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Samsung Hikes Apple Component Price By 20%

Tyler Durden's picture


Two months ago, when we commented on Apple's pyrrhic courtroom victory in which it managed to halt sales of older generation Samsung smartphones - a "victory" which would backfire with Samsung phone sales soaring, while AAPL results missed, forcing the company to accelerate its product launch cadence to a ridiculous 3 months with news that the iPhone 5s is already in the works a month after the launch of the iphone 5 -  we said "The paradox here is that AAPL's victory is quite pyrrhic: if and when Samsung feels sufficiently threatened, it can just pull a Gazprom and halt the supply of mission critical components to the world's biggest publicly traded company." Naturally, the hyperbolic all out response would mean an immediate nuclear war of attrition between the two electronics giants. Instead Samsung would be even better served to show Apple who is boss in quantized increments. Today, it has done just that, forcing Apple to swallow a 20% price increase on hundreds of millions of Samsung application processors used in iPads and iPhones. "Apple first disapproved it, but finding no replacement supplier, it accepted the (increase.)" Game, set, match Samsung.

From Marketwatch:

Samsung Electronics , the world's largest technology firm by revenue, raised the price of mobile processor supplied to Apple Inc. AAPL -0.25% by 20% recently, Chosun Ilbo reported Monday, citing a person familiar with negotiations between the two tech giants.


"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.)"


The two firms have started to reflect the new supply price recently, the report added, citing the same person.


According to the report, Apple buys all APs used for production of iPhone and iPad from Samsung Electronics with the volume estimated to be 130 million units last year and more than 200 million units this year.


Samsung Electronics has a long-term contract to supply APs to Apple until 2014, the report added.

Two things will come out this development:

i) Apple profit margins, as in go down materially; and

ii) Samsung leverage, as in surge.

Because Apple flexed its muscles in US-based courts, and won as was largely expected, in the process ushering "Patents Wars 2: The Asian Empire Strikes Back - Are The Tables About To Turn On Apple?" (they did), and also letting Samsung understand that a little mutual game theory defection may be useful to teach its unruly client a few lessons.

What is for now unknown, but is certainly the biggest risk factor for the world's biggest company by market cap, is how other supply chain verticals will take this retreat by Apple: if recent dramatic events in South African labor relations are any indication, expect every other Apple product supplier to attempt to squeeze incremental profitability out of their own existing relationships with the behemoth which will have no choice but to yield to a coordinated attempt at extracting concessions, now that the balance of power has shifted dramatically in the favor of the suppliers.

One thing is certain: Samsung has nothing to fear in terms of future legal escalation from Apple now or any point in the future.


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Mon, 11/12/2012 - 22:45 | 2974942 vast-dom
vast-dom's picture

Ergo NASDAQ needs to be adjusted down by 40%.

Mon, 11/12/2012 - 22:50 | 2974956 Pladizow
Pladizow's picture

And wait till silver is $200/oz!

Mon, 11/12/2012 - 22:56 | 2974969 vast-dom
vast-dom's picture

As in waiting for JPM's naked shorts to implode. 

Mon, 11/12/2012 - 23:25 | 2975024 TruthInSunshine
TruthInSunshine's picture

Apple's executives are meeting right now, devising on what grounds they are going to sue Samsung, and calculating highly speculative damages (never mind that they don't have a case that will survive summary judgment).

Apple absolutely has to resort to their new "when all else fails, sue everybody" business strategy. If Samsung and other suppliers continue to raise prices on components going into highly commoditized Apple iGadgets, it will crush Apple's net revenue.

Too bad Apple is just the designer, and manufacturers so few (if any?) components that are used in its iDevices. They've left themselves completely vulnerable to their benevolent suppliers.

Mon, 11/12/2012 - 23:35 | 2975037 Michaelwiseguy
Michaelwiseguy's picture

They're both foreign companies, so who gives a shit? 

230 hedge fund managers.

Mon, 11/12/2012 - 23:42 | 2975068 NidStyles
NidStyles's picture

Since when does nationality matter when making a profit on your investment?

Tue, 11/13/2012 - 00:15 | 2975091 TruthInSunshine
TruthInSunshine's picture

The real question is how long until Foxconn opens a subsidiary called Appel, that sells the exact same products that Apple does (since they will be made using the same components and made in the same facility), for 1/2 the price Apple charges?

Strike that, because it's really not as pertinent as it once might have been, now that Samsung and others are making products that are the equal of, and better, than any competing Apple products.

Apple has screwed its business model up so badly so quickly that it's actually truly remarkable.

What would Steve Jobs think of the Lightning Dock and other the crap Apple has introduced that has accelerated planned obsolescence while actually giving shit benefits (if not net-negative benefits) to its customer base if he were alive?

Tue, 11/13/2012 - 01:01 | 2975200 redpill
redpill's picture

Fair value is $85 a share, just like it was 3 1/2 years ago.

Tue, 11/13/2012 - 01:40 | 2975258 Ineverslice
Ineverslice's picture




Tue, 11/13/2012 - 02:32 | 2975315 mr_T
mr_T's picture

In the end, Reggie will be proven right. Last Apple I bought was a IIe never again. At least they provide suicide nets for their iSlaves at Foxconn.

Tue, 11/13/2012 - 03:00 | 2975355 AldousHuxley
AldousHuxley's picture

Real R&D comes from specialized part suppliers. You need math and science long term investment there, not Master Bullshitting Assholes.


well Asian manufacturers are becoing global brand and US (we outsource all the real work) companies are findings themselves out of a job unless supported by the state corporate welfare.


