6 ms·

IPhone 5 Chip Overloads Samsung Production Capacity

45 points by ericmsimons 16y ago

nonane 16y ago
Wow - talk about conflict of interest. So - Samsung knows the exact cpu specs for Apple's next gen iOS devices WHILE they're trying to compete with Apple on the Android platform with the Galaxy series. I wonder how the Apple execs feel about this - it should make them a little uncomfortable knowing that their production line depends on a distributor who has a vested interest in a competing platform. On the other hand, my impression is that Samsung is in the business of selling hardware for a profit. To them, it doesn't matter if they sell more hardware in the form of Galaxies or iPhones - as long as they're pushing out cpus/memory/lcds they don't care where it goes.
- peregrine 16y ago
  Samsung knows better then to breach a contract with someone like Apple. Especially when they are building $3 billion factory to support it. Also I am sure the division that designs phones is separate, contractually, from the division that designs/manufactures chips.
  - nonane 16y ago
    That makes sense. It all roses for Samsung - they have their hands in both pots.
    - malnourish 16y ago
      As many companies do, those with brand identification and a long history of success tend to ride more than one horse, e.g. Google, Sony, etc
    - nonane 16y ago
      Some facts using Samasung's Q42010 earnings release: http://www.samsung.com/us/aboutsamsung/ir/ireventpresentations/earningsrelease/downloads/2010/20110128_conference_eng_2.pdf http://www.samsung.com/us/aboutsamsung/ir/ireventpresentatio... 1) In terms of their revenues, their telecom business is now bigger than their semiconductor business, though from a profit perspective the semiconductor business is about 30% bigger. 2) Year-on-Year growth is slightly higher in the telecom division. 3) Telecom division expects higher than market growth rate mostly fueled by smartphone sets. 4) Telecom has mainly seen very strong growth in their 'strategic' handset models - 40% growth over previous years. Their strategic models are all Android based (5 models in total). Their telecom division is relying on newer revs of these models to drive higher than market returns in 2011. My (very simplistic) reading of this: Apple needs to diversify away from Samsung and create more options (duh). If the Galaxy series turns out to do better than expected next year, it gives Samsung more leverage to raise prices / cut production quotas on Apple's chips.
      - jmtulloss 16y ago
        Every smartphone company wants to diversify away from Samsung, it's never in your interest to be tied to a single supplier. The big problem with this: Samsung is the best. By far. Until their competitors catch up, they're the only reliable game in town.
- wmeredith 16y ago
  I doubt that Apple is overly concerned about the specs thing for all the reasons already stated here, along with the fact that Apple products have (almost) never beaten their competitors on spec sheets, quite the opposite. It's the UX that's their strength; it's very hard to copy and they know it.
  - ergo98 16y ago
    along with the fact that Apple products have (almost) never beaten their competitors on spec sheets This is categorically untrue. The iPhone 3GS was a world above virtually every Android phone at the time. The iPhone 4, when released, didn't have quite as large of a lead, but it still led the competition on virtually every spec. And those specs didn't go unnoticed. From screen brightness to color range to processor speed to GPU performance, this is one of the reasons it was considered the #1 device. It led the spec sheet. The iPhone 5 of course has its work cut out for it, because the competition is much more refined now and they're really in the game. But I am pretty certain that Apple is going to try their damndest to lead the spec comparisons again.
- michaelbuckbee 16y ago
  I wonder if Samsung is even really that interested in seeing Galaxy succeed or if it's almost more profitable to them just to have it as a bargaining point in dealing with Apple. Somewhat relevant, I actually got to play with a Galaxy over the weekend and was really impressed with it (I thought the form factor might be weird, but realized it's very close to a Kindle/Paperback book in size).
- EnderMB 16y ago
  Ever since Samsung released the original Galaxy i7500 they have had a terrible reputation from those who have had to live with their purchases. Samsung have shown that they are in the business of selling hardware, and that has been shown through their repeated lack of support. Groups like the GAOSP became extremely popular amongst Galaxy owners, and the same thing happened with the next generation of Galaxy phones. I'd be shocked if Samsung kept their promise and kept the Galaxy Tab updated once it's not the "hot product" any more. I wouldn't call this a conflict of interest because if anything I would say that Samsung playing such a large part in Android's success only damages peoples perception of Android as a platform, and as an Android fan it saddens me.
