Apple's Supply Chain Diversification Hitting Samsung's Chip Business Hard

Apple has been expanding its supply chain, bringing in companies like Taiwan Semiconductor Manufacturing to produce components for its iPhone and iPad devices. This supply chain diversification may benefit Apple, but it is having a negative effect on rival Samsung's chip manufacturing business, reports The Wall Street Journal.

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Since 2007, Samsung has enjoyed the coveted position of being the only manufacturer of Apple's Ax series of processors and their predecessors. But after several years of negotiations and technical work as the popularity of Apple's iOS devices has soared, Apple has brought TSMC on board to produce A-series chips for the next generation of devices. This transition away from Samsung as the sole supplier of the main chip for iOS devices is cutting into the Korean company's logic chip business.

“Sales and profitability from System LSI (logic chip business) worsened as demand from main customers continued to decline,” Robert Yi, Samsung’s head of investor relations said last week.

Samsung's logic chip division struggled in the just-ended quarter, and the outlook for the business is equally bleak with Samsung acknowledging the continued low demand from customers will remain an issue going forward.

The sharp turnaround has led to analysts such as IBK Securities' Lee Seung-woo predicting losses of approximately 877 billion won ($848.5 million) for the division in 2014, compared to operating profits of 203 billion won ($196.3 million) in 2013 and 1 trillion won ($967.8 million) in 2012.

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Top Rated Comments

macduke Avatar
130 months ago
Anybody else enjoying this recent downfall of Samsung? Missing earnings estimates, being knocked off the top in China by Xiaomi, and now this. Karma!

To be clear, I don't wish Samsung to go out of business. They do a good job making certain hardware components like displays and SSDs. I just want them to be put in their place for all of their shameless copying. Punishment to fit the crime. Now continue along like a good little OEM.
Score: 61 Votes (Like | Disagree)
sammaffei Avatar
130 months ago
Well,…

They bit the hand that fed them. Actually, they gnarled on it until it was a bloody stump. So, in the immortal words of Nelson, "Ha-Ha!"

//www.youtube.com/watch?v=rX7wtNOkuHo
Score: 59 Votes (Like | Disagree)
keysofanxiety Avatar
130 months ago
Anybody else enjoying this recent downfall of Samsung? Missing earnings estimates, being knocked off the top in China by Xiaomi, and now this. Karma!

I'm loving it. It's not just for Apple's sake either. They've shamelessly copied pretty much everybody in the industry -- Kodak, Dyson, Sony, the lot -- then slow down the legal proceedings with constant counter-suing and mistrials until they've made enough profit from the copied tech that they don't need to worry any more.

I hope their lousy business/innovation morals come back to bite them hard.
Score: 52 Votes (Like | Disagree)
barkmonster Avatar
130 months ago
I'm sure their eventual plan is to not give Samsung one cent for anything and bring as much of their component needs in house as possible to maximise profit.
Score: 31 Votes (Like | Disagree)
keysofanxiety Avatar
130 months ago
Oh no, poor Samsung ...

... :D
Score: 22 Votes (Like | Disagree)
pedromcm.pm Avatar
130 months ago
Oh noes.

And this is where I have a big problem.

Samsung Mobile is an absolute pile of crap, and deserve to go down, but other divisions are very useful and do great things, from an engineering POV.

Look at what Samsung did with AMOLED. Look at how fundamental they were in releasing high PPI displays for everybody, great SSDs, etc.

Heck, even the Mobile division is responsible for putting big screens on mainstream phones.

Then again, they still make a lot of money per quarter. Yet :) Who here wants to bet that next year, the giant and all mighty Samsung Eletronics, will post "just" 2 billion $ of net profit, instead of the 6 or 7 they posted?

----------

What a good portion of people here don't understand is that Samsung is good for us consumers. Being actual competition to Apple greatly benefits you and me. Why many of you are asking for less competition in the smartphone arena is beyond me.

No. Samsung killed everything that Sony had, HTC, other companies. And it was never because they made better products.

Just cheap me too copies. It helps when you own the country.
Score: 20 Votes (Like | Disagree)