Apple still chooses to go with the Korean tech giant on application processors


Samsung Electronics is unlikely to suffer heavily Apple’s alleged move to pressure the Korean tech firm by cutting down its orders for components in its iPhone 5, which is expected to be released next Wednesday, analysts here said on Friday.

According to industrial sources, Apple is on the move to depend less on its biggest rival Samsung as the U.S.-based firm did not put in orders for some of its parts such as the mobile dynamic random access memory and NAND Flash memory.

Apple’s action is seen as an apparent retaliation in the two companies’ patent infringement battle staged in nine different countries.

Apple asked SK Hynix and Elpida for mobile DRAM, SK Hynix and Toshiba for NAND Flash and LG Display, Japan Display and Sharp for its displays, said industry sources. But Samsung is still providing the application processors to Apple.

Samsung declined to confirm the news reports.

Although Apple has stopped using Samsung’s displays since 2010, the Suwon-based company has supplied about 30 percent of NAND Flash and mobile DRAMs that go into the making of its flagship iPhone until now.

Apple is known to be the biggest parts buyer for Samsung with it purchasing around 10 trillion won in subparts last year.

Analysts, however, say Apple’s actions will have a limited impact on the world’s top smartphone maker.

“It won’t have a big influence on Samsung’s earnings because Apple’s pricing (of parts) is not so profitable,” said Noh Geun-chang, a senior analyst at HMC Securities.

He said Apple’s move will have about a 7 percent impact on Samsung’s total sales, but only a 2-3 percent influence on its profits.

“Samsung supplied Apple’s demanded parts up until this point because the move itself had a great meaning even with the unfair pricing policy, but the firm is now getting orders for mobile DRAM from many other companies worldwide,” said Noh.

“Apple’s reduced orders will impact the firm in the short term, but will have limited effect in terms of profit.”

Nam Dae-jong, an analyst at Hana Daetoo Securities, also stressed that Apple is not a profitable customer for Samsung and that it was the reason Samsung is not so active in attempting to supply parts like memory chips, batteries and displays to the U.S. firm.

However, it remains as a mystery as to whether Apple could really produce its new iPhone 5 without the help of Samsung as Sharp, for instance, is reportedly having problems in its mass production of displays.

There is also a rather short list of players which could supply components to Apple, excluding Samsung, such as SK Hynix and Elpida in mobile DRAM and SK Hynix, Toshiba and Micron in NAND Flash memory.

“Apple will not be able to totally exclude the option of using Samsung’s parts,” said Noh.

By Cho Ji-hyun (sharon@heraldcorp.com)