Roman Empire crumbled when the barbaric mercenaries they hired became generals and when they revolted no Romans were in the talent pipeline.

Tue, 11/13/2012 - 07:55 | 2975516 old naughty
old naughty's picture

No Jobs...Less Cash...No Hopes.

Empire befell...

Tue, 11/13/2012 - 08:16 | 2975547 GetZeeGold
GetZeeGold's picture



Samsung....those rat bastards.


Tue, 11/13/2012 - 13:45 | 2976634 robertocarlos
robertocarlos's picture

Was that in your best George C Scott voice?

Tue, 11/13/2012 - 10:30 | 2975832 catacl1sm
catacl1sm's picture

Persian empires did the same thing. It worked great until growth ended and neither empire could keep their promises. Coming soon to an empire near you!

Tue, 11/13/2012 - 08:50 | 2975588 j0nx
j0nx's picture

Whoggie? That guy is always tooting his own horn for shit that an imbecile could figure out by using common sense. Analysis and research I can respect. Hubris, not so much.

Tue, 11/13/2012 - 10:07 | 2975771 Estrella
Estrella's picture

Mr_T, man you hold a grudge. The IIe came out in the 80s.

So, you are going to say, that ALL the other computers you have purchased since then (what, 30 plus years) were great machines, and ONLY the IIe was a lemon?

Still, I kind of get the point. I am also ticked off at Apple. Their OS has become ridiculously closed. Very Orwellian. Try getting a product up at the Apple store (the review process takes a month or longer.) I cannot use the iDevices as RAM disks, can't mount iDevices other then through iTunes, etc., etc. Apple is not interested in making general purpose computers but in selling iGadgets. Shame. (I speak as an Apple software developer and with around 20 of their products in my home.)

Tue, 11/13/2012 - 11:13 | 2976011 I only kill chi...
I only kill chickens and wheat's picture

Banshee music player on linux connects just fine to my gen2 itouch. Can manage music, load files whatever. No itunes for me.

Tue, 11/13/2012 - 09:04 | 2975608 mdtrader
mdtrader's picture

Lol Apple has $128 per share of cash and investments. 

Tue, 11/13/2012 - 02:11 | 2975294 A Nanny Moose
A Nanny Moose's picture long until Foxconn opens a subsidiary called Appel, that sells the exact same products....for 1/2 the price Apple charges?

About 11 years ago..only it was LG

Tue, 11/13/2012 - 00:26 | 2975145 sun tzu
sun tzu's picture

You mean it will crush Apple's gross profits and margins

Tue, 11/13/2012 - 00:49 | 2975153 TruthInSunshine
TruthInSunshine's picture

Technically, you are correct.

Practically, it will crush both, as one is derivative of the other, and component costs are an expense.

To be very precise, I should have said it will crush Apple's EBITDA.


Off Topic:  Billionaire (former?) John McAfee-in-Belize and on a[n alleged] rectally inserted, refined bath salts bender & murder spree, bitchez:

John McAfee Wanted for Murder

Tue, 11/13/2012 - 04:17 | 2975411 jballz
jballz's picture

Very former if he ever was a billionaire. Saw his house on the market a couple years ago, trying to eek out 20% of what he paid and lots of inuendo he was broke. 

I danced a jig when I saw that he is wanted for murder. Angriest day of my life damn near, installed mcafee and it crashed my whole system. Called tech support, said it was 50 bucks for assistance. Desperate, I paid it. 

Cocksucker on the phone when he finally picked up: "Oh. Yeah you have to reinstall"

"Reinstall Mcaffee?"

"No, you have to reinstall windows."

Motherfuckers. Been hating him ever since. Karma.

Don't know what sort of hell awaits Bill Gates, probably not enough torment in a third world prison for all the hating directed his way over the years. But Mcaffee...fuck him let him rot. I will even send him a christmas fuck you card to wherever shithole they drop him.


Tue, 11/13/2012 - 06:36 | 2975473 spentCartridge
spentCartridge's picture

Who's fault is it that you had to pay $50 to be told you need to reinstall?

Tue, 11/13/2012 - 09:48 | 2975714 mess nonster
mess nonster's picture

It reminds me of what the liberty movement os going to do to the Republican party.

Tue, 11/13/2012 - 00:34 | 2975154 Overfed
Overfed's picture

I don't think Apple has manufactured anything since the 80s or early 90s.

Tue, 11/13/2012 - 07:29 | 2975499 StychoKiller
StychoKiller's picture

Once, when I was riding my bicycle, I ran over a stick -- thought I was bad ass (until the stick flipped into the front wheel spokes...)

Mon, 11/12/2012 - 23:50 | 2975077 Michaelwiseguy
Michaelwiseguy's picture

Telephones have no Constitutional right to be answered. I use mine maybe 5 times a week.

I personally dislike the device because it has a habit of disturbing me.

Tue, 11/13/2012 - 00:26 | 2975144 nowhereman
nowhereman's picture

I only use mine to hang up on the debt collectors.

Tue, 11/13/2012 - 00:40 | 2975160 TruthInSunshine
TruthInSunshine's picture

5 to 7 cents on the dollar. That's a decent settlement rate assuming one wants to pay off their debt.

