Friday, September 07, 2012

(BN) Samsung Chips Said to Be Kept From New IPhone on Pricing

Samsung Electronics Co. (005930) won't supply memory chips for the first shipments of Apple Inc. (AAPL)'s new iPhone because of a disagreement about pricing, a person familiar with the matter said.

Samsung's displays also won't be included in the initial batches of the new smartphone expected to be released next week, a second person familiar with the matter said. The Suwon, South Korea-based company will continue supplying the processor powering the device, the person said, declining to be identified because the information is confidential.

The iPhone maker has been diversifying its chip and display suppliers to reduce its reliance on its biggest smartphone competitor, which also is the world's largest maker of flat screens and semiconductors holding memory. Apple and Samsung are waging court fights on four continents after the Cupertino, California-based company accused the Galaxy maker of copying the iPhone last year.

"Apple doesn't like to be dependent on Samsung -- there's no question about it," Lee Sun Tae, a Seoul-based analyst at NH Investment & Securities Co., said by phone. Even so, "there's only so much volume Apple can get from other vendors. They will probably have to come back to Samsung later on."

The Korea Economic Daily reported Apple's exclusion of some Samsung components earlier today, citing a deepening legal dispute between the technology giants as a possible reason. Jason Kim, a Seoul-based spokesman for Samsung, and Steve Dowling, a spokesman for Apple, declined to comment. Carolyn Wu, a Beijing-based spokeswoman for Apple, didn't immediately respond to phone calls and an e-mail seeking comment.

IPhone Debut

Apple accounts for about 9 percent of Samsung's revenue, making it the company's largest customer, according to data compiled by Bloomberg.

Sales of memory chips and displays to Apple will probably account for 3 percent of Samsung's earnings per share this year, compared with about 4 percent in 2011, according to Sanford C. Bernstein's estimates.

Samsung shares gained 4.5 percent to 1,250,000 won at the close of trading in Seoul, while the Kospi index rose 2.6 percent.

Apple is preparing to introduce the next iPhone on Sept. 12 in what will be a design overhaul of its top-selling product, two people with knowledge of the company's plans said in July. The company has been introducing a new version of the device each year since 2007.

New screen technology that will be part of the next version of the iPhone is being made by LG Display Co., Sharp Corp. and Japan Display KK, according to research by Sanford C. Bernstein.

The U.S. company will use screens from AU Optronics Corp. and LG Display for a smaller version of the iPad to be released in October, according to four people familiar with the plans in August.

Samsung and Apple's interdependence traces its roots to the beginning of the iPhone, as the U.S. company turned to the South Korean chipmaker to make a microprocessor tailored to the device ahead of its 2007 debut.

The two companies, which had already worked together in screens and memory chips, signed a deal that resulted in Samsung becoming the sole manufacturer of the A-series of chips, which are at the heart of the iPhone and iPad. That relationship was complicated as Samsung gained on Apple in smartphone sales with its own Galaxy devices.

"In addition to litigation risks, we believe Apple is trying to actively diversify their component supply away from Samsung," Mark Newman, a Hong Kong-based senior analyst at Sanford C. Bernstein, said in a Sept. 5 report.

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