Samsung Electronics (SSNLF) may be Apple Inc.’s (AAPL) fiercest rival when it comes to smartphones, but that doesn’t mean it doesn’t want the new line of iPhones to sell like hotcakes. After all if they do, the South Korean consumer electronics company stands to make billions of dollars.
For more than a decade, the two tech powerhouses have grudgingly worked together, with Samsung supplying key components such as memory chips to Apple. That relationship has gotten even more robust more recently given Samsung is the only major manufacture of OLEDs, the bendable screens that will be found on Apple’s new iPhone X. And if Apple hits it out of the park with the X, Samsung can make more money off supplying it parts than from its own line of Galaxy 8 smartphones. (See also: Samsung to Surge Thanks to Apple: JPMorgan.)
Winning From 2nd Place
Based on an analysis conducted by Counterpoint Technology Market Research for The Wall Street Journal, Samsung could earn around $4 billion more in revenue from parts supplied for the iPhone X than from the parts it makes for its own Galaxy S8 smartphones. That $4 billion is expected to come in the 20 months after the iPhone X goes on sale Nov. 3, the typical period in which Apple sells the most devices after a launch. Counterpoint estimates Apple will sell 130 million iPhone X phones giving Samsung $110 on each phone through the summer of 2019. Global sales of the S8 are expected to reach 50 million, providing the smartphone maker $202 in component sales in the first 20 months. “These are two of the largest companies on the planet deeply tied at the hip and directly competitive,” said David Yoffie, a professor at Harvard Business School said in the report. “That makes this stand out compared with almost any relationship you can think of.” (See also: Apple: Making an iPhone 8 Costs $10 More Than a 7.)
That relationship may not last longer, particularly since Apple is looking to reduce its reliance on Samsung for components. Citing industry analysts, the Journal noted the company is looking for other manufactures to produce OLEDs for it by 2019 or earlier. What’s more, it is also encouraging the likes of Sharp and Japan Display to increase their production of OLED screens and is backing a bid by Bain Capital to acquire the memory chip unit of Toshiba Corp., which would give it an alternative to Samsung for memory chips, noted the report.