Anything more offered to the buyers of bundled & unsecuritized delinquent debt is mission failure. The entities that buy defaulted, unsecuritized debt from credit card companies and others pay from 5 to 12 cents per dollar for it, so the settlement rate I highlighted ensures they won't profit, and may possibly lose money.


Tue, 11/13/2012 - 08:55 | 2975598 j0nx
j0nx's picture

Right. Good luck with your list of demands. They will laugh and tell you to fuck off and then ruin your credit and take you to court most likely. Ask a debt vulture for a written guarantee about credit impacts before you pay them and see how fast they start to laugh. If you get a call from a debt collector then 9/10 times it's already too late to do anything about the credit impact.

Tue, 11/13/2012 - 11:55 | 2976171 TruthInSunshine
TruthInSunshine's picture

Good luck?

I actually pay my debts, as I live below my means, no matter how many/much or little/few resources I have, but I have personal knowledge of many people who have paid no more than 12 cents on the dollar to discharge unsecuritized debt this way, including several (less than a dozen but more than 4) who've discharged more than 100k in credit card debt (one person essentially paid 7 cents per dollar, on an aggregate average, to discharge 230k worth of debt spread across many credit cards).

I realize it's the internet and all, but if you really do check out the manner by which large, unsecuritized debts get satisfied, you'll discover this isn't as far fetched as it may seem.

"Screw you. How about if I pay you 8 cents or you get nothing when I file for personal bankruptcy" is very compelling in certain circumstances.

Tue, 11/13/2012 - 15:36 | 2977081 j0nx
j0nx's picture

Sure BK is always an option but I thought the goal was to save your credit here? You aint doing that by paying 8c on the dollar and by demanding a no credit impact before you pay them which is what I'm talking about. Half of the big stick that credit vultures carry around is our fear of them humping our credit score. BK is always the nuclear option anyway. And BK aint cheap either.

Tue, 11/13/2012 - 06:38 | 2975475 spentCartridge
spentCartridge's picture

Same deal with my doorbell.

Tue, 11/13/2012 - 08:33 | 2975572 Winston Churchill
Winston Churchill's picture

No checkee no workee.

Tue, 11/13/2012 - 02:25 | 2975312 WAMO556
WAMO556's picture

Maybe in 12 months, a year, 2, 3, 4 or more years. These banks aren't going to mplode any time soon without your Deposits going first and then your taxes to support them. Go ahead, hold your breath....they dare you.

Tue, 11/13/2012 - 03:15 | 2975371 devo
devo's picture

When is this going to happen?

Tue, 11/13/2012 - 08:19 | 2975551 JPM Hater001
JPM Hater001's picture

"And wait till silver is $200/oz!"

And wait till silver is $2000/oz!


There fixed.

Tue, 11/13/2012 - 08:58 | 2975600 j0nx
j0nx's picture

Keep dreaming. You PM hawks been saying this shit for 10 years now and silver still stuck at 30 something just like it always will be until or unless you sink JPM which frankly aint gonna happen. If silver ever reaches more than $50 oz then it won't matter because we will all have bigger problems to worry about since most likely the dollar will be worthless at that point anyway.

Mon, 11/12/2012 - 23:12 | 2975005 ACP
ACP's picture

Not a problem. The Fed will simply pile another QE on top of the QE that is on top of the QE that isn't working.

Mon, 11/12/2012 - 22:45 | 2974943 GCT
GCT's picture

Its not smart to bite the hand that feeds you or makes your components.

Tue, 11/13/2012 - 01:13 | 2975219 RockyRacoon
RockyRacoon's picture

Samsung seems to have hit upon a plan to get their legal fees back.   Hmmmm.

Tue, 11/13/2012 - 01:34 | 2975225 TruthInSunshine
TruthInSunshine's picture

Sony once owned the consumer electronic gadget market, in the wake of Sony's revolutionary and immensely profitable Walkman, until Samsung cut them down at the kneecaps, completely and brutally.

Contrary to whatever anyone says, it's a provable fact that the iPod, and no other product, was the product that saved Apple and allowed it the cash cushion to engage in the R&D needed to augment its existing portfolio of products and design new ones, and now Samsung is dialed in on Apple...

...eerie similarities that rhyme in terms of history, as Samuel Clemens might have opined.

Tue, 11/13/2012 - 06:13 | 2975462 Acet
Acet's picture

Sony cut themselves down when they went into content production (Movie Studios and the like) and let their Media division dictate to their Electronics division the features of their products while at the same time moving production to China.

The followup to the Walkman, the Minidisk was a proprietary locked-down POS and, at a time when people in the computing world were clamoring for a data storage solution (these were the times of the floppy disk and the ZIP drive), Sony didn't allow people to use them to store data. Sony continued with this policy of locking down their products to protect "content" (notice how Sony's DVD players were always the ones without any "undocumented trick" to remove Region coding), all the while they cheapened design and moved production from Japan to China, which meant that Sony's products, previously known for quality and reliabily, just became an overly expensive version of the same crap everybody else was selling (only worse, 'cause they were locked-down tight).

Fifteen years ago, Sony had made their name as a Consumer Electronics brand of quality and innovation that gave customers what they wanted. Now they're a sleazy Movie company with a me-too cheap electronics arm.

