Apple has been seeking to squeeze Samsung's significant position in its supply chain since the Galaxy maker became a serious challenger to the iPhone. But now it seems the Korean firm may be moving first to cut their ties.
According to Korean reports, Samsung Display plans to end its agreement to provide Apple with LCD panels from next year.
The Korea Times, citing an unnamed senior Samsung executive, said the vendor "believes its American partner is no longer a cash generator” because of its “stiffer supply chain management structure”. That could be code for Apple not delivering the margins Samsung would want, as the former spreads its mobile display favors to LG and Sharp too, introducing more competition and demanding hefty discounts. And CEO Tim Cook, aware of the falling prices of devices like the iPad mini, will be using his famous supply chain wizardry to put pressure on prices across the chain.
“We are unable to supply our flat screens to Apple with huge price discounts. Samsung has already cut our portion of shipments to Apple and next year we will stop shipping displays,” said the source.
The reports may also suggest that Samsung wants to manage the relationship with Apple proactively, seeking alternative customers rather than remaining over-reliant on a difficult and litigious buyer. Given the difficulties that Apple has sometimes experienced in getting sufficient numbers of its RetinaDisplay panels for new device launches, Samsung may also be trying to put the iPhone maker on the defensive.
At the launch of the iPad HD, for instance, Sharp and LG were initially unable to deliver enough screens to Apple's quality standards, leaving the OEM dependent on its old Korean partner, the world's largest mobile screen manufacturer.
According to the reports, Samsung said it would replace lost Apple business with orders from its own handset division and from Amazon, among others. Samsung itself mainly uses its AMOLED technology, in which it has a world lead in volume and innovation, although its next generation flexible AMOLEDs have been delayed from Q312 until the early part of next year.
However, a Samsung spokesman told CNet: "Samsung Display has never tried to cut the supply for LCD panels to Apple,” and insisted the reports were false.
Samsung Display was still the top panel supplier to Apple as of the first six months of this year, shipping over 15 million units to the firm, according to market researchers DisplaySearch, followed by LG Display on 12.5 million and Sharp on just 2.8 million. Apple has invested in the Japanese company to try to accelerate its mobile screen efforts and create a more balanced market, diluting the dominance of the two Korean suppliers. And the same analysts say that Samsung has supplied only 3 million screens to Apple since the end of June.
Apple has also been trying, with mixed success, to reduce its dependence on Samsung for other iDevice components, notably memory and processors. It originally sourced iPhone app processors from the Korean firm but now has its own designs, though these are still manufactured by Samsung's foundry. The next step is said to be for Apple to transfer at least some of its chip production to TSMC of Taiwan.