Samsung, one of Apple’s most important partners in the manufacturing of its iOS devices, and most heated rivals in selling them, has denied previous reports of a price hike. According to one Samsung official, prices are negotiated at the beginning of the year. Raising them before the year is done would break a contract. As Chris Ciaccia of The Street reports, such a move would not be in the best interests of Samsung in the long run:
If Samsung were to raise prices by 20%, Piper Jaffray analyst Gene Munster noted it would be a 1% to 2% hit to gross margins, but that Apple would eventually move to another supplier, and negotiate more favorable rates.
While Samsung does hold a certain amount of leverage over Apple, being the only supplier of the A-series chips used to run iOS devices, they seem careful not to abuse that position. While Apple’s move to another supplier might be inevitable, it’s in Samsung’s best interests not to give Apple cause to go elsewhere prematurely.
If and when Apple does leave Samsung behind, it will represent a loss of billions of dollars, which, if they are prepared for it, Samsung will be able to mitigate through contracts with other partners. If Samsung were to make a move that caused Apple to move to another manufacturer before Samsung was ready, it would be a devastating blow to the company, from which it would take a lot of time to recover.
Source: The Street