Tue, 11/13/2012 - 12:25 | 2976303 Aegelis
Aegelis's picture

Add to that Sony's purchase of the Massively Online Roleplaying game Everquest, which started out with a bang, but due to bugs that would never get fixed, horrible customer service, pay another $40 to play expansions (I think there were 12 last I checked), and a refusal to update the game with things like graphics and quests (aka stuff to do beside kill the same beast you did a thousand times before).  Blown opportunity gave Blizzard a leg up when they whiteboarded, "What didn't we like with Everquest?  Great, we have a list, let's build and update a superior game"

Mon, 11/12/2012 - 22:45 | 2974944 vinayjha
vinayjha's picture

Between AAPL and Samsung war, only China manufacturer will benefit.

Mon, 11/12/2012 - 23:04 | 2974986 rhinoblitzing
rhinoblitzing's picture

How long before AAPL has the Chinese knock off the chip...

China has completely given the WTO the finger and stuck it up our ass... and Russia just got let in the WTO a few weeks back while no one was looking. IP/Trade/Patent war between Russia and China should be interesting.

One of the questions Romney and his democraticly run campaign never asked, "Just what did you mean when you told Dimitri that you will have more flexibility after the election?"


Tue, 11/13/2012 - 01:54 | 2975274 Ms. Erable
Ms. Erable's picture

More flexibility = capable of bending over much further while spreading cheeks far wider.

Tue, 11/13/2012 - 15:07 | 2976981 NidStyles
NidStyles's picture

Samsung is made most outside of China. In fact they make efforts to manufacture in other countries than China, because South Korea and China do not get along very well.

Mon, 11/12/2012 - 23:02 | 2974952 Pancho Villa
Pancho Villa's picture

All your profit are belong to us!

Mon, 11/12/2012 - 22:52 | 2974958 rhinoblitzing
rhinoblitzing's picture

Veddy Interesting...Vut Stupid!



Mon, 11/12/2012 - 22:56 | 2974967 A Lunatic
A Lunatic's picture


Mon, 11/12/2012 - 22:59 | 2974973 cornflakesdisease
cornflakesdisease's picture

I hate my apple ipod.  It doesn't synch right with my favorite music software on my laptop and I only bought it because it could store my whole music collection.  As soon as sony makes something equivelt in mega titties; I'll BUY!

The apple software sucks and blows chunks of corn.



Mon, 11/12/2012 - 23:04 | 2974990 blunderdog
blunderdog's picture

Fix it with Rockbox.  It works, it's totally worth it.  Play flacs.

Tue, 11/13/2012 - 07:20 | 2975496 e.blair
e.blair's picture

Use Winamp.  Free and works great.

Mon, 11/12/2012 - 22:59 | 2974974 Itch
Itch's picture

What would Steve Jobs do...

Mon, 11/12/2012 - 23:49 | 2975078 Agent P
Agent P's picture

Probably nothing...because he's dead.

Mon, 11/12/2012 - 23:00 | 2974980 Majere
Majere's picture


Maybe the big Corps will figure out that China manufacturing...wasn't as good a deal as it looked on paper (fiat).

Tue, 11/13/2012 - 00:28 | 2975148 sun tzu
sun tzu's picture

What does China manufacturing have to do with Samsung raising prices? Samsung is not Chinese

Tue, 11/13/2012 - 01:31 | 2975245 Majere
Majere's picture

HREE's ST.  Almost all come from China.  Other parts are also M.I.C. which then hikes up prices on other things used in those devices.  Samsung isn't a one stop shop. 

My comment wasn't really wasn't directed at Samsung, so much as the "BIG Corps" like the fruit of the loom.  This will set the model for others to do the same, and China will see this and follow suit.  They understand the Econ Biz model well enough - again, look at what they did on the supply side for HREE's . . . then look what the price did.  HREE's are used in all of the "smart" phones, TV's, computers, iPads, etc... 

So you could say that because of the HREE hike just over a year ago, that cut into Samsung, and the apple rolled down with the stock price.  Look outside the apple crate's like fighting without fighting.

Mon, 11/12/2012 - 23:05 | 2974991 blunderdog
blunderdog's picture

This is significant. 

Mon, 11/12/2012 - 23:10 | 2975003 Dr. Engali
Dr. Engali's picture

O.T. I was just looking at all the story links on Drudge and its like the whole fucking world is going insane. I honestly have no idea how humanity has made it this far. Especially when I see the same cluster of inbreds that are in positions of power. To paraphrase the Joker.... This world needs an enema.

Mon, 11/12/2012 - 23:20 | 2975015 kito
kito's picture

hey doc, first texas, then indiana??? their secession petition is growing exponentially:

Mon, 11/12/2012 - 23:29 | 2975034 Dr. Engali
Dr. Engali's picture

Kito... I believe this country will eventually Balkanize into smaller nation states. I don't think this is the start of something serious , but it would be nice if it was. My guess it doesn't happen until after the complete collapse.

Mon, 11/12/2012 - 23:40 | 2975057 Michaelwiseguy
Michaelwiseguy's picture


Don't you mean "Complete and Total Economic Collapse"?

Mon, 11/12/2012 - 23:50 | 2975084 Dr. Engali
Dr. Engali's picture

Yes that's exactly what I mean.

Tue, 11/13/2012 - 01:40 | 2975259 TruthInSunshine
TruthInSunshine's picture

Dr. E, I have told people for about 2 years now (during the so called "recovery") that we're in a bona fide economic depression, and that few can see it and/or admit it due to the government spending $1.44 for every $1 of revenue it's taking in, in order to "print" what would be soup lines and violent acts born of economic calamity off of the streets (the main difference between now and the 1930s is SNAP/EBT cards, Social Security, Medicare, SSI, other direct benefits), and that the real rate of unemployment/significant underemployment is 24% using what was the BLS' own methodology pre-1994 (not to mention the evolution of the McJobs service sector economy with McJobs wages and McBenefits).

