Samsung makes displays, CPUs, RAM, and SSD storage chips, selling ammunition for most smartphone makers, but it’s Apple which helps the Korean company stay profitable. Why? How? Apple buys lots of smartphone components and one of the chief suppliers is Samsung.
It would appear that the ideal situation to be in is to make most of the ammunition used in a war– for both sides. If you’re the bullet maker for everyone, know matter who wins or loses, you win, right? Samsung took a hit in revenue and profits a few years ago, and again last year, thanks to the exploding Galaxy Note 7 fiasco. This year revenue and profits are up, but most of that is not from selling premium Galaxy smartphones. It’s from selling bullets to the enemy. Every enemy.
Samsung manufactures a variety of CPUs, including at times, Apple’s own A-series chips used in iPhone and iPad. Plus, the Galaxy maker also makes displays and memory chips for many of the hundreds of smartphone manufacturers. Yes, for Apple, too.
In fact, Samsung has become more like the Apple envisioned by Steve Jobs decades ago.
Jobs envisioned a Mac factory that took in raw sand at one end of a highly automated facility, turned it into silicon used in chips, and churned out finished Macs at the other end. Samsung isn’t far from that reality as it builds smartphones that used mostly Samsung components. Buy purchasing CPU manufacturing of Apple-designed A-Series chips, by buying displays, RAM, and SSD storage from Samsung, Apple helps to keep Samsung rich, and fuels the flames that drive its largest competitor.
Apple ingenuity– with proprietary CPU designs and the distinction of iOS itself– helps to differentiate Apple’s iPhone from Samsung’s highly touted Galaxy line of smartphones.
But Samsung is doing exactly what Steve Jobs would prefer for Apple. Build the components used in iPhones and iPad instead of buying them from the enemy.
On the other hand, Samsung is just another Android smartphone maker, albeit with the best know brand name, and the one that gets the profits Apple does not get. There is little difference between a Samsung Galaxy S-whatever smartphone that lists for $725 and a cheap Chinese knock off smartphone for $299. They both have good cameras and run Android OS.
Meanwhile, Apple’s iOS and smooth hardware and software integration create the differentiation the company needs to command most of the smartphone industry’s profits.
That said, by using Samsung components for iPhone and iPad, Apple sets the stage for competition to Samsung from other component makes in Taiwan and elsewhere. It’s a battle, of course, but it’s Apple that leads the way to giving outsized profits to Samsung’s component manufacturing effort.
Apple is helping to make Samsung healthy.