Apple gets a lot of love for creating gorgeous looking devices and drop dead simple software, but it’s companies like Samsung, LG, and TSMC who we should lavishing with attention. They invest in hard research and development, the type of stuff that’s needed to come out with ultra high resolution displays, faster processers, solid state storage, and everything else that makes up modern smartphones and tablets. According to a report from The Korea Times, Apple is set to order $11 billion worth of parts from Samsung over the course of 2012. To put that number into some perspective, it’s believed that Apple bought $7.8 billion worth of components from Samsung during 2011. A Samsung official who wishes to remain anonymous also told the South Korean publication that:
“Apple is planning to release a smaller iPad, probably with a 7.85-inch screen, and to sell more of its MacBook Air PCs using Samsung’s faster solid state drive (SSD) storage.”
Should that Samsung employee have said anything about future Apple hardware? Obviously not, but what’s Apple going to do? As much as Apple would like to stop doing business with Samsung, because Samsung is one of their largest competitor in the mobile phone space, there are very few companies who can make the type of components that Samsung makes and in such incredible volume. We’ll no doubt hear about LG and Sharp getting Apple contracts, but let’s be honest, Samsung’s going to get the lion’s share of Apple’s business.
The bigger question here is does Samsung’s component business put them at a serious advantage compared to other companies? Yes and no. Yes, Samsung can put the best parts in their devices and price them lower than the competition, but whereas Apple enjoys 30%+ margins on consumer hardware, the margins on components is typically in the single digits.
Not like 5% of $11 billion is a bad thing though!
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