- dagw 16y ago
  If Samsung is like most multi-national magecorp. conglomorates then there is probably very little connection between the cpu part and the phone part of the company. I'm sure the CPU people look at phone people as just another customer, and the phone people look on the CPU people as just another supplier. As you say the cpu people just care about their profit margins and probably have no incentive to hurt their bottom line to boost the bottom line of the phone division.
- ergo98 16y ago
  Samsung knows the exact cpu specs for Apple's next gen iOS devices Samsung was a co-developer of the A4 chip, which they derived for their Hummingbird platform. You could as easily say that Apple knew what Samsung was up to.
deleted 16y ago
[deleted]
flashgordon 16y ago
Hardly surprising. But aside from Apple paying bucket loads (I dont have a reasonable guess at this number but I am assuming a fair amount will go towards the 3.6Bn to build the new plant?) to Samsung for getting access to their production facilities, doesnt this offer by samsung effectively go against its own mobile plans? Or would samsung's reason be that Apple will get its production scale somehow/somewhere so it might as well be them?
jacques_chester 16y ago
I didn't see any hard evidence. "Rumoured that", "leaks from sources" and "hinted" do not add up to the emphatic headline. But I guess we're talking about Apple rumours here: anything goes. Anyhow, no such discussion can go without the obligatory posting of a link to the Apple Product Cycle: http://www.misterbg.org/AppleProductCycle/ http://www.misterbg.org/AppleProductCycle/
hop 16y ago
Interesting they are building the chip fab in Austin - maybe they will be moving more manufacturing to the US. Must be more convenient too since Apple is designing the silicon. Edit: Silicon, not livestrong bracelet material.
- rabidsnail 16y ago
  I'm sorry, but I can't help myself. It's silicon. Silicone is a kind of synthetic rubber.
- bane 16y ago
  Austin has a very long history with semiconductors. No doubt the availability of capable employees and a local feeder school has played a large part in the equation.
thinkbohemian 16y ago
Any clue where they're getting their info on the Austin, Tx plant? (I live in ATX)
- tpearson 16y ago
  They're probably talking about the expansion of Samsung's Austin fab. http://www.prnewswire.com/news-releases/samsung-austin-semiconductor-begins-36b-expansion-for-advanced-logic-chips-95960189.html http://www.prnewswire.com/news-releases/samsung-austin-semic...
rabidsnail 16y ago
Why hasn't Apple built a fab yet? Do they still not produce enough iphones to be able to use the full capacity of a major chip fab (it would need to be major because they need to produce chips at high yield at 45nm)? Another company in Apple's position might build a fab and farm the extra capacity out to other companies, but that seems to go against Apple's dna. Still, I think it would make sense to pay some premium for the security of being sure their chip supplier won't decide to stop supplying them with chips.
- jacques_chester 16y ago
  1. Fab-building is a nightmarishly expensive proposition, and worse, you need to keep on building them to keep up. I think that's a treadmill that Apple are happy to leave to their suppliers (Intel, TMSC, Samsung et al). 2. Intel might decide not to be such a good friend if Apple get into fabrication.
  - tesseract 16y ago
    I can't imagine Intel and Apple being on the greatest of terms right now anyway, due to the Nvidia integrated graphics situation.
    - InclinedPlane 16y ago
      The tech industry isn't high school, companies that get into emotional huffs based on this sort of BS don't survive long. I'm sure Intel and Apple are on perfectly fine terms with each other. Intel is not dumb enough to ignore the importance of selling tens of millions of CPUs a year (as Mac components).
  - rabidsnail 16y ago
    >> 1. Fab-building is a nightmarishly expensive proposition, and worse, you need to keep on building them to keep up. I think that's a treadmill that Apple are happy to leave to their suppliers (Intel, TMSC, Samsung et al). Apple has the money, and if they can use the capacity the marginal cost of production should be lower for them, since there's not a third party taking a cut. Apple's also paying for the treadmill-running through their suppliers (unless they're getting chips at a loss, which I doubt). This is assuming Apple's internal demand is high enough to use the capacity of a whole fab. >>2. Intel might decide not to be such a good friend if Apple get into fabrication. If that's the case then Apple can threaten to tell on them. Intel has been down that road before, and I don't think they want to go there again. Also I think that, in the long term, Apple is trying to move away from Intel.