Now, a significant plurality if not slight majority of the people who refused to/didn't/couldn't believe what I was saying a mere two years ago are in genuine agreement.

Tue, 11/13/2012 - 02:17 | 2975304 WAMO556
WAMO556's picture

That you are depressed? No Dought.

Did you eat today???

Tue, 11/13/2012 - 02:28 | 2975313 TruthInSunshine
TruthInSunshine's picture

Did you not learn how to read, thus preventing you from comprehending the "economic" immediately preceding "depression" in what I wrote?

Or are you attempting to be humorous, which would actually be quite sad?

And "[d]ought?" Really?

Tue, 11/13/2012 - 02:36 | 2975326 WAMO556
WAMO556's picture

You didn't answere the question.

A tale of two cities - the best of times, the worst of times.

Tue, 11/13/2012 - 02:53 | 2975333 TruthInSunshine
TruthInSunshine's picture

I'm not depressed in the psychological sense; quite the opposite, actually.

Citing Dickens in this context raises the question as to whether you're schizophrenic or suffering from schizoaffective disorder. If so, eat a lot of fruits and vegetables, get plenty of exercise and rest, and eliminate refined foods and beverages from your diet.

I'm pulling for you, SockPuppet.

Tue, 11/13/2012 - 08:28 | 2975566 new game
new game's picture


truth, your passion is much appreciated...

Tue, 11/13/2012 - 02:14 | 2975299 WAMO556
WAMO556's picture

After the Vandals, Visigoths have raped, pillaged and plundered. Oh wait, we are rhyming as opposed to repeating?!

Only ivory tower theoreticians could make this shit up.

Tue, 11/13/2012 - 02:09 | 2975290 WAMO556
WAMO556's picture

Will you, your children, grandchildren and so on see this Great Collapse?

You know, being a contrarian, when the shoe shine boy says that there is going to be a collapse.....

Is there any on this website who was alive during the Great Depression? NO?

Will the collapse start before, or after high tea?

Just saying.

Tue, 11/13/2012 - 06:48 | 2975480 samcontrol
samcontrol's picture

q opinologo!
Man you sure can give Nostradameus a run for his money..

Tue, 11/13/2012 - 07:32 | 2975498 e.blair
e.blair's picture

Humanity made it this far because there is so much of it.  Many many died along the way because of their stupidity. 

But don't take Drudge too seriously.  His whole shtick is constinually looking for the most outrageous stories and even then exaggerating them in his headlines.  It's childish and tiresome and a waste of one's time.

Tue, 11/13/2012 - 08:36 | 2975577 Winston Churchill
Winston Churchill's picture


totally agree excepting it's needs a turpentine enema.

Mon, 11/12/2012 - 23:16 | 2975008 Cognitive Dissonance
Cognitive Dissonance's picture

So..........just like that Apple has lost its mojo? While there is no doubt that Apple is struggling at this point that doesn't mean it's dead and buried. Not by a long shot.

It seems that Apple is the company people love to hate and you have to wonder if it is because of its huge profits, double digit growth, the $100+ Billion cash position and the love affair 200+ hedge funds have with it. Do you hate Apple or its stock price and media following?

While Apple has certainly taken advantage of all the media attention and leveraged its position to the hilt, does that make Samsung any better? Is Apple fully responsible for ALL of the media attention it receives?

Just sayin'

Mon, 11/12/2012 - 23:22 | 2975019 kito
kito's picture

sorry, but apple has become just another fruit........

Tue, 11/13/2012 - 00:31 | 2975150 sun tzu
sun tzu's picture

Apple is not dead, but the days of 40% margins are dead. Suppliers will push costs up while competitors will push revenues down.

Tue, 11/13/2012 - 01:41 | 2975262 BORT
BORT's picture

But Steve is.  The new guy must be laughed at behind his back constantly

Tue, 11/13/2012 - 09:53 | 2975725 earnyermoney
earnyermoney's picture

Steve Jobs declared "Thermonuclear war". Mr. Cook is carrying out Steve's vision. Why Steve Jobs gets a pass amazes me. Steve Jobs' blind arrogance is the reason they're in trouble.

Tue, 11/13/2012 - 01:43 | 2975263 TruthInSunshine
TruthInSunshine's picture

Apple's not dead, but it is most certainly slipping quickly into the status of an iCommodity seller.

Mon, 11/12/2012 - 23:15 | 2975009 ebworthen
ebworthen's picture

That's what Apple gets for trying to compete with Lawyers and Judges rather than the marketplace.


Mon, 11/12/2012 - 23:41 | 2975065 machineh
machineh's picture

If you want a phone or tablet made with Samsung parts, it's cheaper just to buy it straight from Samsung.

Cut out the Apple middleman with its 50% or 100% markup.

Sammy makes rectangles with round corners, too.

Tue, 11/13/2012 - 09:07 | 2975613 Metalredneck
Metalredneck's picture

Harley Davidson taught them that.

