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This article was published on October 15, 2012

Apple’s supplier relationship with Samsung moving to ‘hate-hate’ terms: Report

Apple’s supplier relationship with Samsung moving to ‘hate-hate’ terms: Report
Josh Ong
Story by

Josh Ong

Josh Ong is the US Editor at The Next Web. He previously worked as TNW's China Editor and LA Reporter. Follow him on Twitter or email him a Josh Ong is the US Editor at The Next Web. He previously worked as TNW's China Editor and LA Reporter. Follow him on Twitter or email him at [email protected].

The supplier relationship between Apple and Samsung is believed to have been on rocky terms because of the ongoing legal feud between the two rivals, and a new report out of Korea describes it as having moved from “love-hate” to “hate-hate”.

After speaking with industry sources, The Korea Times believes the Apple and Samsung cooperation is “about to become one-dimensional”. A senior Samsung official told the paper that Apple has indicated it doesn’t plan to use Samsung’s technology anymore.

“Samsung’s agreement with Apple is limited to manufacturing the A6 processors. Apple did all the design and we are just producing the chips on a foundry basis,” he said.

If Apple were to significantly decrease its reliance on Samsung as a manufacturer, it would have an noticeable impact on South Korean company’s bottom line. One report from earlier this year suggested that Apple was Samsung’s largest customer, constituting as much almost 9 percent of Samsung’s revenue. That hit would come on top of a $1.05 billion judgment against Samsung that a jury levied in August.

Another Samsung insider told the publication that Apple has become the kind of chip client that only requires manufacturing, rather than needing additional services like design and architecture. The custom A6 chip in the iPhone 5 demonstrates Apple’s commitment to bringing more of the chip design work in-house. It’s hardly a stretch of the imagination to view Apple’s hiring of Jim Mergard, one of Samsung’s top chip experts, earlier this month as a competitive blow to Samsung.

“The high-profile hiring of someone like Mergard directly from a big rival no doubt increases mutual tension. Apple wants to internalize its management, even for application processors, and to lower its dependency on Samsung for those logic chips,” a source told the Times.

Another Samsung official said: “Apple is threatened by Samsung’s rapid rise. Apple is excluding it from major projects. However, it can’t completely wipe Samsung from its business partner list.”

Citigroup analyst J.T. Hsu recently suggested that Apple could move even further away from Samsung by ordering all of its rumored upcoming 20-nanometer quad-core processors for Samsung manufacturing rival TSMC. Rumors of Apple’s switch to TSMC have been bouncing around for some time now, but Hsu’s note does stoke further uncertainty about the future of the working relationship between Apple and Samsung.

Both companies have been battling fiercely around the globe with each wielding their intellectual property in hopes of blocking each other’s products in key markets. In an effort to have the billion-dollar judgment reversed, Samsung has challenged the credibility of the jury’s foreman, alleging that he had a conflict of interest because of an undisclosed lawsuit with Seagate, his former employer. The company has seen a bit of reprieve in recent weeks with the lifting of US injunctions against its Galaxy Nexus smartphone and the Galaxy Tab 10.1 tablet.

Even as Apple appears to be turning away from Samsung, the Galaxy device maker is hardly in trouble. It’s currently the world’s top mobile phone and smartphone maker, and it expects to post sales of roughly 52 trillion won ($46.7 billion) and profit of 8.1 trillion won ($7.3 billion) for the third quarter.

Image Credit: Justin Sullivan / Getty Images

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