45 points by ericmsimons 16y ago

Wow - talk about conflict of interest. So - Samsung knows the exact cpu specs for Apple's next gen iOS devices WHILE they're trying to compete with Apple on the Android platform with the Galaxy series. I wonder how the Apple execs feel about this - it should make them a little uncomfortable knowing that their production line depends on a distributor who has a vested interest in a competing platform. On the other hand, my impression is that Samsung is in the business of selling hardware for a profit. To them, it doesn't matter if they sell more hardware in the form of Galaxies or iPhones - as long as they're pushing out cpus/memory/lcds they don't care where it goes.

peregrine 16y ago
Samsung knows better then to breach a contract with someone like Apple. Especially when they are building $3 billion factory to support it. Also I am sure the division that designs phones is separate, contractually, from the division that designs/manufactures chips.
- nonane 16y ago
  That makes sense. It all roses for Samsung - they have their hands in both pots.
  - malnourish 16y ago
    As many companies do, those with brand identification and a long history of success tend to ride more than one horse, e.g. Google, Sony, etc
  - nonane 16y ago
    Some facts using Samasung's Q42010 earnings release: http://www.samsung.com/us/aboutsamsung/ir/ireventpresentations/earningsrelease/downloads/2010/20110128_conference_eng_2.pdf http://www.samsung.com/us/aboutsamsung/ir/ireventpresentatio... 1) In terms of their revenues, their telecom business is now bigger than their semiconductor business, though from a profit perspective the semiconductor business is about 30% bigger. 2) Year-on-Year growth is slightly higher in the telecom division. 3) Telecom division expects higher than market growth rate mostly fueled by smartphone sets. 4) Telecom has mainly seen very strong growth in their 'strategic' handset models - 40% growth over previous years. Their strategic models are all Android based (5 models in total). Their telecom division is relying on newer revs of these models to drive higher than market returns in 2011. My (very simplistic) reading of this: Apple needs to diversify away from Samsung and create more options (duh). If the Galaxy series turns out to do better than expected next year, it gives Samsung more leverage to raise prices / cut production quotas on Apple's chips.
    - jmtulloss 16y ago
      Every smartphone company wants to diversify away from Samsung, it's never in your interest to be tied to a single supplier. The big problem with this: Samsung is the best. By far. Until their competitors catch up, they're the only reliable game in town.
wmeredith 16y ago
I doubt that Apple is overly concerned about the specs thing for all the reasons already stated here, along with the fact that Apple products have (almost) never beaten their competitors on spec sheets, quite the opposite. It's the UX that's their strength; it's very hard to copy and they know it.
- ergo98 16y ago
  along with the fact that Apple products have (almost) never beaten their competitors on spec sheets This is categorically untrue. The iPhone 3GS was a world above virtually every Android phone at the time. The iPhone 4, when released, didn't have quite as large of a lead, but it still led the competition on virtually every spec. And those specs didn't go unnoticed. From screen brightness to color range to processor speed to GPU performance, this is one of the reasons it was considered the #1 device. It led the spec sheet. The iPhone 5 of course has its work cut out for it, because the competition is much more refined now and they're really in the game. But I am pretty certain that Apple is going to try their damndest to lead the spec comparisons again.
michaelbuckbee 16y ago
I wonder if Samsung is even really that interested in seeing Galaxy succeed or if it's almost more profitable to them just to have it as a bargaining point in dealing with Apple. Somewhat relevant, I actually got to play with a Galaxy over the weekend and was really impressed with it (I thought the form factor might be weird, but realized it's very close to a Kindle/Paperback book in size).
EnderMB 16y ago
Ever since Samsung released the original Galaxy i7500 they have had a terrible reputation from those who have had to live with their purchases. Samsung have shown that they are in the business of selling hardware, and that has been shown through their repeated lack of support. Groups like the GAOSP became extremely popular amongst Galaxy owners, and the same thing happened with the next generation of Galaxy phones. I'd be shocked if Samsung kept their promise and kept the Galaxy Tab updated once it's not the "hot product" any more. I wouldn't call this a conflict of interest because if anything I would say that Samsung playing such a large part in Android's success only damages peoples perception of Android as a platform, and as an Android fan it saddens me.
dagw 16y ago
If Samsung is like most multi-national magecorp. conglomorates then there is probably very little connection between the cpu part and the phone part of the company. I'm sure the CPU people look at phone people as just another customer, and the phone people look on the CPU people as just another supplier. As you say the cpu people just care about their profit margins and probably have no incentive to hurt their bottom line to boost the bottom line of the phone division.
ergo98 16y ago
Samsung knows the exact cpu specs for Apple's next gen iOS devices Samsung was a co-developer of the A4 chip, which they derived for their Hummingbird platform. You could as easily say that Apple knew what Samsung was up to.

