Apple to decrease proportion of orders from Samsung
According to TrendForce, at the time when the iPod made its impact on the global market, Apple was not only Samsung's biggest NAND flash customer, but also the world's largest NAND flash purchaser. This status, in a sense, allowed the Cupertino giant to obtain ideal prices, particularly when it makes large bundle purchases. Following the major success of the iPhone series, and following the iPad's success in redefining the standard for the mobile device market, Apple became a major buyer within the market for the energy efficient—although more expensive—mobile DRAM and the market for NAND flash memory chips. Should the Cupertino giant decrease NAND flash orders from Samsung, and begin to rely instead on SK Hynix, Toshiba and Micron, the Korean company will likely experience a negative impact on its business revenue. The impact, however, might not be as severe as many think, given the reputation that Samsung has already established with its global brand, and considering how the company, with its multiple product lines, can digest its flash memory inventory more easily nowadays.
TrendForce believes that Apple decision to diversify risk following the expansion of its supply sources is a part of an established strategy. From an industry perspective, the proportion of Apple materials provided by Samsung is continuing to go on a downtrend. Regarding the iPhone and iPad's LCD screens, manufacturers such as Japan Display, LG and Sharp are providing the respective panels, whereas Samsung still manufactures the panels for the larger Macbook notebooks. Beginning with iPhone 4, Apple has stopped relying on Samsung for the smaller smartphone panels. The new iPhone 5 will begin to use the new in-cell touch panels, which will not be provided by the Korean company.
With regard to the smartphones' lithium batteries, Apple mainly makes its purchases from ATL and Sanyo, and is lowering the amount bought from Samsung SDI. It should be noted that Samsung will not be providing the lithium battery used for the iPhone 5 either. Regarding the iPhone and iPad's LED backlight components, Apple will still uses materials purchased from Nichia and TG.
According to TrendForce, the proportion of DRAM memory chips provided by Samsung suppliers to Apple, along with the Korean company's DRAM market share, has been showing a downtrend, plummeting from the initial 40 percent from 2012 to a much lower figure today. The rest of the DRAM market share is held by and divided amongst manufacturers such as SK Hynix and Elpida Memory.
The fact that Apple is lowering its orders from Samsung's supply chain can be attributed to two factors. First, Samsung and Apple's inability to reach an agreement to lower prices below market level—following the Cupertino company's large purchase orders—has led the latter to turn toward other DRAM manufacturers. Since Samsung's Galaxy series shipment ranks first worldwide, and given how the extra memory inventory could be used for these products, the Korean company can be expected to minimize the impact received from Apple's declining orders.
The second reason for the declining Samsung orders can be attributed to Apple's desire to maintain a relationship with a certain number of vendors, which gives it a certain advantage over purchasing price. With the Elpida and Micron merger, the two have combined their expertise on Mobile DRAM and NAND Flash, and released multifunctional eMCP products that help to benefit and expand the mobile device market. Other than to halt Samsung's expanding power, Apple's increasing orders from Elpida allows the mobile DRAM market to be maintained, allowing the power within the market to be balanced amongst the three major memory chip manufacturers.
Looking at the eventual announcement and release of the iPhone 5 and iPad Mini, and considering that the new iPad has 1GB RAM, Apple's appetite for mobile memory chips has risen on a massive scale. Although the main orders are placed with Hynix and Elpida, a portion of Apple's memory-related components are still ordered from Samsung. Regardless, Apple continues to take active steps to diminish its supply chain ties with the Korean-based company.
On the whole, Apple is gradually beginning to diminish the number components and materials bought from Samsung. One exception to this is the mobile core processor, namely the A6 chip. It appears the Cupertino firm is actively searching for OEMs other than Samsung to provide this component. While the media points to TSMC as amongst the possible candidates for this role, TrendForce believes that, for the A6 and A7 chips, Apple will just as likely turn to GlobalFoundries and Intel, which currently provides the Core i processors for Apple's notebooks. The ultimate choice will likely narrow down to whose products fits or performs up to Apple's product standards.
An issue also worth considering is whether Apple will increase its partnership with Taiwan-based manufacturers now that it is gradually cutting supply chain ties with Samsung. Other than the fact that Foxconn will still remain the main OEM and that AUO will continue to provide panels for the tablet, it appears that the other Taiwanese component manufacturers have little chance of being pursued by Apple. Rather, it seems Apple will continue to turn to the first-tier manufacturers for its orders, namely those based in the U.S., Japan and Korea.