electronics, claiming that Samsung copied the look and feel of its iPhones and iPads with its own smartphone and media tablet offerings, according to a report by the Wall Street Journal.
''There is clear evidence Apple is starting to shift away from Samsung. We believe that, on the memory front, Apple has stepped up efforts to work with Elpida, Toshiba and Micron,'' he said. ''In addition, while it will take a few years for Apple to shift foundry suppliers, we believe Apple is shifting away from Samsung. We believe TSMC will start getting revenue from Applein Q4 of this year.''
This in turn could impact Samsung's bottom line. Samsung recently announced sales of 36.99 trillion won ($34.6 billion) on a consolidated basis for the first quarter, a 7 percent increase year-on-year. For the quarter, the company posted consolidated net income of 2.78 trillion won ($2.6 billion), a 30 percent drop year-on-year, due in part to a drop in DRAMs.
Chip makers are chasing after Apple and for good reason. ''Apple is the largest customer for semiconductors in the world. We estimate that Apple will account for roughly $20 billion of semiconductor demand this year,'' Richard said. ''This represents 6 percent of overall semiconductor demand. In addition, roughly 70% of Apple's chip demand or $14 billion is NAND flash, DRAM and leading edge logic. Apple's chip demand represents roughly two to three large fabs.''
So its TSMC vs Intel. Needs to be seen who will win the business from Apple. But one thing for, this is very bad news for samsung because APPLE is a very big customer. Moreover Samsung's quarterly results are down 30% this quarter.
Sorry last paragraph SHOULD read:
In the end I think that due to Apple's fickle nature that Samsung would be doing themselves a favor by not renewing any contracts that do not have extension clauses in them.
If you look at Samsung's Semiconductor Sales Report you'll see that Apple's "sweetheart" deal for Samsung's constrained semiconductors (NAND)and low margins are starting to wear both on Samsung's bottom line as well as its relations with other customers.
I don't think that selling fewer parts at higher profit margins than selling many at a highly reduced margin really matters to Samsung.
On top of that Samsung as well as any other supplier, contractor, manufacturer, etc for Apple has to always know that they are having to bend over backwards to keep Apple happy.
In the end I think that due to Apple's fickle nature that Samsung would be doing themselves a favor by not renewing any contracts that have extension clauses in them already.
I can't see Apple walking away from Samsung for flash and DRAM if they are offering the best value. The A4 and A5 is another story. They have a legitimate worry about CPU structural units being copied.
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