Here’s How Samsung Can Hurt Apple Some More
If Samsung were to raise the price of mobile processors it supplies to Apple (NASDAQ:AAPL), the iPhone maker could see a drop in its overall margins by as much as 2 percentage points. The observation was made by Piper Jaffray analyst Gene Munster, who was prompted into the analysis by a news report earlier in the week that said Samsung had already increased chip price for Apple by about 20 percent.
Munster wrote in a note to investors on Wednesday that he would not be surprised by the price increase, “given the legal tension” between the two companies. But since the processors are a core component of the iPhone and iPad, Munster calculated a 20 percent increase in prices would hit Apple’s margins between 1 and 2 percentage points. The chips represent between 6 percent and 9 percent of the total component cost of an iOS device, Apple Insider said.
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While Apple currently has no choice but to continue its partnership with the Korean company, Munster said an eventual move to an alternative supplier such as Taiwan Semiconductor Manufacturing Co. (NYSE:TSM) was likely. “We believe that if Apple were to move to another vendor in the next year or two, they may be able to negotiate better chip prices, which would roll back the impact from the Samsung price increase,” he said.
The analyst added that while overall margins were likely to drop for Apple in the December quarter because of the several product introductions, they will ultimately improve to reach levels of 41.5 percent for calendar years 2013 and 2014. “It does not appear that new product launches for iPhone 5 and iPad mini carry significantly different margins than prior launch margins for the same product lines,” Munster wrote.
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