Apple Cuts Memory Chip Component Order to Samsung for New iPhone 5

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Figure 1. iPhone

'Apple vs Samsung'. - A never-ending legal battles between Apple and Samsung appear to interfere with the business relationship of both. Apple reportedly lowered Samsung components in order to be used in the latest generation iPhone.

As reported from yahoo (09/06/2012) that  Apple Inc has reduced its orders for memory chips for its new iPhone from its main supplier and competitor Samsung Electronics Co, a source with direct knowledge of the matter said on Friday.

South Korea's Samsung is a core Apple supplier, producing micro processors, flat screens and memory chips - both dynamic random access memory (DRAM) chips and NAND memory chips - for the iPhone, iPad and iPod.

Apple has been cutting back its orders from Samsung as it seeks to diversify its memory chip supply lines, although the South Korean firm remains on the list of initial suppliers for the new iPhone, the source told Reuters. The person declined to be named because the negotiations are confidential.

The Korea Economic Daily, citing an unnamed industry source, reported on Friday that Apple had dropped Samsung from the list of memory chip suppliers for the first batch of the new iPhone, the iPhone 5, which is widely expected to be unveiled next Wednesday. The report said Apple instead picked Japan's Toshiba Corp, Elpida Memory and Korea's SK Hynix to supply DRAM and NAND chips.

And according The New York Times reported that Samsung’s handset business, led by robust sales of its Galaxy line of products, has become its most important earnings pillar, bringing in two-thirds of Samsung’s overall profit. The company said Thursday that sales of Galaxy S III smartphones had topped 20 million since the model’s introduction in May.

Analysts at Bernstein estimate that Apple’s purchases from Samsung of chips for mobile devices have fallen significantly and now account for only 2.5 percent of Samsung’s 2012 earnings.

Apple frequently faces a supply crunch when it rolls out a new product because the product often creates a consumer stampede that drives demand far in excess of supply and production capability.

Still, Samsung remains the sole producer of Apple-designed micro chips that power the iPhone and iPad, making the relationship too important for either party to put at risk.

Samsung’s component sales could hit $13 billion next year and bring in $2.2 billion in operating profit, according to a recent estimate by Morgan Stanley. That is nearly 8 percent of estimated group operating profit.

Still from The New York Times, that Apple might face a difficult task in seeking to invalidate patents held by HTC of Taiwan for data transmission in wireless devices, a U.S. trade judge said at a trial that could lead to import bans on the newest iPad and the next version of the iPhone, Bloomberg News reported from Washington.

 “Clear and convincing means something to me,” the U.S. International Trade Commission judge, Thomas Pender, said Thursday, referring to the legal standard for determining that a patent should not have been issued. “I have to be pretty darn certain a U.S. patent is invalid.”

HTC accuses Apple of infringing two patents it owns. HTC said the patented methods are critical to the 4G technology known as LTE, or long-term evolution, which allows faster downloads.

A victory could let HTC seek an import ban against the latest iPad and even the newest iPhone, if it uses LTE when it is unveiled as early as next week. That could give the Taiwanese handset maker leverage to force a settlement with Apple, which has made its own patent-infringement claims against HTC.