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Apple, with limited choices, likely to retain Samsung partnership

June 29, 2013 at 1:35 PM   |   Comments

CUPERTINO, Calif., June 29 (UPI) -- U.S. technology giant Apple is stuck working with rival Samsung Electronics, despite a souring relationship, an industry analyst said.

Apple has used Samsung as a supplier of critical components for years. At the same time, Samsung built up its own business that now ships more smartphones than Apple, The Wall Street Journal said Saturday.

Apple and Samsung have sparred in court in recent years over ownership of the rights to various patents.

In the meantime, Apple is till Samsung's largest customer for components. Industry analyst Mark Newman at Sanford Bernstein in Hong Kong estimated Apple bought $10 billion worth of components from Samsung in 2012 -- accounting for a major portion of Samsung's $59.13 billion components business.

It also means Apple cannot easily walk away from Samsung to find replacement components, and Samsung is certainly interested in keeping Apple as a client, the Journal said.

"If Samsung loses Apple as a client, it will have an impact because Apple represents a large portion" of Samsung's component business, Newman said.

"That's forced more of these strange bedfellows, because the choices are limited," said Michael Marks, a Stanford University Graduate School of Business instructor on supply chains.

The odds of Apple finding other suppliers who can match its production and quality standards "aren't good," Marks said.

"That is why they keep buying from Samsung."

Nonetheless, Apple is trying to distance itself from a rival that company executives believe profited from using Apple's own technology.

Apple recently signed a contract with Taiwan Semiconductor Manufacturing Company to produce microchips for iPads and iPhones, but it took long negotiations to get to that point.

The talks with the Taiwanese company began in 2010. Part of the talks included Apple asking for TSMC to dedicated part of its factory to Apple products, but the Taiwanese company refused to lock itself into one client and lose flexibility, the Journal said.

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