There are more reports out this week that Apple Inc. is moving away from using Samsung chips in its products.
All of the reports cite the ongoing Apple-Samsung patent battle as the root of the problem. Apple, says one report, doesn't want to use its competitor's technology in its products.
Really? Then what about displays? If Apple really wants to cut the cord with Samsung, drop Samsung as a display supplier. It will deal a bigger blow to the Korean company.
Analyses of the impending Apple-Samsung split spend a lot of time on the A6 processor (soon to be A7) that Samsung manufactures for Apple. According to a teardown analysis by IHS iSuppli, the value of the A6 in the iPhone 5 amounts to $17.50. The iPhone's Retina display is valued at $44 — the single biggest cost in the iPhone's bill of material.
Samsung is not the exclusive manufacturer of Retina displays: LG Display, Sharp, and AU Optronics are among other companies licensed to manufacture the Retina. However, Sharp has recently been hit with yield problems, and AU has taken a beating in US courts for price fixing. AU's court woes probably won't affect yield, and LG has definitely earned its chops competing with Samsung in display manufacturing. But Samsung still has to be a major supplier of displays to Apple.
And Apple is facing another problem. Within the next few weeks, Apple is said to be unveiling a new MacBook Pro with a Retina display. (There have been mixed reports about the arrival of the MacBook and the size and type of display.) Apple is also expected to launch the iPad Mini, which will probably sport a Retina. Where are all of these Retinas coming from?
I'd wager a good number of them are coming from Samsung factories. If, as iSuppli reports, a four-inch Retina is valued at $44, seven- or eight-inch Retinas will cost more for the iPad mini, and 13-inch Retinas (for the MacBook Pro) will carry yet a higher price tag. Samsung can only be profiting from these sales.
The Retina was developed and patented by Apple, so technically, Apple isn't using a competitor's display technology in its products. Apple is clearly secure in its patents as it is defending them against all corners. But severing ties with Samsung is eventually going to mean severing ties with Samsung's display factories, and Samsung is the 800-pound gorilla in the display world.
Yes, it will be a blow to Samsung, and I'm not suggesting Apple do this. But if Apple has drawn a line in the sand, and it seems that it has, then displays will be the next move, and the costliest one at that. But it may cost Apple as well.