What Would Happen If Samsung Just Stopped Making Parts For The iPhone?

What Would Happen If Samsung Just Stopped Making Parts For The iPhone?

It’s unlikely that Samsung would just suddenly stop making components for Apple with no notice — for one thing, it’s probable that air-tight product contracts are in place that would prevent Samsung from doing just that — but let’s get hypothetical: what would happen if Cupertino’s legal campaign resulted in Samsung just taking all of its silicon and going home?

Short answer: it wouldn’t be pretty.

A solid chunk of every iPhone is built out of components supplied by Samsung, including the flash memory, DRAM memory and applications processor. In total, these components account for 26% of the component cost of each iPhone 4.

If Samsung got so pissed with Apple over suing them for ripping off the design of the iPhone and iPad, who would supply these components? There are few companies that could match Samsung’s price, or ship in enough volume to make the tens of millions of iPhones the world is clamoring for.

Of course, all of this is just out loud musing. Businesses are good at compartmentalizing, and so while Apple and Samsung may be at each other’s throats in the courts over intellectual property issues, that may not affect the production side of things at all. That said, there’s a reason Samsung is fighting so hard for its Galaxy smartphones and tablets: there’s a lot more money to be made selling smartphones and tablets to customers than selling Apple the components to make the same.

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  • liamgreen

    They would just go with some one else. Simple

  • SbMobile

    They would easily find someone else. Which most likely going to happen down the road anyway. This article is pointless because Samsung couldn’t even violate their contracts with Apple hypothetically. Every country has strict anti-trust laws. No Samsung exec is going to risk going to jail. Especially, in a non-North American country. The jail-time would be harsh. Once the factories in Brazil & China are built, a lot of these stories will seem even more irrelevant. Apple’s #1 in almost every tech/mobile category. It would be hard to believe that they don’t have the foresight to deal with these obvious issues before they become problems. 

  • gareth edwards

    No man is an island – same goes for companies. One day you’re king of the hill and hurling rocks, next day your yesterdays news.  This is how things are, it pays to both ensure you stay relevant and make good relationships, both make your chances of success greater.  We can all point to lots of companies over the years that we thought were bulletproof only to be surprised when the market bit them in the ass. Apple is no different. They’re on the up now but it is not impossible to imagine something happening that could change their (significant) fortunes. Unlikely but not impossible.

  • David Alexander Harrison

    Alas, it’s not that “simple”.  While they doubtless would just switch to a new supplier, it would cost far more & so the sale cost of the phones for the consumer would go up as well…

  • lls55
  • Jordan Clay

    You obviously didn’t read the article.  Cost would go up, supply would go down.

  • 300AShareMakesMeSmile

    Why would Samsung quit producing iPhone/iPad components for Apple?  Doesn’t Samsung make far more money from Apple device components than from selling their own smartphones?  Does anyone have solid information on that fact.  Apple certainly must have long-term contracts with Samsung that they wouldn’t be able to break without a major penalty.  Besides, didn’t Apple just recently invest money in Samsung to build some some factory for flat panel displays?  http://news.cnet.com/Apple-inv

    I honestly don’t see why Samsung would just drop one of its best customers over some licensing problems for which fees can be worked out in the long run.

  • Adam_Mckenzy1

    guys I paid $23.89 for an i Pad 2 32-GB and my girlfriend loves her Panasonic

    Lumiix GF 1 Camera that we got for $ 38.43 there arriving tomorrow by UPS.

    I will never pay such expensive retail prices in stores again. Especially

    when I also sold a 40 inch LED TV to my boss for $ 638 which only cost me $

    61.77 to buy. Here is the website we use to get it al from,

    http://EgoWin.com

  • Yaz Khoury

    I don’t think Samsung would stop supplying Apple soon like the article said because of the strict contract. If Apple thought suing Samsung over patent infringement would in any way risk the contract both companies share, Apple wouldn’t have went to court in the first place.

  • wayzom

    This is a key point, not only would they lose more revenue then their mobile division makes, they would face billions of dollars in fines in the US and the EU for anti-competitive behavior. If they would like to continue operating in those countries, they would be required to at least completely separate control of their divisions. They would likely have to split up completely.

    Apple would fully recover in under a year. Samsung would be crushed. The effects could ban the sale of all their products in at least two massive markets.

    Did this story start here or Gizmodo or is this guy just selling the same story all over.

  • wayzom

    It was meant to be hypothetical, but dumb hypotheticals are just dumb.

  • SuperTomcat

    Apple would go for LG… or not?
    http://www.appleinsider.com/ar

    Until now Samsung is the only one reliable and cheaper supplier, almost every component producer for other companies is dedicated to Android devices and Samsung is the only one can supply for multiples companies and systems.
    Samsung is increase its own market with smartphones and tables, that means more components for Samsung Mobile than other companies like Apple, so at the end Samsung could use their own  Apple components to their own final products.

  • ConceptVBS

    Without having economies of scale, other companies will be hard to match prices that Apple expects from replacement component suppliers.

    This is why Samsung is so successful in providing Apple with components: they have economies of scale plus quality to back it up.

    Just look at recent LG for instance. Having alternative suppliers is good, only if they can keep up with the quality that is.

  • ConceptVBS

    Samsung wins either way.

    Samsung is both a device manufacturer and a component supplier.

    If one area demand falls down, the other will prop it back up again.

    They have the business risks spread out across a wide range of products.

    They are essentially making the cake and eating it too.

  • John

    What is Samsungs market value? Is it Less than 73 Billion dollars? I know some fruit company with that just in spare cash.

  • John

    I’m looking at new TV and BluRay/DVR, and Samsung are at the top of my pick list – because everybody else is just using their components anyway. They make some of the the best screens right now, their reliability is  excellent – only Sony are better IMHO but I have other reasons for boycotting Sony products.

  • Cold_dead_fingers

    I love my iPad. I’m typing from my DarwinPad as we speak. Wait, what?

  • Robert Pruitt

    It’s clear that Apple is not trying to put Samsung out of business but to persuade them to focus on making components, not entire devices.  It may come to the point when Samsung has to make a difficult choice.

  • Scott Connie

    Contracts aren’t binding though, they can be broken and Apple have been sueing Samsung trying to have the Galaxy products banned from sale, where as Samsung haven’t done that, even if Samsung do keep supplying stuff they can simply send 1 part a day and that would kill/crush Apple on the spot, yet Samsung have kept their side of the contract.

    Apple are the ones who will lose Samsung have far too many patents and can simply sue other part factories just so that put holds on those factories as well.

    Also the Korean Government part own Samsung.

  • Michael Parker

    Apple are backing a loser in my opinion. Taking on a much bigger company like Samsung is just asking for trouble!

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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