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Samsung and Apple Executives Discuss Long-Term Component Supply Relationships

Amid an ever-increasing intellectual property dispute involving Apple's mobile devices and Samsung's Android-based hardware products, rumors have claimed that Apple has been seeking to reduce its reliance on Samsung as the major component supplier for iOS devices. But even if Apple does switch to new suppliers for some components, such as TSMC for future A-series chips, Samsung will almost certainly continue to play a role in Apple's mobile hardware designs.


As reported by Yonhap News, Apple and Samsung are indeed exploring long-term component supply relationships, plans advanced in part by discussions earlier this week between Apple CEO Tim Cook and Samsung Chief Operating Officer Lee Jae-yong.
Lee Jae-yong, chief operating officer (COO) of Samsung Electronics said Wednesday he had discussed long-term parts cooperation arrangements with Apple Inc.'s chief Tim Cook.

The meeting took place Monday after Lee attended a memorial service for Steve Jobs, Apple's late co-founder, and as Samsung and Apple remain locked in fierce legal disputes to control the global smartphone and tablet computer markets.
Lee noted that Samsung and Apple are locked into supply agreements for 2012 and are exploring how to push technology forward through the 2013–2014 timeframe.
Upon arriving at a Seoul airport, Lee, the only son of Samsung Electronics Chairman Lee Kun-hee and heir apparent to South Korea's largest family-owned business group, told reporters his company will continue to sell parts to Apple until 2012. Apple is one of Samsung's most important buyers and single largest semiconductor customer.

"For the 2013-2014 period, we discussed how best to supply even better parts," he said, adding that during the more than two-hour meeting, the businessmen touched on past challenges and how to promote good relations in the future.
Apple has been keen to lock in long-term supply commitments with component suppliers, sometimes prepaying billions of dollars in advance to secure massive supplies looking over several years. Apple's strategy gives it leverage in supply negotiations, helps fend off competitors seeking to source components for their own devices, and results in partnerships to push technology forward.

Lee declined to specifically discuss whether any progress was made Monday on patching up the relationship between the two companies, which are both in the tenuous position of relying on the other in component contracts even as they wage fierce battles in courts around the world. Samsung noted last month that it had been relatively "passive" in the legal dispute out of respect for the company's supply relationship with Apple, but that it would be stepping up its attacks on Apple for "free riding" on Samsung's intellectual property.

Top Rated Comments

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38 months ago

I don't understand why Samsung doesn't try to start making unique products.

Either:
A.) Apple has perfected the Phone / Tablet and Samsung should stop trying, because they will always either be making an inferior product, or they'll be copying Apple. Samsung should stop making any phones or tablets and should instead focus on making the next big thing. What will that be? IDK, but Apple manages to come up with new product lines every few years, so it seems like Samsung aught to be capable of that, too.

or
B.) I seriously doubt the Phone or Tablet has been perfected by Apple, and so Samsung aught to try making unique devices that aren't obvious knockoffs. Possibly locking their designers in a room where they can no longer see Apple products until they manage to come up with a new and unique design would be a good idea.


Except...Samsung makes unique products. They're called the Galaxy Tab (Have you seen what Apple's suing about? Form!) and Galaxy S (Apple doesn't have much of a case about the phone).

The main problem has been from Apple's point of view Samsung presenting its products as if they were iPad/iPhones.

I'm sick and tired of reading fanboys with NO knowledge on anything saying Samsung doesn't innovate. Without Samsung's own patent portfolios, as well as production lines it CREATED, there would be no i products, period.

Also, if Apple gets all of these phones banned, I would SERIOUSLY support some sort of anti-trust legislation aimed specifically at them. Why? I like competition. You should too.

Apple's doing fine. They have their supplies, they're making their sales, they're making money and in good shape. People like you should just sit back and stop being so hateful. Samsung is a perfectly good company that makes perfectly good products, even if they're generic. If they weren't unique, why would people buy them over unique ones? If they're copying, its just incentive for Apple to innovate more, to have an advantage on the competition for six months. How is Samsung hurting YOU, the consumer?

Although if Samsung violated any laws, they should pay an appropriate price. Its that simple.

Stop being a fanboy and look for your own interests.
Rating: 12 Votes
38 months ago
The dilemna for Apple is that Samsung's semiconductor division is currently the most innovative and reliable supplier in the quantities that they need.

Innovation wise, Samsung consistently leads with Flash memory size breakthroughs (doubling GBs), so Apple needs them at least for that capability.

