Analysis: Friend and foe; Samsung, Apple won't want to damage parts deal

Mon Aug 27, 2012 6:19am EDT
 
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By Miyoung Kim

SEOUL (Reuters) - While Samsung Electronics is reeling from a patent pounding by its smartphone rival Apple Inc, this is unlikely to damage the other part of their relationship - where Samsung is the sole supplier of Apple-designed chips that power the iPhone and iPad.

At an emergency meeting in Seoul early on Sunday following the damning U.S. legal defeat, the South Korean group's post mortem was led by vice chairman Choi Gee-sung and the head of the mobile business JK Shin, rather than by CEO Kwon Oh-hyun, whose primary role is in charge of the components business.

The clear message from Samsung is that a strict internal firewall between its handset business and its components operations remains intact.

While it plans to appeal the U.S. verdict, and a damages bill for $1.05 billion for copying critical features of Apple's popular mobile devices - a sum that could be trebled - Samsung will not want to put at risk its Apple supply contract which is worth billions of dollars.

As well as being the only supplier of micro processors for the iPhone and iPad, Samsung also supplies DRAM and NAND-type memory chips and flat screens used in the popular Apple gadgets. Samsung products comprise 26 percent of the component cost of the iPhone, Samsung's lead counsel Charles Verhoeven was quoted as saying in the media.

Samsung's component sales could hit $13 billion next year and bring in $2.2 billion in operating profit, according to a recent estimate by Morgan Stanley. That's nearly 8 percent of estimated group operating profit for next year.

TOO IMPORTANT

Experts and analysts said the symbiotic business relationship between Samsung and Apple is too important for either to put at risk.   Continued...

 
An employee holds up a Samsung Electronics' Galaxy Tab tablet computer (L) and an Apple iPad as he poses at a store in Seoul August 27, 2012. REUTERS/Lee Jae-Won