John Paczkowski

Recent Posts by John Paczkowski

Apple Supply Chain: Now With Less Samsung


Apple has long been one of Samsung’s largest customers, and Samsung one of Apple’s biggest component suppliers. But with tensions between the two companies running high, thanks to a sprawling global patent battle, and with Apple working to diversify its supply chain, the pair’s previously symbiotic relationship is beginning to change.

Supply chain sources tell the Korea Economic Daily, the Chosun Ilbo and Reuters that Apple has been reducing its component orders to Samsung. While it continues to rely on Samsung for some iOS device parts, Apple has opted not to use it as a key supplier of the memory chips and displays for its next-generation iPhone. Instead, it has turned to Toshiba, SK Hynix and Elpida Memory for memory chips, and to LG Display for liquid crystal displays.

“Samsung is still in the list of initial memory chip suppliers,” a source with direct knowledge of the matter told Reuters. “But Apple orders have been trending down.”

What’s behind that trend? Well, that’s not entirely clear. A move away from Samsung is certainly in line with Apple’s stated plans to widen its supply chain. A diversified supply chain minimizes operational risk and comes in handy during unforeseen calamities, as we saw following the 2011 earthquake and tsunami in Japan.

That said, it’s hard not to think that Apple’s legal brawl with Samsung isn’t playing some sort of role here. Cutting back component orders for a device like the next-generation iPhone could cause Samsung a bit of bottom-line pain, particularly if it ends up stuck with excess component inventory. What better way to undercut a fierce rival than to disrupt a key and well-established revenue stream?

Samsung and Apple did not respond to requests for comment.

(Image courtesy iFixit)

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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google