Mon, 11/12/2012 - 23:16 | 2975012 Jumbotron
Jumbotron's picture

You're about to see how fast Apple rolls Samsung over and fucks them in the ass with no lube.  You guys have not been paying attention.  When Nvidia sold Apple and a lot of other manufacturers defective GPUs for laptops Apple went with AMD / ATI for their next generations and also Intel IGP's as well. 

Also...why do you think that Apple bought PA Semi and Intrinsity?  To give them control of their CPU design that they just farm out anyway.  They can just moved that tech over from Samsung to TSMC and the other components that they use from Samsung can be obtained from Qualcomm or Broadcom or Ralink or even TI.

Samsung....relax that anal're about to go Greek.

Mon, 11/12/2012 - 23:35 | 2975038 cxl9
cxl9's picture

You seem to have an odd fascination with anal sex. Not that there's anything wrong with that.

Tue, 11/13/2012 - 01:20 | 2975229 dark pools of soros
dark pools of soros's picture

He might be a friend of John McAfee


Mon, 11/12/2012 - 23:36 | 2975042 Muppet Pimp
Muppet Pimp's picture

Sorry to hear you are caught long Jumbotron.  Keep the faith, it might come back : )

Tue, 11/13/2012 - 11:01 | 2975974 Jumbotron
Jumbotron's picture

"Sorry to hear you are caught long Jumbotron.  Keep the faith, it might come back"


Just to let you know....I do not....nor have I ever owned an Apple product.  I do not nor have I ever owned Apple stock.  Just telling you how it is from past Apple experience.  Maybe 6 months....maybe a year.  But Samsung just screwed themselves.  Maybe Cook goes to it with a lighter foot.....but Jobs would have squeezed them out in a heartbeat.

Mon, 11/12/2012 - 23:40 | 2975054 NidStyles
NidStyles's picture

There are no alternatives to the Samsung displays. In fact that is the major selling point of those iCrap gadgets. Apple screwed with their distributors and they will get what they sowed.

Mon, 11/12/2012 - 23:58 | 2975099 pitz
pitz's picture

Apple's a lightweight outside of packaging design and software development. 

Tue, 11/13/2012 - 01:40 | 2975260 ServingMyKing
ServingMyKing's picture

Go look at a teardown of the latest iDevices and you will see they have Apple (A4,A5,A6 etc) application processors.  Samsung used to be a main supplier for flash memory for the older iDevices.  Hynix supplied the flash memory for the iPad mini and the iPhone 5. Numonyx supplied the flash memory for the iPad 3G.  I don't see that Apple has any dependence on Samsung.

Tue, 11/13/2012 - 02:16 | 2975302 NidStyles
NidStyles's picture

Except every single one of their devices that are actually selling has that nifty Retina Display. You know that Display that in all reality is just a fancy Samsung IPS panel. Nope no dependencies at all, just Apple's latest marketing gimmick for the past two years comes from Samsung. 


Everyone is stuck on this idea that Samsung only makes chips, you'd be surprised to learn that they make everything. I mean everything, from SoC setups to full on mainframes for ships. Something like 98% of the electronics in the world have something from Samsung in them.

Tue, 11/13/2012 - 11:08 | 2975991 Jumbotron
Jumbotron's picture

"Except every single one of their devices that are actually selling has that nifty Retina Display. You know that Display that in all reality is just a fancy Samsung IPS"


Once again...sure about that?

Tue, 11/13/2012 - 07:42 | 2975504 StychoKiller
StychoKiller's picture

Lemme tell you a short story:

SCO's (formerly known as Santa Cruz Operation) leaders decided to sue their customers for using Linux, claiming that they and they alone held all the Unix™ copyrights.  Unfortunately for them, two of those customers were Novell (which actually did own the Unix™ copyrights!) and IBM, which could afford to fight SCO and make an example of them.

DO NOT fsck with the people on whom yer livelihood depends!

Mon, 11/12/2012 - 23:16 | 2975013 meizu
meizu's picture

This is why Apple is now talking about developing its own processors.

Mon, 11/12/2012 - 23:45 | 2975073 machineh
machineh's picture

Probably it will.

But that's 2-3 years -- a half-dozen product cycles -- down the road. And it's not a core Apple competency.

Meanwhile ARM is upping its game every day.

At best, Apple is a long shot to succeed at producing its own proprietary chips.

Tue, 11/13/2012 - 01:52 | 2975272 Ropingdown
Ropingdown's picture

I must be missing something.  Apple already bought good ARM-license designers a few years ago, PA Semi and Intrisity, one of which provided Samsung with part of its mobile low-power chip design.  Apple's biggest problem, as one of the worlds largest, sometimes the largest, to avoid anti-trust problems and also to not bring in-house all the risks of electrical engineering surprises.  There are lots of great chip makers out there and they aren't all particularly profitable in their chip fab segment.  I agree with the 'core competency' bits, above.  5% of Apple's cash would buy a great fab or AMD control.  The shadenfreude glee on such a thin basis as Samsung's little nicket-and-diming seems a bit over-the-top.

Tue, 11/13/2012 - 07:46 | 2975505 StychoKiller
StychoKiller's picture

And like Honeywell, Hewlett-Packard, IBM and Motorola (to name a few), will find themselves bleeding red ink in short order.  Notice that Ford and GM no longer manufacture their own steel, seats, electronics, etc?

