Date: Wednesday, November 14th, 2012, 07:53
Category: iPad, iPhone, News, Processors, retail
The ne’er ending fight between Apple and Samsung continues.
Following up on yesterday’s story about Samsung potentially raising the cost of building mobile processors for Apple, such a change would be expected to reduce the company’s overall margins by as much as 2 percentage points.
Per AppleInsider, Gene Munster of Piper Jaffray noted on Wednesday that the processors built by Samsung at its chip fabrication plant in Austin, Tex., are the core component of Apple’s iPhone and iPad. The chips tend to represent between 6 and 9 percent of the total component cost of a given iOS device.
A report surfaced this week that claimed Samsung has increased the price of its mobile processors for Apple as the two rival companies are driven further apart.
Munster said a 20 percent increase in chip prices would result in a hit to Apple’s margins between 1 and 2 percentage points. He also said that he would not be surprised if the price increase turns out to be accurate, “given the legal tension” between the two companies.
But he also buys in to rumors that Apple plans to move its chip production away from Samsung, and will have assembly of its custom processors like the A6 found in the iPhone 5 handed to another company, such as Taiwan Semiconductor Manufacturing Co.
“We believe that if Apple were to move to another vendor in the next year or two, they may be able to negotiate better chip prices, which would roll back the impact from the Samsung price increase,” he said.
But in the meantime, Munster said it appears Apple has no choice but to continue its partnership with Samsung, even if the Korean electronics maker did put a massive price hike in place.
Piper Jaffray has projected that while Apple’s margins will dip during the December quarter in the face of a number of major product transitions, margins will quickly improve in the company’s fiscal year 2013. Munster has called for Apple to earn gross margins of 41.5 percent for calendar years 2013 and 2014.
“It does not appear that new product launches for iPhone 5 and iPad mini carry significantly different margins than prior launch margins for the same product lines,” he said.
Margins have been a major concern among investors in recent weeks, as Apple’s stock has taken a major hit. But most analysts have stood by Apple. Chris Whitmore of Deutsche Bank said last month that concern over Apple’s margins has been “overblown,” and that the reduction is “nearly entirely cyclical and not structural.”
Stay tuned for additional updates as to the feud between the Hatfields and the McCoys as they become available.