Market Overview

Apple to Dump Samsung for Other Chip Makers

Apple (NASDAQ: AAPL) is pushing ahead with a plan to purchase supplies from new vendors as it attempts to sever ties with chief arch rival, Samsung.

According to The Wall Street Journal, Apple has been ordering some of its memory chips from SK Hynix, a South Korea-based manufacturer of flash memory and dynamic random access memory (DRAM) chips.

At the same time, Apple is expected to use Sharp's in-cell displays for the upcoming iPhone 5 as the company moves to cut costs. The new displays are reportedly less expensive to manufacture than those previously provided by Samsung. However, they are also more difficult to produce, which could lead to a significant production shortage.

This marks the first time that Apple has taken a step to move away from Samsung, a company that doubles as both a competitor and a supplier. Samsung produces chips, displays, and other technologies for several corporations within the smartphone and tablet industries. The company also manufactures its own devices, including those within the categories Apple wishes to dominate -- smartphones, tablets, and computers.

It is not uncommon for rivals to team up to manufacture new products. Sony (NYSE: SNE) and Panasonic (NYSE: PC) recently put aside their competitive differences to team up and produce OLED displays together. Their goal is to achieve low-cost mass production OLEDs by 2013.

For many years, the Apple/Samsung relationship was beneficial to both firms. Apple enjoyed the luxury of purchasing quality, low-cost supplies from Samsung, which earned billions of dollars in the process.

Their relationship began to fall apart when Apple sued Samsung for infringing on its patents. While the complaint had nothing to do with their supplier agreement, it has grown into a worldwide legal dispute with lawsuits filed in multiple nations.

Even without the lawsuits, some analysts expected Apple to switch suppliers as it attempted to secure and maintain worldwide dominance of the smartphone market.

During the second quarter, Samsung phones outsold the iPhone by more than 20 million units. This was accomplished with the help of numerous device iterations, including the hugely popular Galaxy S III.

Samsung's success may have also been influenced by international shopping trends. In 2011, Apple lost market share in Europe as consumers switched to lower-cost alternatives.

Follow me @LouisBedigianBZ

Posted-In: Apple iPhone 5 Samsung SK Hynix The Wall Street JournalNews Tech Best of Benzinga

 

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