Apple sticks with Samsung

Apple is being forced to kiss and make up with its enemy Samsung even while the pair are locked in an abortive trademark battle.

The Wall Street Journal has noted that Apple’s efforts to find a company other than Samsung have faced all sorts of problems.

After years of technical delays, Apple finally signed a deal with TSMC to make some of the chips starting in 2014. But the process had been beset by glitches preventing the chips from meeting Apple’s speed and power standards.

While Apple managed to stop buying iPhone screens from Samsung and has reduced iPad-screen purchases, it looks like Samsung will remain the primary supplier for chips through next year.

It has taken a while for Apple to wake up to the fact that its dependence on Samsung limits Apple’s ability to bully decent deals out of its suppliers.

Part of the dependence is based on Apple and Samsung working closely in development for years on custom built chips.

Apple sources say it is proving difficult to replicate  that relationship with someone else.

The deal with TSMC is a milestone but it is a long way from being as efficient as the relationship with Samsung.

TSMC was not as amenable to Apple’s strange ways. Apple demanded to invest in TSMC, or to have TSMC set aside factory space dedicated to Apple chips. TSMC chairman Morris Chang rejected that because he wanted to maintain its independence and manufacturing flexibility.

For its part, Samsung has reason to keep the Apple relationship going. Cupertino is still Samsung’s biggest customer for components.

Apple’s component orders from Samsung were $10 billion last year and over half of that was for the Samsung made processor.

Another difficulty for Apple is that Samsung has its fingers in a lot of pies. Apple hoped to lean on Sharp to provide it with the new iPad’s high-resolution displays.

Sharp had missed the launch deadline as it struggled to mass-produce displays using a new technology and Apple used Samsung instead. Then in March, Samsung agreed to buy a three percent stake in Sharp and to buy more LCD panels from it.

This meant that if Apple wanted to bang on Sharp’s door again it would have to deal with Samsung as a Sharp shareholder and customer. Apple would have no bargaining power with Sharp.

All this means that Apple is stuck with Samsung for a long time to come and the assumption is that it is a marriage of inconvenience which favours the South Korean supplier.