deleted 16y ago

[deleted]

flashgordon 16y ago

Hardly surprising. But aside from Apple paying bucket loads (I dont have a reasonable guess at this number but I am assuming a fair amount will go towards the 3.6Bn to build the new plant?) to Samsung for getting access to their production facilities, doesnt this offer by samsung effectively go against its own mobile plans? Or would samsung's reason be that Apple will get its production scale somehow/somewhere so it might as well be them?

jacques_chester 16y ago

I didn't see any hard evidence. "Rumoured that", "leaks from sources" and "hinted" do not add up to the emphatic headline. But I guess we're talking about Apple rumours here: anything goes. Anyhow, no such discussion can go without the obligatory posting of a link to the Apple Product Cycle: http://www.misterbg.org/AppleProductCycle/ http://www.misterbg.org/AppleProductCycle/

hop 16y ago

Interesting they are building the chip fab in Austin - maybe they will be moving more manufacturing to the US. Must be more convenient too since Apple is designing the silicon. Edit: Silicon, not livestrong bracelet material.

rabidsnail 16y ago
I'm sorry, but I can't help myself. It's silicon. Silicone is a kind of synthetic rubber.
bane 16y ago
Austin has a very long history with semiconductors. No doubt the availability of capable employees and a local feeder school has played a large part in the equation.

thinkbohemian 16y ago

Any clue where they're getting their info on the Austin, Tx plant? (I live in ATX)

tpearson 16y ago
They're probably talking about the expansion of Samsung's Austin fab. http://www.prnewswire.com/news-releases/samsung-austin-semiconductor-begins-36b-expansion-for-advanced-logic-chips-95960189.html http://www.prnewswire.com/news-releases/samsung-austin-semic...

rabidsnail 16y ago

Why hasn't Apple built a fab yet? Do they still not produce enough iphones to be able to use the full capacity of a major chip fab (it would need to be major because they need to produce chips at high yield at 45nm)? Another company in Apple's position might build a fab and farm the extra capacity out to other companies, but that seems to go against Apple's dna. Still, I think it would make sense to pay some premium for the security of being sure their chip supplier won't decide to stop supplying them with chips.

jacques_chester 16y ago
1. Fab-building is a nightmarishly expensive proposition, and worse, you need to keep on building them to keep up. I think that's a treadmill that Apple are happy to leave to their suppliers (Intel, TMSC, Samsung et al). 2. Intel might decide not to be such a good friend if Apple get into fabrication.
- tesseract 16y ago
  I can't imagine Intel and Apple being on the greatest of terms right now anyway, due to the Nvidia integrated graphics situation.
  - InclinedPlane 16y ago
    The tech industry isn't high school, companies that get into emotional huffs based on this sort of BS don't survive long. I'm sure Intel and Apple are on perfectly fine terms with each other. Intel is not dumb enough to ignore the importance of selling tens of millions of CPUs a year (as Mac components).
- rabidsnail 16y ago
  >> 1. Fab-building is a nightmarishly expensive proposition, and worse, you need to keep on building them to keep up. I think that's a treadmill that Apple are happy to leave to their suppliers (Intel, TMSC, Samsung et al). Apple has the money, and if they can use the capacity the marginal cost of production should be lower for them, since there's not a third party taking a cut. Apple's also paying for the treadmill-running through their suppliers (unless they're getting chips at a loss, which I doubt). This is assuming Apple's internal demand is high enough to use the capacity of a whole fab. >>2. Intel might decide not to be such a good friend if Apple get into fabrication. If that's the case then Apple can threaten to tell on them. Intel has been down that road before, and I don't think they want to go there again. Also I think that, in the long term, Apple is trying to move away from Intel.