Apple’s component deals with Samsung to be unaffected by recent ruling

Mon, Aug 27, 2012

News

Despite going after each other’s throats in their recent patent infringement lawsuit, Apple and Samsung remain very important business partners given that the Korean based electronics giant happens to be the sole supplier of the chips that power Apple’s uber-profitable iPhone and iPad.

To that end, the Orlando Sentinal reports on an emergency meeting held in Seoul early on Sunday that was led by┬ávice chairman Choi Gee-sung and JK Shin, who heads up Samsung’s mobile business. CEO Kwon Oh-hyun, who is tasked with overseeing the component business, was reportedly not in charge of the meeting.

The clear message from Samsung is that a strict internal firewall between its handset business and its components operations remains intact.

While it plans to appeal the U.S. verdict, and a damages bill for $1.05 billion for copying critical features of Apple’s popular mobile devices – a sum that could be trebled – Samsung will not want to put at risk its Apple supply contract which is worth billions of dollars.

As well as being the only supplier of micro processors for the iPhone and iPad, Samsung also supplies DRAM and NAND-type memory chips and flat screens used in the popular Apple gadgets. Samsung products comprise 26 percent of the component cost of the iPhone, Samsung’s lead counsel Charles Verhoeven was quoted as saying in the media.

Samsung’s component sales could hit $13 billion next year and bring in $2.2 billion in operating profit, according to a recent estimate by┬áMorgan Stanley. That’s nearly 8 percent of estimated group operating profit for next year.

Apple recently received a judgement for $1.05 billion from Samsung, but again, Apple and Samsung’s relationship over the course of a year is worth many more billions. Samsung needs Apple just as much as Apple needs Samsung.

And citing a quote from Florian Mueller, the report notes that “Apple isn’t that stupid (to risk its Samsung parts deal). Apple’s agreements with Samsung will ensure that Samsung has no choice but to comply and supply.”

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