Analysis: Apple, Samsung argument may spur supplier shakeup

Reuters

An intensifying quarrel between technology companies, Samsung (Seoul, South Korea) and Apple (Cupertino, Calif., U.S.A.) is triggering expectations that both companies will be looking to partner with other companies in the near future.

Last year, Apple was Samsung's No. 2 customer, accounting for $5.7 billion of sales tied mainly to semiconductors, according to Samsung's annual report. It has since become Samsung's top client.

But last month Apple moved to protect its smartphone and tablet business by filing a lawsuit again Samsung. Samsung makes parts central to Apple's mobile devices, but Apple accused the Samsung of "slavishly" copying the iPad and iPhone in its own Galaxy devices.

The lawsuit comes just as Samsung is set to become the world's top smartphone vendor, ending Nokia's decade-plus reign.

With the electronics companies in an argument over smartphones and tablets patents, any worsening in their supply relationship could mean more business for Toshiba Corp, Micron, Hynix Semiconductor, Intel and TSMC.

While it would be a challenge for Apple to sever or water down its long-standing relationship with the huge Korean company, Apple CEO Steve Jobs is known for abruptly spurning former partners. Its relationship with Google cooled rapidly after the Internet giant got into smartphones, for instance.

Finding alternative sources for components and reducing its reliance on Samsung for everything from flash memory to processors and displays would make sense for Apple as the two compete head-to-head in an exploding market for mobile devices, analysts say.

"They have become more competitors and less partners and so I think Apple will definitely not be looking to Samsung as its go-to partner-of-choice for NAND flash," said Brian Marshall, an analyst with Gleacher & Co, a brokerage service provider. He expects Apple to source its future mobile processors from other companies.

If Apple does decide to become partners with other companies, PC chipmaker Intel would likely be interested. Intel is scrambling to find traction in the fast-moving mobile market and has repeatedly expressed a desire for Apple business.

"There is a lot of competition, especially for high-profile and leading-edge wins like Apple," said Real World Technologies analyst David Kanter. "When you toss Intel into the mix, then it becomes even more interesting."

Citigroup estimates new business from Apple could account for around 1.4% of Intel's sales, expected to hit $56 billion in 2012, were they to make a deal with Apple.

"The reality is that they kind of need each other," Wu said. "The other reality is that they make a lot of money off each other."

(Editing by Edwin Chan and Maureen Bavdek)

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