Tuesday, April 30, 2013

As ye sow … so shall ye reap … Apple wins an early battle very big, but do they lose the war?

There is this somewhat silly concept called karma, which perfectly describes the concept of behaving as you would want others to behave towards you – the “golden rule” if you will. In other words, if you screw someone to get ahead, you are accruing “bad karma” …

So when Apple won that wet dream award of $1B from some wing nut jury over their patent dispute with Samsung, things were looking pretty rosy. (Note: The award has been reduced already by a judge with a capacity for reason.)

Things must have looked pretty rosy for Apple and I’m sure more than a few corks were popped … but as they say, karma is a bitch.

And now Samsung is tightening the supply chain noose for displays and processors and that has Apple predicting a “divot” in their upcoming profits.


I laughed out loud when I read this paragraph quoting analyst Peter Misek:

Apple is having to switch from in-cell to on-cell for the iPhone 6 as in-cell is proving unable to ramp to 4.8”. This new technology is unproven and Apple will incur significant costs to ramp production. We also believe that this is a stopgap technology in front of OLED. We believe it will take Apple and partners two years or more to commercialize OLED as the OLED market for smaller displays is effectively controlled by Samsung who will not supply Apple. In the meantime both LG Display and Japan Display will be forced to be on a dual track for screen technologies for Apple.

This transition for Apple will raise screen prices by 10 to 25 percent. Remember that it is Samsung who has completely swung the market towards the larger displays and even “phablets”, a crossover tablet and phone. Think they had something in mind?

But it gets better … I read this next and howled … Smile

Apple is trying to switch processor manufacturing completely to TSMC and away from Samsung. The problem: Apple need Samsung for its older chips and can't cut over production. Misek said Samsung will start raising prices on legacy chips in the summer which will raise Apple's bill of materials another 20 percent to 30 percent.

This is a beautiful example of how the opponent’s next move is sometimes subtle. Apple may not yet be defeated, but I think they earned themselves this swift kick in the jewels :-)