Samsung and Apple share a unique relationship, in which Samsung is both a rival and a supplier for the U.S. firm. But currently, its relationship as a supplier is helping the Korean firm make more profits than ever. The Wall Street Journal claims that Samsung is poised to earn more from making parts for the iPhone X than for its own Galaxy S8 handset.
According to the WSJ, the Korean firm could earn as much as $14.3 billion from supplying parts for the iPhone X thorough 2019, compared to just $10.1 billion for doing the same thing for the Galaxy S8. Citing data by Counterpoint Research, the report says that the iPhone X includes $110 worth of parts (including lay, chips, batteries, and capacitors) from Samsung and its affiliates. On the other hand, the Galaxy S8 has $202 worth of Samsung-supplied parts.
Counterpoint expects Apple to sell 130 million iPhone X units through the summer of 2019, compared to just 50 million Galaxy S8 units. The study assumes that most of the sales from the flagship phones will come in the first 20 months of availability. The sales number from Counterpoint could come as a disappointment for Samsung because, despite the headstart, the Galaxy S8 sales estimate is much lower than that of the iPhone X. The Galaxy S8 has been available since April, while the iPhone X won’t start shipping until November.
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Samsung and Apple’s business relationship is more than a decade old, when the grandson of Samsung’s founder, Lee Jae-yong, personally met Apple co-founder Steve Jobs to finalize the deal for supplying flash memory for iPods, says the WSJ, citing people familiar with the matter. The relationship has only strengthened in recent years, but it’s more out of necessity than maintaining a decade-old healthy business relationship. Samsung is one of the few suppliers that can meet Apple’s demands when it comes to the quality and quantity of a few components, like NAND flash memory and OLED displays.
Though Apple is not exactly very positive on this relationship, there is not much it can do about it for now. However, it has been encouraging other suppliers to sort of replace Samsung. For instance, it has reportedly been in talks with Sharp Corp. and Japan Display to develop OLED production operations. Further, to get more supplier options, Apple is also supporting Bain Capital’s bid for Toshiba memory-chip business.
David Yoffie, a professor at Harvard Business School, told the WSJ, “These are two of the largest companies on the planet deeply tied at the hip and directly competitive. That makes this stand out compared with almost any relationship you can think of.”
According to S&P Global Market Intelligence, for 2017, Samsung and Apple are expected to be the most profitable companies globally (excluding Chinese banks). Apple will be hoping that its new iPhones will further push its smartphone sales, which represented about two-thirds of its $215.64 billion in revenue in fiscal 2016. On the other hand, Samsung as a supplier is expected to make billions from OLED screens and NAND flash memory for iPhones, according to investment bank CLSA.