Samsung courts Apple suppliers in manufacturing scrabble

Samsung courts Apple suppliers in manufacturing scrabble

Summary: Has the race to secure links in the supply chain begun?

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TOPICS: Apple, Samsung
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Credit: Sarah Tew/CNET

As Samsung continues to dominate in global smartphone sales, the company's supply chain is feeling the pressure.

According to recent figures released by Gartner, Android is the preferred operating system, and South Korean firm Samsung holds 30.8 percent of the global marketshare for smartphone sales. With estimated shipments of 64.7 million units in comparison to Apple's 38.3 million in Q1 2013, it is not hard to see why manufacturers and those supplying the parts and labor to assemble the company's products might be feeling the strain.

The smartphone market is worth $253 billion, and both Apple and Samsung are jostling to take the largest slice of the market as possible. However, as reported by Reuters, this means that manufacturers able to cope with rising demand are in short supply -- and so Samsung is now courting some of Apple's main parts suppliers.

Although Samsung produces much of its parts in-house, the company has approached Apple partners including Sharp -- of which the firm now owns a three percent stake in return for investment of $110 million -- which is able to manufacture a range of screens suitable for mobile gadgets. In addition, Samsung placed an order with Sharp for LCD screens suitable for the Galaxy range, although according to the publication, this order has been cancelled, at least for now.

Samsung is now using U.S.-based Qualcomm's chips more often in the flagship Galaxy S. Tech firm Toshiba and Gorilla Glass designer Corning Inc both supply parts for Apple and Samsung products.

The overlap between Samsung and Apple is currently limited and unlikely to prove a disruption. However, as more consumers adopt mobile gadgets worldwide and the fight to dominate this market continues, we may see a fight between the two giants that doesn't involve patents.

"The next round of the post-patent battle for them will be over component supplies," said Lee Sun-tae, analyst at NH Investment & Securities told Reuters. "Who wins access to the best performing components in class in large quantity -- that's the key ... and explains why Samsung is shopping for components more than ever."

Topics: Apple, Samsung

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30 comments
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  • Wow

    If Apple loses the supply chain, they're really in trouble.
    slickjim
  • What market share?

    Apple was never after market share from day dot.
    They even publicly announced it.
    Its disappointing to see journalists use this 'phrase' because it's confusing and misleading.
    cootified
    • If you don't see the relevance

      of marketshare to the whole mobile industry, perhaps you shouldn't be commenting here.
      Little Old Man
      • marketshare

        So those who come here are supposed to worship market share?

        What else?
        danbi
        • Why would you have to worship it...

          To understand the relevance?

          Just ask Microsoft why they are missing certain apps on their phones. Then ask people why Windows phone sucks. then ask yourself how the two are related.
          mrefuman
    • Not about marketshare

      Apple had several of the best chips on lock down by buying the whole lot available and if Samsung takes that away, they literally knock the legs right out from under Apple.
      slickjim
      • Samsung taking 'Apple' chips away

        You do realize, that in order for Samsung to do that, they must place an order larger than Apple's and at higher price than Apple's and commit to longer-term contract than Apple with those suppliers.

        All of this costs a whole lot of money. Samsung first needs to have that much money 'free', then be prepared to just throw that money out of the window. What for? To force Apple use different parts?

        I don't believe anyone at Samsung is that stupid.
        danbi
        • Why not?

          Samsung has plenty of money and sells more phones than Apple, so they place more orders to suppliers than Apple. Samsung is currently selling 2-3 times more phones than Apple, so in theory they can double or triple the size of any Apple parts order. They only need to do that on one key item to really cause Apple some grief.

          Keep in mind Samsung isn't facing the massive stock pressure that Apple is. They also make some of their own parts as well as some for Apple which is going to cause more pressure for Apple to replace.

          Apple used patent lawsuits in an attempt to try to put Samsung phones off the market. Now Samsung is hitting back at Apple to do them harm.

          That is what happens when one company decides to go "thermo nuclear war" on another.


          The real losers are going to be the customers, all of us.
          Emacho
          • How much is plenty for you?

            Apple is way too big fish for Samsung.

            It is Apple that has the money, not Samsung. When Apple cuts off Samsung for most/all of the parts in their devices, we will be able to observe the impact that has on Samsung.

            In essence, what Samsung is doing is stupid. They shouldn't have let their smartphone division dictate their course, and alienate them with Apple (and others). Smartphones are an short-term phenomena, while the component supply damage will last a lot.
            danbi
          • Size Samsung

            Samsung is a massive corporation that has a big footprint in many industries. Samsung's revenue is 17% of South Korea's GDP. Samsung's 2011 revenue was $247.5 billion. Apple's 2012 revenue was $156.5 billion. Samsung's total assets amount to $384.3 billion. Apple's total assets amount to $176 billion.

            Samsung is bigger than Apple. Samsung is a whale that could swallow that big fish Apple whole, if they dedicated the resources to the cause.
            pfrench1
          • Apple is less than 5% of Samsungs business

            and a low margin part of Samsung's business.
            They won't miss Apple taking the business elsewhere.
            It would actually help Samsung free up capacity to pump out more high margin devices of their own.
            It is Samsung doing Apple a favour here, not the other way round.
            warboat
        • Seriously?

          Perhaps you haven't followed Samsung... They have a history of this behavior! They have been in multiple lawsuits for Dumping and they know that Apple out of the way leaves no competition for #1 phone manufacturer (As though Apple is even competing now).
          slickjim
        • Apple is just a drop in the ocean

          do the zealots even realise that more than 99% of electronic components manufactured do not end up in Apple devices?
          it's like they think Apple owns electronic component industry.
          warboat
        • If you haven't heard...

          Apple is already cutting back on orders with their vendors.
          pmshah9
    • Not interested in market share

      I guess all those rumours of a low cost iPhone are total rubbish then, because that would be going after market share..........
      Boothy_p
    • You mean to say

      you actually believed that Apple doesn't care about market share? Even charities care about market shares.
      jsargent
  • Market shares...

    .....Apple never been after market shares? Best joke of the day...
    TheCat123
    • Profits not market share

      Apple has the highest profit margin on their phones. They do not need to sell as many units as Samsung or anyone else to make boatloads of money.

      Rumors of a low cost model aside Apple has always aimed at the premium end of the market with their products.
      MajorlyCool
      • No they haven't. That's just where they make their money.

        Ipods, Ipad Minis, Apple TV, Apple, mac mini. Those are all low cost devices. The cheapest of which was the catalyst that pulled apple from the ashes.

        Also worth noting: Premium typically suggest a price point above and beyond the actual value of the product.
        mrefuman
  • supply chain logistics

    Apple has just spent two years securing an alternate supply chain to Samsung. This likely means it has its people on fixed contracts. These potentially include a 'no compete' clause. While the Apple v Korea thing is interesting, it must also be true that other smartphone vendors will be feeling this pressure as they will be unable to get parts. Personally? I think it makes software an even more important element to the proposition, but both Apple and Samsung will be trying to dream up distinctive web services. http://blogs.computerworld.com/smartphones/22218/smartphone-biz-hits-component-barrier-apple-loses-its-throne
    jonnyfuturity