In developing its new iPhone, Apple Inc. has reduced orders for memory chips from Samsung Electronics and is seeking out other supply lines.
Given the lawsuit victory, it stands to reason that Apple would seek to diversify away from its main rival. But Samsung continues to be among Apple’s main chip providers, producing flat screens, micro processors and memory chips (dynamic random access memory chips and NAND chips) for the Cupertino tech giant.
Apple has been cutting back orders from Samsung with respect to the new iPhone line, however, and sources have said that the company is looking to drop the South Korean company entirely from producing memory chips for their products. Instead, Apple has been looking to Toshiba, Elpida Memory and SK Hynix to supply NAND and DRAM chips.
“Samsung is still on the list of initial memory chip suppliers (for new iPhones). But Apple orders have been trending down and Samsung is making up for the reduced order from others, notably Samsung’s handset business,” said a source as reported by Reuters.
According to industry analysts, Samsung now counts on Apple’s memory chip orders as accounting for roughly 2.5 percent of its core business on the 2012 earnings sheet. Despite the lawsuit and the relatively sour relationship between Apple and Samsung, the Reuters source says that Apple is only looking to widen its supply chain and the rapport has nothing to do with its reduction in orders.
No matter how other supply chains may lessen between Apple and Samsung, Samsung is still the sole provider of iPhone-powering micro chips. For Samsung, this accounts for a big chunk of its lucrative component sales profit – expecting to bring in $2.2 billion in operating profit next year. For Apple, the micro chips are integral to iPhones and iPads.
So while Apple may be diversifying some components of its iPhone supply chain this time around, the key supply chain between Samsung and Apple remains unbroken and as strong as ever – at least for now. The world of business is a funny place, where companies can sue the pants off each other in courts around the world but still maintain an absolutely vital supply chain relationship when it counts.