Samsung raises their prices on Apple processors

Samsung has reportedly raised the prices they charge for manufacturing chipsets like the iPhone 5's Apple A6 by a whopping 20%. While no reason for the increase was given, Apple’s increased demand for processors, as many as 200 million chips this year, up from 130 million last year, could be a factor. Whatever the case may be, Apple seems to have little choice but to agree to the price hike, having no viable alternative suppliers at this point. MarketWatch reports:

According to the report, Apple buys all APs used for production of iPhone and iPad from Samsung Electronics with the volume estimated to be 130 million units last year and more than 200 million units this year.

Samsung Electronics has a long-term contract to supply APs to Apple until 2014, the report added.

There have been rumors that Apple will be switching away from Samsung for future processors. Apple’s contract with Samsung may throw some doubt on previous reports that a switch to a new manufacturer would come by the end of next year. However, it is not stated whether or not Samsung’s contract is exclusive, and in any case, if Apple were to make a transition to a new chip manufacturer, they would probably still need Samsung to produce their older chips, so it’s no surprise that a contract is in place through 2014.

There may be concerns that older chips like the A5 may have some Samsung design elements, and are in some way subject to Samsung’s patents. This would make it difficult for Apple to have them made by another supplier without paying Samsung a fee, or else opening themselves up to a lawsuit.

This incident demonstrates why it is necessary for Apple to not only move away from a rival for a part of their most important business, but also why it is important to have more than one supplier of key components.

Source: MarketWatch