Samsung not seen quaking in boots over Apple-Elpida report

Thu May 17, 2012 3:38am EDT
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By Miyoung Kim

SEOUL (Reuters) - Apple Inc will struggle to cut its reliance on rival Samsung Electronics for component supplies, analysts and industry sources said on Thursday, despite speculation that it has begun reducing its use of Samsung memory chips.

Samsung has lost 6 percent of its value, or $11 billion, since a Taiwanese trade news outlet reported on Wednesday that Apple had placed big new orders with Japanese chipmaker Elpida for dynamic random access memory (DRAM) chips.

The report has stoked concerns among Samsung investors that Apple wants to help turn the struggling Elpida, now in bankruptcy protection, into a much bigger supplier to the U.S. tech giant, partly at the expense of South Korea's Samsung.

Apple is Samsung's largest customer, buying chips and displays, but the pair are also bitter rivals for the sale of smartphones and tablets and are engaged in a patent war.

But tech analysts in the United States and South Korea said they doubted the report by Taiwan's DigiTimes, if confirmed, would signal major damage for Samsung and for its supplier links to Apple, despite the fierce selloff in Samsung shares.

"Apple has been diversifying its suppliers and the deal with Elpida had no major impact on other major suppliers as Elpida's share of the global mobile DRAM market is quite small," said one source with direct knowledge of Elpida's sales breakdown.

The source said Elpida was already selling more than half of its mobile DRAM chips to Apple - an estimate supported by Merrill Lynch - and that its current production offered limited scope in the short term to take market share from Samsung, which controls more than half of the global mobile DRAM market.

"(There's) nothing new in our view given Elpida usually assigns about 40-60 percent of its mobile DRAM capacity for Apple according to our channel checks," Merrill Lynch analyst Simon Woo said.   Continued...