[Seiblybiozy]

Apple reduces its reliance on Samsung for iPhone 5 parts

2012-09-10
17:51 (GMT+8)



An Elpida Memory employee. This Japanese manufacturer is one of the companies chosen by Apple to replace Samsung's role in manufacturing spare parts for the company (Photo/Courtesy of Elpida)

After a patent war between Apple and Samsung finally ended, the relations between these two arch rivals have remained tense, a South Korean media report said, adding that Apple was planning to replace most of its iPhone 5 spare parts produced by Samsung.

Apple has replaced the suppliers of memory chips such as fast NAND flash memory and DRAM with South Korea's SK Hynix Semiconductor, Japan's Elpida Memory and Toshiba Corp. It has also replaced its LCD suppliers with South Korea's LG Display and Japan Display, an industry source said.

To manufacture the next iPhone's batteries, Apple chose China's Amperex Technology and Japan's SANYO Electric Co, dropping Samsung SDI from its initial supplier list, Korea Economic Daily said.

Zhu Jizhi, executive vice president of Chinese IC maker Cogobuy, told First Financial Daily that it was easy for Apple to replace the suppliers of its standardized products, although it could not end its reliance on Samsung for the supply of core spare parts.

Of note, the role of Taiwanese manufacturers in Apple's purchase management cannot be ignored, because they specialize in cost control and could affect Apple's purchase decisions. With the increasingly tense relations between Apple and Samsung, Apple is diversifying its spare-part suppliers.

Korea Economic Daily said Apple had dropped Samsung from its list of memory suppliers for the first batch of iPhone 5. Its first shipment is estimated to exceed 10,000 units. Apple did not order memory devices for the first batch of iPhone 5 from Samsung, including Mobile DRAM and NAND flash.

Samsung subsidiary Samsung SDI did not receive orders for batteries for the next iPhone model. Apple has reportedly outsourced battery assembly to Taiwan's Foxconn Technology Group, also known as Hon Hai Precision Industry Co. Foxconn bought some parts, such as cells, from other suppliers.

Ju told the Shanghai-based First Financial Daily that standardized products such as cells could be easily replaced. In addition, an industry insider said Apple would not manufacture its own spare parts in the short term. However, it is likely to use its ties with spare-part makers in Japan, the United States and China to change the market. This could affect Samsung's business performance.

Samsung's supply of storage chips and monitors to Apple accounts for an estimated 3% of its earnings per share (EPS) this year, lower than the 4% in 2011. Meanwhile, memory from Samsung is expected to contribute 2.5% to Apple's EPS.

Apple has reportedly placed more orders with Taiwanese suppliers, including Elpida Memory's Taiwanese company and other flat-panel makers. First Financial Daily said that as Apple's largest contract manufacturer, Foxconn had a responsibility to help Apple reduce its reliance on Samsung.

Foxconn will offer a wide range of key spare parts next year, by when it will contribute 50% to Apple's costs, up from 10% this year. This means Foxconn could become a strategic ally of Apple, instead of a contract manufacturer, the report added.