In the wake of Apple’s highly publicized $1 billion plus victory over Samsung in their recent patent infringement lawsuit encounter, the open question for supply chain management communities is how, if at all, the aftermath of this lawsuit will impact the ongoing relationship of Samsung in being a major strategic component supplier for Apple. Supply Chain Matters is of the viewpoint that the impact will not be immediate, but will change to some degree over time.
The best traditional business media reporting we have run across that reflects on the supply chain implications of the recent verdict comes from a syndicated published report by Reuters which clearly opines that Samsung and Apple will not damage their long-term component supplier agreements. Correctly noted is that the current agreements are too valuable and too important for either company to place at-risk. The article quotes a Samsung executive who took part in a high-level strategy session on Sunday as indicating: “(The) supply contract remains a separate issue from the litigation and there’ll be no change to it going forward.”
Samsung is the prime supplier for ARM microprocessor chips that power iPhones and iPads. The company also supplies DRAM memory chips along with LCD displays, but as Supply Chain Matters has commented previously, Apple has been actively sourcing other suppliers to provide more secondary sources of volume suppliers. Recent announcements from Samsung include multi-billion dollar investments to boost output at both its U.S. and South Korean chip production facilities as well as investment its next generation display technologies.
Financial industry analysts speculate that Samsung has the ability to leverage its importance as a leading-edge technology supplier and can leverage that capability by diversifying its current customer base beyond Apple. The Reuters article points out that only a select few suppliers can scale to the volume output requirements of Apple, and yield decent margins and profitability. We can collectively concur with that conclusion.
Legal experts speculate that the appeals process from last week’s patent infringement verdict could drag-on for another year. Apple will continue its efforts to be made whole both in financial damages and in pursuit of injunctions associated with the continued sale of certain Samsung smartphones and tablets.
The best analogy we can share is one of a marital relationship, where one partner is discovered to have been cheating. Both partners feel compelled to continue the marriage because of important family or economic factors, but relationship is forever changed in terms of trust.
The next major turning point will likely be when certain Samsung supply agreements reach multi-year contract renewal status. Lawyers may well earn another hefty set of fees.
What about your views? Do you believe that the relationship of Samsung as a strategic supplier to Apple will change?