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With all of the hoopla surrounding Apple’s recent patent victory over Samsung, many people forgot that Apple was one of Samsung’s biggest customers. For years, Samsung has been supplying displays and processors to Apple’s factories in China. These components are used to make all sorts of different Apple products.
But according to the Korea Times and Forbes, Samsung “will terminate its contract with Apple an no longer supply liquid crystal display (LCD) panels to its long time partner.”
Samsung isn’t doing this out of spite for Apple. Instead, it’s forced to do this to stay in business. Samsung is selling its new iPad screens for less than half of what it sold the iPad 2 screens for. Why? Apple started buying parts from Samsung competitors at a lower price, forcing Samsung to sharply cut its prices.
In other words, Apple is demanding prices that Samsung simply cannot offer.
Samsung doesn’t just sell screens to Apple. It also provides the company with mobile chips used in both the iPad and iPhone. However, the Korea Times reported last week that Apple was going to terminate its mobile chip contract with Samsung. In fact, the most recent mobile processor – the A6 – was designed completely in-house by Apple.
Switching to low-cost competitors sometimes works out for companies, but not always. Screens and processors are two of the most essential components in any mobile device, and a problem with either of these two components – say, problems caused by low-quality manufacturing – could create an influx of customer complaints in the near future.
In any case, it looks like Samsung and Apple will no longer be doing business with one another in the near future. Which means that a no-holds-barred court battle can begin at any time. Grab your popcorn.