Samsung looks to earn around $4 billion more in revenue making parts for the iPhone X than from the parts it makes for its own flagship Galaxy S8 handset, according to new research revealed on Monday.
According to a report in The Wall Street Journal, citing data by Counterpart Research, Samsung is expected to be the supplier of $110 in parts per iPhone X, including the display, chips, batteries, and capacitors from Samsung itself and an assortment of Samsung affiliates. The Galaxy S8 has $202 in Samsung-supplied parts.
Through the summer of 2019, Counterpoint expects 130 million iPhone X sold, with 50 million Galaxy S8.
The study assumes that the largest share of a flagship’s sales comes in the first two years of availability. It also appears that the study manufacturers gave the Galaxy S8 a head start, and longer period of sales —the iPhone X won’t ship until November, and the Galaxy S8 has been available since April.
“Counterpoint expects Apple will sell 130 million iPhone X units, earning Samsung $110 on each through the summer of 2019, while Galaxy S8’s global sales are expected to be 50 million, earning Samsung $202 each from components such as displays and chips in its first 20 months of sales, according to estimates based on a projected bill of materials. The Counterpoint analysis includes parts sales from Samsung Electronics plus two Samsung affiliates that make batteries and capacitors.”
Also not included in the report is income that Samsung or Apple will earn as a result of the sales of the devices —it only encompasses earnings from manufacturing. Also not included are other devices from 2017 like the Galaxy Note 8, or the iPhone 8. Apple is seeking to cut back on its dependence on any one manufacturer.
Apple’s partnership with Bain Capital and others to buy Toshiba’s memory division appears to be one such move, as is the encouragement of other companies like LG to delve into OLED manufacturing. The Galaxy S8 retails for $749, but often has a notably lower street price. Apple’s iPhone X starts at $979. Not included in the study is the Galaxy Note 8, which retails for $949.
WSJ reports that Apple and Samsung’s close association can be traced back more than a decade to when Lee Jae-yong — the grandson of Samsung’s founder — personally negotiated with Apple co-founder Steve Jobs to provide flash memory for iPods, according to people familiar with the matter.
That enduring relationship has strengthened in recent months, but mostly out of pure necessity. Samsung is one of only a small number of semiconductor makers that can make large amounts of NAND flash memory, and remains the only significant manufacturer of the OLED displays adopted by Apple for the iPhone X, tightening the dependence of the two companies on each other.
At meetings, Samsung executives are known to tell attendees who pull out iPhones: “It’s OK. They’re our best client,” according to people familiar with the matter.
Samsung employees often refer to Apple with code names. One of the most popular is “LO,” short for “Lovely Opponent,” people familiar with the matter said. Apple’s descriptor for Samsung, meanwhile, is Samsung, according to people with knowledge of the situation.
Employees at the iPhone maker are often critical of its rival’s devices, pointing out software and hardware flaws behind closed doors. KGI Securities analyst Ming-Chi Kuo has claimed OLED iPhone panel supply is “controlled wholly by Samsung”, which may have contributed to the $999 iPhone X’s high price.
In a bid to reduce its dependency on Samsung parts going forward, Apple has recently encouraged OLED production by rival suppliers like Sharp and Japan Display, while also pursuing alternative sources of NAND flash, most recently by agreeing with Bain Capital and others to acquire Toshiba’s chip plant in a deal reportedly worth $17.7 billion.
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