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the price is not the only factor that matters in a buying decision. It can be. What if Qualcomm gives discount only if Apple buy as many as it need which is fa

the price is not the only factor that matters in a buying decision. It can be. What if Qualcomm gives discount only if Apple buy as many as it need which is fairly predictable. Then Apple would have enough supply and wont need to look for another supplier.

Slartie 9y ago
In that case Apple is still free to just buy a few percent of the chips they need from a different supplier, use those as well in production and in the worst case shelve the surplus chips from the Qualcomm supply agreement (if the quantities set in the agreement perfectly match the needs of Apple at that moment). Whether this makes economic sense depends on whether savings_due_to_discount - (price_of_chips_from_second_supplier + lost_value_of_surplus_chips) works out for Apple. That may be a negative number, which means that Apple has these costs for getting the majority of chips from Qualcomm at the super-cheap discount while still having a second supplier actively used in production. But these costs may still be worth the risk mitigation that occurs when having a second supplier in the chain. Especially for Apple, for which lost revenue due to supply constraints can quickly eat up any marginal savings on one component in the supply chain. The point is: it is an economic decision, which is exactly what it should be, and the decision can be made and re-evaluated at any time. If you exclude second suppliers by contract, it's only an economic decision when the contract is signed, after that the economic decision becomes a non-decision, even if the economic rationale changes (for example because a competitor became better). And that is exactly why this contract clause is anti-competitive and was deemed illegal.
- wtfstatists 9y ago
  > In that case Apple is still free to just buy a few percent of the chips they need from a different supplier, If supplier only needed few % sales from Apple, then Apple could have just given them money for other reasons (funding etc). Thus no loss of choice for consumers. This case is simply money grab. If those % of sales are not enough, then supplier dies. Loss of choice but now due to legal means.
mercutio2 9y ago
Qualcomm is persona-non-grata to Apple at this point. Apple doesn’t want to buy Qualcomm chips at any price, if it can get replacements from anywhere else. It wants reliable partners, and if possible, to contract manufacture its own baseband chip designs, without paying more to Qualcomm in ostensibly FRAND fees for chips it designs itself than just buying the chips from Qualcomm.
deleted 9y ago
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Slartie 9y ago

In that case Apple is still free to just buy a few percent of the chips they need from a different supplier, use those as well in production and in the worst case shelve the surplus chips from the Qualcomm supply agreement (if the quantities set in the agreement perfectly match the needs of Apple at that moment). Whether this makes economic sense depends on whether savings_due_to_discount - (price_of_chips_from_second_supplier + lost_value_of_surplus_chips) works out for Apple. That may be a negative number, which means that Apple has these costs for getting the majority of chips from Qualcomm at the super-cheap discount while still having a second supplier actively used in production. But these costs may still be worth the risk mitigation that occurs when having a second supplier in the chain. Especially for Apple, for which lost revenue due to supply constraints can quickly eat up any marginal savings on one component in the supply chain. The point is: it is an economic decision, which is exactly what it should be, and the decision can be made and re-evaluated at any time. If you exclude second suppliers by contract, it's only an economic decision when the contract is signed, after that the economic decision becomes a non-decision, even if the economic rationale changes (for example because a competitor became better). And that is exactly why this contract clause is anti-competitive and was deemed illegal.

wtfstatists 9y ago
> In that case Apple is still free to just buy a few percent of the chips they need from a different supplier, If supplier only needed few % sales from Apple, then Apple could have just given them money for other reasons (funding etc). Thus no loss of choice for consumers. This case is simply money grab. If those % of sales are not enough, then supplier dies. Loss of choice but now due to legal means.

mercutio2 9y ago

Qualcomm is persona-non-grata to Apple at this point. Apple doesn’t want to buy Qualcomm chips at any price, if it can get replacements from anywhere else. It wants reliable partners, and if possible, to contract manufacture its own baseband chip designs, without paying more to Qualcomm in ostensibly FRAND fees for chips it designs itself than just buying the chips from Qualcomm.

deleted 9y ago

[deleted]