Tue, 11/13/2012 - 10:39 | 2975872 The Paucity of Hope
The Paucity of Hope's picture

Maybe they can work with Motorola and IBM like they did with the PowerPC

Mon, 11/12/2012 - 23:21 | 2975018 flyonmywall
flyonmywall's picture

All that Apple has to do with its giant cash hoard is go do a little shopping, and with a few percent of it buy a company that is just itching to get into mobile space in a big way, AMD.

Instant processor design expertise, graphics chip expertise but no marketing sense whatsoever.

Inject a couple of billion into AMD, they'll design whatever Apple wants, and give Nvidia, Intel, and Samsung the finger.


Mon, 11/12/2012 - 23:51 | 2975081 machineh
machineh's picture

AMD is to Samsung as an asteroid is to Jupiter ... or a flea is to an elephant.

Samsung's third quarter profits were SIX TIMES AMD's gross sales.

But don't let me intrude on your own private Idaho.

Tue, 11/13/2012 - 01:14 | 2975222 Overfed
Overfed's picture

I wonder how Apple's cash reserves compare with Samsung's. Not that I'm in Apple's corner here, but they may have enough $$ to just buy AMD, who can and do design very good chips, then have all of the chip manufacturing capability they need in-house. Something I would be looking at pretty seriously if I were in charge at Apple.

Mon, 11/12/2012 - 23:26 | 2975026 Freewheelin Franklin
Freewheelin Franklin's picture

It's on, bitchez.

Mon, 11/12/2012 - 23:35 | 2975040 patb
patb's picture

Apple will either need to start designing and manufacturing the processors,  or they will need to spool up second source vendors.


but it's a definite shot at them by Samsung.

Mon, 11/12/2012 - 23:40 | 2975058 cornedmutton
cornedmutton's picture

Good summary by Capt Obvious here.

Tue, 11/13/2012 - 01:40 | 2975261 Ropingdown
Ropingdown's picture

Apple has already is designing the processors.  Chosing a fab isn't difficult in these times.  When Samsung decided to become Apple's competitor in mobile devices, they made a big bet. Of course the Chinese are coming after Samsung, too, from other directions.  Tough world out there.

Tue, 11/13/2012 - 07:47 | 2975507 StychoKiller
StychoKiller's picture

Which vendor do ya think is gonna trust AAPL after this?

Mon, 11/12/2012 - 23:48 | 2975044 jonjon831983
jonjon831983's picture

So did "someone" know this news was coming and started the AAPL dump?


cough. (Braeburn)

Mon, 11/12/2012 - 23:37 | 2975045 NidStyles
NidStyles's picture

I called it, not here, but I called it.

Mon, 11/12/2012 - 23:38 | 2975046 stormsailor
stormsailor's picture

or contract those processors through marvel  (mrvl).   good entry on mrvl 7.77,  methinks a good buy and hold.  marvel is in the mobile business and has supplied chips for years

Tue, 11/13/2012 - 00:38 | 2975164 ebworthen
ebworthen's picture

Marvel makes a good chip; never had a problem with their stuff.

Mon, 11/12/2012 - 23:38 | 2975049 Zgangsta
Zgangsta's picture

I believe that all Americans should be allowed to have guns.

However, I believe that only I should be allowed to have bullets.

Mon, 11/12/2012 - 23:44 | 2975071 reader2010
reader2010's picture

Why doesn't Apple just takeover Samsung instead?

Mon, 11/12/2012 - 23:56 | 2975093 pitz
pitz's picture

Apple's "cash" balances are questionable, and it is unlikely that Samsung shareholders would accept Apple scrip in exchange for ownership of their very valuable factories. 

Tue, 11/13/2012 - 01:36 | 2975250 Ropingdown
Ropingdown's picture

Samsung's fabs very valuable?  With every fab having to be retooled incessantly?  And 20% increase is how much in dollars?  11?  14?  And what's the margin on iPhones?  Short term, any co's suppliers can push prices up during a launch. They don't because buyers have a memory.  Samsung knows well-enough that Apple's not going to be hanging around so they'd better pick Apple's pocket while they can.   Sam's got LG pulling the Nexus 4 biz.  What software platform does Sam OWN? Didn't think so. Processors are a small part of the total parts list for an iPhone or Nexus 4.

Tue, 11/13/2012 - 00:14 | 2975129 jonjon831983
jonjon831983's picture


South Koreans would rise up and USA would have diplomatic crisis on their hands.  j/k.


A lot of these massive Korean companies are family owned.  They'd probably die before letting some American company buy out an empire.

Tue, 11/13/2012 - 09:47 | 2975706 machineh
machineh's picture

Quite right.

Living in a relatively open large economy, it's easy for americanos to forget how vigorously smaller countries such as Korea and Canada and Argentina will defend local ownership of national champions, no matter how much it costs the stockholders.

Tue, 11/13/2012 - 01:35 | 2975249 BORT
BORT's picture

And bring the current, crushing themselves daily, mangement team to Korea

Tue, 11/13/2012 - 01:52 | 2975273 Schmuck Raker
Schmuck Raker's picture

You're about 25% of Market Cap too late.

Tue, 11/13/2012 - 00:08 | 2975118 Conman
Conman's picture

in other news UK going after AMZN  for tax evasion by accounting gimmicks. How soon will other countries do this to AAPL, etc?

Tue, 11/13/2012 - 00:17 | 2975133 monkeyboy
monkeyboy's picture




Tue, 11/13/2012 - 02:03 | 2975284 Ineverslice
Ineverslice's picture


Lot o' that in play these days. The bigger they are...

