According to MarketWatch, Samsung Electronics Co., Ltd. (LON:BC94), which is the largest tech firm in the world, according to revenue, has increased the price of the mobile application processor (AP) it supplies to Apple Inc. (NASDAQ:AAPL) The 20 percent increase was approved by Apple Inc. (NASDAQ:AAPL) after company representatives attempted to find a replacement supplier but was unable to do so.
Apple Inc. (NASDAQ:AAPL) purchases all of its APs for its iPad and iPhone from Samsung Electronics Co., Ltd. (LON:BC94). Last year’s volume was estimated around 130 million units, and this year’s volume is expected to be more than 200 million units, in order to keep up with demand for new models of the iPad and the iPhone 5. Samsung has a long-term contract to supply the APs to Apple Inc. (NASDAQ:AAPL) for two more years.
Analysts believe that Apple Inc. (NASDAQ:AAPL) could be designing its own chips by then, which would give the tech giant more control over the supply chain for the iPad and iPhone. Bob Mansfield, who was Apple’s hardware chief, was appointed a senior vice-president of technologies late last month and has now been tasked with bringing Apple’s chip-making and related manufacturing tasks in-house, so that third-party suppliers could be cut out of the supply chain. In addition, the company also hired Jim Mergard, a former Samsung and AMD chip designer, which seems to indicate that Apple Inc. (NASDAQ:AAPL) wants its chips to be able to function similarly to the current chips provided by Samsung Electronics Co., Ltd. (LON:BC94). This would provide backward compatibility for users of Apple’s previous versions of devices.
According to this morning’s report, the price increase is already in effect. Representatives from Samsung Electronics Co., Ltd. (LON:BC94) and the South Korea office of Apple Inc. (NASDAQ:AAPL) have so far declined to comment on the report.