As an arch enemy, why does Apple “give” BILLIONS of dollars to Samsung every year?
- Tram Ho
Nowadays, most of us know famous names like “Apple” and “Samsung” and also own at least one or two products of these brands.
Both are large, extremely well-known companies in the technology industry. They continuously developed and became competitors for many years.
If Apple releases a new line of phones, tablets, or laptops, then soon after, Samsung will announce its products to compete, and vice versa, and so on for more than 10 years.
Up to this point, they have also been involved in many lawsuits together. But what most people don’t know, despite the fierce competition, they still have a strong business relationship and together benefit billions of dollars.
The story behind
Screen of iPhone X
In 2017, Apple released the iPhone X with a great new feature that no previous iPhone had. It’s an OLED screen.
This screen was an important factor that helped the iPhone X become the best-selling phone line at the time. And many people don’t know that it is powered by Samsung. But why? What did they think when giving their biggest competitor such a powerful “weapon”?
Are you thinking Samsung made a wrong decision? But no, this is a very profitable deal, it is even one of the best deals Samsung has ever made. They will collect $110 from each iPhone X sold. Thus, in the following 20 months, Apple sold nearly 130 million iPhones and brought Samsung 14 billion USD. This is amazing.
Undeniably, this is also a big win for Apple. Every year, Apple produces and sells millions of iPhones. But for the iPhone X, they need to have millions of OLED screens in a short time. They can’t make them themselves, because OLED screens are difficult to manufacture and expensive. So, Apple turned to one of the biggest companies in the world, a company that had a 90% market share in the field of OLED display production in 2017. They negotiated, offered the most favorable deals. for both sides.
Of course, in this case, Apple needs Samsung more because without their help the iPhone X would not be able to launch. Realizing its important role, Samsung offered a price of $110 per screen, much higher than the price Apple paid at $45. To make up for the expensive screens, Apple raised the price of the phone by a thousand dollars.
iPhone X is not the only event marking their collaboration. Even this is not the first time that Apple and Samsung have worked together. As competitors and with a long history of litigation, the two companies have exchanged and cooperated a lot in the course of their business.
From the A4 chip and the iPhone 4. Samsung continued to make other chips for Apple, and the A9 was the last chip, before Apple switched to TSMC with their current manufacturer.
Of course, A9 is not the end for Samsung to become a companion in the iPhone product line. They still make RAM, flash memory and screens… That’s why Samsung regularly gets a lot of money from Apple.
But why did they choose to cooperate in the first place?
To a lot of people, this partnership doesn’t seem like much, even if both sides make a lot of money. As competitors, shouldn’t they find a way to “kill” each other? What if Samsung doesn’t provide hardware, screens,… for the iPhones? Will Apple’s business be affected?
The answer is NO. Although I know it will be difficult to find a manufacturer that can supply millions of screens a year like Samsung. But Apple has been investing heavily in LG displays in the hope that it can become a potential replacement.
However, if it refuses to Apple, it will be difficult for Samsung to find a company that can buy millions of its chips and products every year. In fact, Samsung and Apple are not really competitive in the smartphone segment as many people think.
Smartphones are only a small part of Samsung’s revenue, as well as selling hardware and many other products. A few years ago there were rumors that Samsung would stop making smartphones. But this ultimately did not happen.
Overall, this partnership makes a lot of sense at the moment, but it can’t be sustained in the long term. Samsung needs a customer who buys a large number of products worth billions of dollars. Apple needs so much hardware that it’s almost impossible for any manufacturer to provide them all.
For Apple, this is dangerous. They are trying to change, overcome their weaknesses.
A few years back, Apple changed its chip supplier to TSMC. At the same time, they also invested in LG in the hope that it will be a new, potential display supplier. However, Samsung currently controls most of the display market and makes it a very difficult role to replace. But not without a way.
Apple does not like having to depend on Samsung and vice versa, Samsung also does not like to cooperate with Apple. But for now, it benefits both sides. Maybe a few years later, they will terminate the cooperation or a new partnership is formed.
Source : Genk