Tue, 11/13/2012 - 00:42 | 2975167 Redhotfill
Redhotfill's picture

I wish Jobs were alive....  this would be my post if he were:  1share of APPL 30% les than what is was a month ago, Airfaire and hotel to share holders meeing $1,136  seeing Jobs whine in person and try to explain to shareholders why APPL took a hit cuz he got pwned by some Koreans ..... PRICELESS!

Tue, 11/13/2012 - 01:22 | 2975234 Incubus
Incubus's picture

Who run Barter town?

Tue, 11/13/2012 - 01:51 | 2975269 Schmuck Raker
Schmuck Raker's picture

And what a fabulous allusion it is....BUT, "...Game, set, match Samsung."

I, in my blissful ignorance, think that maybe(just maybe), we will soon see the ultimate eConOMICAL warfare(salesman/Untripenaur vs. Suppliar/UncleThom).

WHAT could happen??

WHO could care??????

Tue, 11/13/2012 - 01:55 | 2975275 Schmuck Raker
Schmuck Raker's picture

Thousands of square haectars of Sugarcane were laid waste for thid pillosoficalese.


Tue, 11/13/2012 - 01:58 | 2975277 Dre4dwolf
Dre4dwolf's picture

Apple has some balls, I mean seriously, how are you going to bring Samsung to court for "patents" when Samsung essentially MAKES 98% of your phone.


The iphone is MORE OF A SAMSUNG PRODUCT than it is an "apple product", Apple in "name only".

Apple is a discgrace.

Tue, 11/13/2012 - 06:00 | 2975454 Mad Mohel
Mad Mohel's picture

Big ^  They shat where they ate.

Tue, 11/13/2012 - 10:27 | 2975829 edifice
edifice's picture

Apple in "name only".

Well, it says right on the product, "Designed by Apple in California Assembled in China" So, technically, they're admitting the fact you pointed out.

Tue, 11/13/2012 - 11:36 | 2976104 Toolshed
Toolshed's picture

And you win by pointing out the obviouser?

Here, let me point out the obviest:

Fuck Apple!

Tue, 11/13/2012 - 02:29 | 2975318 q99x2
q99x2's picture

I almost bought one of those $200 white Samsung Android phones at an AT&T shop a month ago. They are bitchen. But I decided to keep my 2007 Nokia cell and buy a clone Android tablet instead. Too bad AAPL maybe if you would pay some friggin taxes and manufacture in the states you'd do better than relying on your middle men profits. Why don't you move your HQ to Bejing you bunch of ingrates.

Tue, 11/13/2012 - 03:12 | 2975367 boeing747
boeing747's picture

FYI, APPLE is buying up office buildings in Silicon Valley with cash. You guys shall know what happen later.

Tue, 11/13/2012 - 06:00 | 2975455 Mad Mohel
Mad Mohel's picture

Thanks for the heads up professor.

Tue, 11/13/2012 - 09:05 | 2975609 GetZeeGold
GetZeeGold's picture



APPLE is buying up office buildings in Silicon Valley with cash.


On purspose? Everyone knows you should be buying farmland.

Tue, 11/13/2012 - 03:23 | 2975378 SoundMoney45
SoundMoney45's picture

Generally a foundry price increase on a per die basis is related to poor yields, and a price increase on a per wafer basis is related to increasing costs.  It is hard to say if this is inflation driven, die yield driven, line yield driven, or emotionally driven, however, I suspect one of the former over the latter.  The fabless-foundry model is where one company, Apple in this case, designs the chip, and a second company, Samsung in this case, manufactures the chip.  In this case, Samsung owns the process, and Apple owns the chip design. Alternative foundries would include TSMC, Global Foundries, Toshiba and IBM. 

On a separate note, Apple introducing a new phone in six months or less after the iPhone 5 is most likely an admission that the current design of the iPhone 5 is too difficult to manufacture, and that these manufacturability issues could not be resolved without significant end customer visible changes.  


Tue, 11/13/2012 - 03:31 | 2975383 Tenshin Headache
Tenshin Headache's picture

Newton was right!

Tue, 11/13/2012 - 06:14 | 2975463 falak pema
falak pema's picture

Wait till Samson meets Delilah and gets his hair shorn! 

All these Oligarchs are like the proverbial beanstalk, they shrivel when Jack finds Jill on Blueberry hill! 

Tue, 11/13/2012 - 06:12 | 2975460 Zaphod B.
Zaphod B.'s picture

Will seem very inflationary to those in the Mariner Eccles Bldg. unless one substitutes beef for chicken. Nice price increase right b4 holiday....exit hedge funds stage left.

Tue, 11/13/2012 - 09:52 | 2975723 machineh
machineh's picture

LOL -- if BLS substituted Nexus 7's for mini Ipads in the CPI, we'd be in outright deflation, and the 10-year T-note would yield 1 percent.

Don't let 'em do it, Ben!

Tue, 11/13/2012 - 06:12 | 2975461 falak pema
falak pema's picture

Oligarchical incestuousness...always leads to "thieves falling out"...

Tue, 11/13/2012 - 07:31 | 2975500 egoist
egoist's picture

Treat your vendors well.

Tue, 11/13/2012 - 07:53 | 2975513 Uncle Remus
Uncle Remus's picture

As the worm turns.

Tue, 11/13/2012 - 07:59 | 2975521 resurger
resurger's picture

Who lauffs last, lauffs the hardest ..

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