Despite Apple and Samsung’s legal battles, historically the two have remained business partners. Photo: Ariel Zambelich/Wired
Apple relies on Samsung for a number of vital components in its products, including displays, memory chips, and processors. And for good reason. Apple has intense production and quality demands, and Samsung has been one of the few component manufacturers with production capacities to meet that demand. In 2011, Samsung was the number two semiconductor company in the world, bested only by Intel. According to statements in their landmark patent trial this past summer, Samsung products make up 26 percent of the component cost of the iPhone. The company is the sole supplier of Apple processors.
But since the August conclusion of Apple v. Samsung, many have wondered how the two companies would be able to continue their business relationships. “Today’s verdict should not be viewed as a win for Apple, but as a loss for the American consumer,” Samsung said in a statement the day the trial came to a close. Apple openly accused Samsung of copying its ingenuity throughout the case. Sure enough, reports have begun to surface that Apple is increasingly trying to migrate component orders, like memory chips, away from its longtime frenemy. The latest example, according to analysts, is the iPad mini, which Apple is expected to announce on Oct. 23. The mid-sized tablet may be Apple’s most Samsung-free product yet.
On the display front, Apple quit using Samsung as a source with the iPhone 4, according to Vinita Jakhanwal, director of mobile and emerging displays for IHS. Samsung still provides displays for the iPod, according to Jakhanwal, but the company’s share is shrinking. Apple once relied heavily on Samsung for iPad displays, but reports indicate that it has increasingly been turning to LG and Sharp in recent months. Jakhanwal expects Samsung to be completely shut out of the display chain for the iPad mini. “The likely suppliers are LG Display (LGD) and AU Optronics (AUO),” she told Wired via e-mail.
NPD analyst Paul Semenza also sees increasing signs of Apple severing ties with Samsung. ”Samsung and LGD are the top suppliers of the size and performance level that Apple uses,” he said. “But it could be possible for Apple to shift more to AUO and Chimei Innolux Corp. (CMI) in particular. For the iPad, Sharp could possibly increase its share, and Hannstar and Tianma are also ramping up production, but not for Retina.” Indeed, Samsung not only supplies a large portion of the displays for Retina products like the 2012 MacBook Pro with Retina Display, its displays are seen as superior to those of LG. There have been numerous reports of screen burn-in on LG’s Retina displays. So it will be difficult for Apple shake that business relationship anytime soon.
When it comes to processors, Apple used to let Samsung not only manufacture them but also have a hand in their design. But a report this week from the Korea Times claims that Apple didn’t collaborate with Samsung on the development of the new A6 processor in the iPhone 5. “Apple is still relying on the Korean firm to manufacture its chips but has made it clear it will no longer use its rival’s technology,” the report says. This follows an Oct. 11 Wall Street Journal report that Apple hired away Jim Mergard, a “chip design luminary,” who, among other accomplishments, headed up the development of AMD’s code-name Brazos chip technology.
The cheaper, smaller iPad mini is rumored to sport the older A5 processor, not the A6, meaning Samsung will still have a foothold. But the stickiest part of all this for Apple is memory. “While I think Apple would like to move away from Samsung for the purchase of its memory chips. I think it is unlikely — at least for the next generation of iProducts,” IHS analyst Mike Howard told Wired.” Samsung is a big force in this arena. Its products make up 70 percent of the DRAM market and currently supplies 40 percent of Apple’s DRAM needs. “For Apple to steer the ship away from Samsung will take at least another year,” Howard said.
However, Apple managed to do it with the iPhone 5, which uses Japan’s Elpida for its DRAM needs. There are other companies ready meet Apple’s demands, too. Howard points to South Korean firm Hynix and San Jose-based Micron (which recently purchased Elpida). He said both have competitive LP DRAM products and enough scale to meet Apple’s production demands. Toshiba, Micron, and Hynix combined could comfortably meet Apple’s NAND needs. But for now, Howard expects that the iPad mini will house some of the same Samsung parts as in the larger iPad: LPDDR2 (DRAM) and NAND, likely available at 16, 32 and 64 GB.
“I suspect the DRAM will remain at 1GB, same as iPhone 5 and iPad 3,” Howard said. Other reports, however, suggest that the iPad mini will only have 512 MB of RAM, being more akin internally to an iPad 2 than a third-generation iPad.