Price and quantity wise, Samsung also very likely has the best price and yield for making Flash and the custom CPUs for Apple.

Until Apple funds the buildup of reliable alternative sources, they're kind of stuck with Samsung.
Rating: 7 Votes
38 months ago

Except...Samsung makes unique products.


Really (http://www.reddit.com/tb/kr14a)?

There are loads (http://www.reghardware.com/2006/05/08/samsung_skin_mac_graphics/) of (http://9to5mac.com/2011/07/18/family-ties-earn-this-smart-cover-knock-off-a-samsung-certification-and-a-place-on-their-store-shelves/) examples (http://allthingsd.com/20110923/what-are-apples-icons-doing-on-samsungs-wall-of-apps/) out there, as well as what you find if you compare Samsung 2006 (http://www.gsmarena.com/samsung_at_cebit_2006-news-177.php) vs Samsung 2007 (http://www.samsung.com/us/news/newsRead.do?news_seq=3516) (1 month after iPhone debut).

Case. Rested.
Rating: 6 Votes
38 months ago
I don't understand why Samsung doesn't try to start making unique products.

Either:
A.) Apple has perfected the Phone / Tablet and Samsung should stop trying, because they will always either be making an inferior product, or they'll be copying Apple. Samsung should stop making any phones or tablets and should instead focus on making the next big thing. What will that be? IDK, but Apple manages to come up with new product lines every few years, so it seems like Samsung aught to be capable of that, too.

or
B.) I seriously doubt the Phone or Tablet has been perfected by Apple, and so Samsung aught to try making unique devices that aren't obvious knockoffs. Possibly locking their designers in a room where they can no longer see Apple products until they manage to come up with a new and unique design would be a good idea.
Rating: 6 Votes
38 months ago
they both need each other.

Apple needs a manufacturer and won't want to jump ship too soon without getting a new one.
Samsung needs apple to see what products they should make.
Rating: 6 Votes
38 months ago
That has got to be an *awkward* meeting.
Rating: 6 Votes
38 months ago

That has got to be an *awkward* meeting.


Why? It's not like Samsung doesn't know what it has been doing by copying. And Apple is equally aware that its patents are not on firm foundations. They will work something out, for sure.
Rating: 5 Votes
38 months ago

Samsung doesn't need Apple, as they have other clients, but if I recall correctly, Apple easily accounts for over 10% of Samsung's component supply business. Apple on the other hand, doesn't really need Samsung at all, there are plenty of other supplies out there, as they already have been shifting too.

Just like in the patent wars, Apple wins, Samsung loses.

Last I heard, Apple accounts for just under 6%, and of course that's just in Samsung's components business (they also make consumer electronics, appliances, ships, etc.).

Sony is reported to be just behind Apple in total Samsung orders, and right now demand for the types of components Samsung produces greatly outstrips supply, so replacing even a key customer is not likely an insurmountable challenge.

Meanwhile, Apple's experiments with TSMC have had mixed results, with yields far below the levels Apple needs to drive its growth.

Very few companies have a 28nm process, and even fewer have Samsung's yields.

Tim Cook is an undisputed genius with supply chain management. I trust his judgment on this.
Rating: 4 Votes
38 months ago

That has got to be an *awkward* meeting.


Apple wants to buy components from Samsung. And Samsung wants to sell components to Apple. Cook probably things that this whole patent and copying situation is stupid and wishes it would go away (obviously without damaging Apple), and Lee probably thinks exactly the same thing (obviously without damaging Samsung). And both are happy that they have contracts through 2012 for buying and selling components so that part of their businesses is unaffected by all the stupidity.

So they will just have a meeting where iPad design and patents are not mentioned at all. Because arguing would be just a waste of time.

(A theory posted on www.theregister.com: Whoever ordered copying the iPad design has been fired months ago, and Samsung can for cultural reasons not be seen to lose face. In which case the two might be discussing how to finish the affair, with each side being able to claim victory with a straight face).
Rating: 3 Votes
38 months ago

Apple should just have a segment in their keynotes that illustrate how other competitors have copied, err i mean closely resemble their products. It would make for an entertaining segment.

"Iphone4S released in October 2011, and look what Samsung released in 2 months after... a voice assistant named Sami"

:p


hmm...

http://youtu.be/pp0HlX1ySGg?t=5m30s

That phone is 6 months old now.
Rating: 3 Votes

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