Apple Shifts iPhone Chip Suppliers

The Wall Street Journal – Apple Inc. has recently shifted some memory-chip orders for its coming iPhone from Samsung Electronics Co. to other Asian chip makers, people familiar with the matter said Friday, suggesting that the U.S. company is diversifying its component suppliers as patent disputes between the two technology giants escalate.

As patent disputes continue, Apple shifts its chip orders for the new iPhone from Samsung to other companies. The WSJ’s Yun-Hee Kim explains the future of their rocky relationship.

A person familiar with the situation said Apple has been ordering more memory chips used to store data in its smartphones from South Korea-based SK Hynix Inc. However, Samsung will still be supplying the main processors used to power the new iPhone, another person familiar with the situation said.

“Orders to SK Hynix for both mobile DRAM and NAND flash memory chips from Apple have risen in recent months,” said one of the people, who declined to be named.

Spokesmen for SK Hynix and Samsung declined to comment. A spokesman for Apple in Korea also declined to comment.

An Apple Inc. iPhone 4S smartphone.

Samsung, which competes with Apple in the smartphone market, is also one of Apple’s biggest component suppliers. In addition to memory chips and processors, it also supplies the displays used in Apple’s iPads. However, the new iPhone is expected to be equipped with displays from Japan’s Sharp Corp. Korea’s LG Display Co. and Japan Display Inc., according to other people familiar with the situation, as it uses a different panel manufacturing technology that Samsung doesn’t use. Apple is also likely diversifying its supply chain for chips in anticipation of strong demand for its product.

Analysts said that the ongoing high-profile litigation between the two companies may have accelerated Apple’s move to reduce its dependence on Samsung.

“Apple started to lessen its dependence on Samsung for components since the latter half of last year when the two were fighting to win the spot for the world’s largest provider of smartphones. But Apple’s move to diversify its component vendors likely accelerated since early this year when the Apple-Samsung patent litigation escalated,” said John Park, an analyst at Daishin Securities.

Mr. Park said he doesn’t expect Apple’s move to have a significant impact on Samsung because there are many other smartphone vendors launching new models this year and Samsung is also seeing strong demand for its own smartphones which use chips developed internally.

Apple and Samsung are locked in a fierce patent dispute across the globe. Apple first sued Samsung in April last year, alleging that the South Korean company copied the design and the feel of its iPhone and iPad tablet. Samsung then countersued alleging that Apple violated its telecommunications patents.

In late August, a U.S. federal jury awarded Apple damages of $1.05 billion, ruling that Samsung violated six of Apple’s seven patents related to design and software. Samsung has said it plans to appeal.

Apple is also seeking to ban the sale of Samsung’s flagship smartphones in the U.S. market. There are more than nine other patent infringement cases in other countries including Australia, the Netherlands, Germany, France and Japan.

The stakes are high for both companies as Apple and Samsung are both vying to become the leading smartphone maker in the world. As of the second quarter of this year, Samsung led the market with a 34.6% share, compared with Apple’s 17.8%, according to data from market research firm Strategy Analytics.

Apple has sent an invitation to the media for Sept. 12, where it plans to discuss new products. People familiar with the situation have said that Apple is planning to launch its new iPhone.

In July, people familiar with the situation said that the new iPhone will use in-cell liquid crystal display panels, a new technology that makes the smartphone’s screen thinner by integrating touch sensors into the LCD, eliminating the need for a separate touch-screen layer. But the people said that in-cell panels are technologically more difficult to mass produce compared with conventional LCD panels.

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