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Summary:

Price changes on components in and of themselves aren’t necessarily controversial. There could be plenty of reasons Samsung had to charge Apple more. But in the context of the last few months which saw Apple win a verdict of $1 billion against Samsung, it naturally raises eyebrows.

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A report from South Korea indicates that the Apple-Samsung relationship continues to sour: On Monday, Chosun Ilbo reported that Samsung raised the price that it charges Apple for mobile processors, according to Marketwatch.

Apple reportedly bought 130 million mobile processors from Samsung last year, and 200 million this year. It’s not clear by how much prices were raised.

Price changes on components in and of themselves aren’t necessarily controversial. There could be plenty of reasons Samsung had to charge Apple more. But in the context of the last few months which saw Apple win a verdict of $1 billion against Samsung, it naturally raises some eyebrows: is this some form of payback?

Not necessarily. But it doesn’t fit with Apple’s recent history. Apple’s big advantage in the marketplace has been scale: it’s among the world’s top purchasers of most mobile components due to the sheer number of smartphones and tablets it sells. CEO Tim Cook is known for his skill in managing that scale and how he finds suppliers willing to do Apple’s bidding for the lowest possible price.

In this case, it’s very likely that Apple has no other choice — it’s not clear any other supplier could churn out as many mobile processors as Samsung can or, even if that was possible, if Apple could make the switch so quickly. The original report quotes an unnamed source who says:

“Samsung Electronics recently asked Apple for a significant price raise in (the mobile processor known as) application processor,” the person was quoted as saying in the report. “Apple first disapproved it, but finding no replacement supplier, it accepted the (increase.)”

These two have always had an odd arrangement as partner-competitors. Sure, smartphones and components (displays, processors, memory chips) are totally different divisions at the gigantic corporation that is Samsung. But the trial this summer strained credibility that the two were really “trusted partners” the way many at the two companies described it.

When asked about the company’s relationship with Samsung at Apple’s quarterly earnings call last month, Cook wasn’t quite as effusive as he’s been in years’ past. When asked by an investor about Apple moving orders for iPhone and iPad displays from Samsung to other suppliers, he simply said, “We continue to be a customer of Samsung and continue to have a commercial relationship.” The transcript doesn’t convey the pause Cook put in when he seemed to be searching for the right word to describe their relationship. He didn’t come up with “valued partner” or “enthusiastic customer” anything positive — just “we are a customer of Samsung.”

Perhaps Samsung sees Apple the same way: no more special treatment or special pricing in hopes of keeping the relationship strong. If our costs are raised, we will pass those on to you.

  1. Personally I think it’s something Samsung should’ve done a long time ago – about the same time Apple started suing them. But either way, it seems Samsung will get that lost billion dollars lost in the lawsuit, one way or the other.

    But this is why these lawsuits are ultimately bad for us, the consumers. Samsung will get their money back, and Apple will get the higher prices on the processors back, too, either by selling the phone at a higher price, charging the carrier more for it, or using cheaper components than they otherwise would’ve used, to increase their profit and make that money back.

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  2. I don’t believe this. If you believe this, that would also mean that you believe that Apple is just now signing contracts for its 2013 purchases. No way Tim Cook is working purchasing in that short -sighted of a fashion.

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