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Samsung and Apple Executives Discuss Long-Term Component Supply Relationships

Wednesday October 19, 2011 6:36 am PDT by Eric Slivka

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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kdarling

101 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

TimUSCA

101 months ago

That has got to be an *awkward* meeting.

Rating: 5 Votes

clibinarius

101 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: 5 Votes

AppleFan1984

101 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

gnasher729

101 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

vanzantapple

101 months ago

Apple's products will be better with Samsung under the hood. Samsung makes quality stuff.

PS. They make so many different items, heck, they even make refrigerators. I have one. It's awesome, almost magical.

Rating: 3 Votes

clibinarius

101 months ago

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.

Calm down fanboy, did you read where I said that Samsung in Apples view promotes itself as Apple products? No? No?

Sheesh.

Apple's suing about what it has patent and copyright protection over. If you were in Apple's shoes you wouldn't do likewise? Virtually all that's left after "form" is software. That's not Samsung's domain.

Now there's some cheek, calling others "fanboys" and then making a statement like that.

I fail to see why the hatred of Samsung aside from rooting for a team, especially if you don't use Samsung products. You're right, I would sue if I felt it was in my rights. But I also would know its BUSINESS and NOT PERSONAL, unlike most people here. I digress...

Absolutely. Doesn't everybody like LEGITIMATE competition? And doesn't everyone want to punish CHEATERS?

Another one of those ironic statements from clibinarius. How did Jesus put it? "Why do you see the speck in your enemy's eye, but not the log in your own eye?"

Are you arguing for the generic nature of Samsung's products, or for their uniqueness? What your "got it covered either way strategy" reveals is that you're a Samsung fanboy regardless: "Either Samsung wins, or Samsung doesn't lose."

Until Apple sets up their own hardware facilities to build their own stuff, as far as I'm concerned, Samsung builds Apple products, and there's little denying that, no matter how much you want to. If Samsung shut down overnight, there'd be no real macbooks, there'd be no iPhones, no iPads, nothing. And no one else has the productive capacity at this time to make the devices. Sony? You are aware that Sony and Samsung share their plants, right? LG? With their low quality displays in Apple products? And do they even make the other components?

I wonder, do you take generic knock off drugs when you get a cold? Why? Oh, but they're legal? Well, that's the thing-the COURTS have to decide on the matter. In the US, Samsung products are legal. Clearly the government isn't filing injunctions at this time. And in Europe, wasn't the ruling over the camera SOFTWARE, not the OS or design?

You've got to be kidding, right? You're asking how copying hurts the consumer, as it "only" reduces the innovator's advantage to a 6 month window? You honestly believe this wouldn't harm and eventually kill innovators, and therefore innovation? How much do you know about the history of patent law, and why the term of protection was determined to be SEVENTEEN YEARS?

It would be great to see you backing up those words with your other words.

Pot. Kettle. More iron.

6 months in phone use is a long advantage. Unless you want to stifle innovation. Why not patent the mobile dual core processor? Maybe Intel can sue their competitors out of existence. I mean, they're not innovating? A 22 nm Dual Core Chip...man. Those ARM designs should be banned.

Pot. Kettle. More Iron. You have no clue what you're talking about.

Sammy mobile chief just admitted they don't.

http://english.yonhapnews.co.kr/business/2011/10/19/26/0501000000AEN20111019000200320F.HTML

https://forums.macrumors.com/showthread.php?t=1258427

Looks to me that they're just making sure Apple can't say they're ripping them off. Samsung might not have felt that, say, a swipe was a big deal.

Maybe HP can make WebOS profitable by suing Apple too. I mean, have you looked at Palm OS before WebOS? Apple ripped off A LOT by your standards. Now I think its so generic its fair game. So I see nothing wrong with iOS.

You buy Apple because the products work and work seemlessly. Displaying a graphic doesn't bother me so much aside from how it creates confusion in the marketplace and is therefore, and rightfully, illegal. The fact is, Samsung makes generic products. They have a generic OS, and put together generic hardware. They do a really good job of doing it too. They even put together Apple's hardware. Why is that so hard to admit?

Without Samsung's hardware innovations and production, as I've said, current Apple products would be impossible. Name me ONE hardware innovation that Apple has come up with that it makes itself or invented? You can't. Its because Apple doesn't build the machines, it designs them from parts on the market. And it does a really good job of doing it. But the hardware is insanely generic. ARM based processors. Flash Ram. USB 2. GPS chips. There's NOTHING in here that is NOT generic. So Apple's innovations are almost ALL on the software side, as well as the form factor. And those are GREAT innovations. I like a phone that works well. If Apple went out of business though, it really wouldn't effect the industry too much. The industry would lose a driver of innovation. But it would still exist at the end of the day. If Samsung went out of business, Apple would probably buy it due to the fact without Samsung, Apple would not have any products getting to market within the next year and a half.

That's not being a fanboy. That's reality. If you hate Samsung so much, ask for your Apple product to not contain any Samsung parts.

This was typed on a Macbook Air, read on an iPhone 4s, by the way-I was tempted to get an SII but passed in the end. I am an Apple fanboy I suppose. But I'm not a blind, hate everyone that Apple competes with fanboy. You'd probably boo Bill Gates when he Microsoft saved Apple all those years ago (Remember that incident?).

Also, since you're talking about software elements needed to run, I don't see why they shouldn't be licensed, say, the same way as 3G patents (that Apple needs, mind you, and should be fairly offered to Apple, as the courts ruled).

I'm done posting for now. I feel like a communist getting into arguments with North Koreans about Kim Jong Il in fact NOT being more important to communism than, say, Marx.

Oh, and when you get sick, do yourself a favor and NEVER take the generic. You know, bad for innovation.

Rating: 3 Votes

JBytes

101 months ago

they both need each other...

They'll stay together for the sake of the children.

Rating: 3 Votes

swagi

101 months ago

Oh really???

You either
a) have been living under a rock
b) don't have a clue about ice cream sandwich (http://www.engadget.com/2011/10/18/samsung-galaxy-nexus-hands-on/)

BTW my next phone, if Nokia oesn't come up with a decent WM7 handset.

Rating: 2 Votes