Here’s a Way to Decode the Apple-Samsung Affair

Samsung is increasingly shaping its strategy based on its relationship with fellow tech giant Apple (NASDAQ:AAPL), with whom it intriguingly shares a fierce rivalry as well as a supply partnership. According to a report in The Chosun Ilbo, around 200 top Samsung executives will meet in South Korea next month as part of the company’s annual meeting, and among the proposed topics of discussion are the company’s goals, including product sales and legal strategy against Apple. The two rivals are involved in multiple legal battles against each other in multiple countries and there are several cases up for hearing in the coming calendar year.

Bernstein Research analyst Mark Newman wrote in a research note that while Samsung was in “a new era of profit maximization,” the antagonism with Apple had increasingly caused a change of strategy at the Korean company. “Possibly in response to Apple’s hostile tactics, Samsung has become noticeably more conservative in capex [capital expenditure] and more assertive in price negotiations on the component side,” Newman wrote. “Profits and returns are now more important than share gains.”

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But Samsung is also a supplier of processors and displays for Apple’s mobile products, a relationship that adds a different dimension to their rivalry. Recently, there was a report that the Korean company may have increased the prices of the chips it supplies to the iPhone maker, which may end up affecting Apple’s margins.

Newman sees the standoff as a business decision. “Apple requires more capacity for its custom processors that are exclusively made by Samsung,” the analyst wrote. “However, without long-term commitment beyond end of 2013, Samsung is refusing to spend literally billions of dollars. The risk for Samsung is idle capacity; the risk for Apple is not enough processors for iPhones/iPads.”

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