Samsung told The Korea Times on Monday that it will end its LCD panel supply relationship with Apple as of next year. That’s according to a “senior Samsung source” who declined to be identified, citing insufficient margins owing to Apple’s supply pricing strategy. Samsung’s role in Apple’s LCD supply chain has dwindled, with the Korean company reportedly cut out of iPad mini production, but Samsung’s decision to pull the plug may have been a pre-emptive strike by the parts manufacturer owing to a declining relationship between the two.
Samsung is said to be fielding more orders from its consumer electronics division, as well as from Apple competitor Amazon, in volumes that could make up for the loss of Apple as an LCD component customer. Apple was Samsung’s top customer according to NPD DisplaySearch for the first half of the year, but Apple began cutting its LCD orders back in September and was reportedly shifting order volumes to LG and Sharp, as ongoing patent disputes worsened.
Pricing on Apple’s latest iPad display had caused Samsung to earn only half as much per pixel on its production compared to previous models, so narrowing margins clearly had an impact on the decision, but this also can’t help but look like a case of Samsung ending a relationship that was already on the rocks to begin with. Apple was already clearly trying to reduce its reliance on its rival’s component supplier arm, as indicated by changes to the way it designs its processor and sources RAM and NAND flash chips, but this may accelerate Apple’s intended timeline.
Apple is a massive customer of LCD panels, and is set to become an even more demanding customer with the impending probable launch of the iPad mini. Earlier, there were concerns about whether or not Samsung’s display supplier competition could produce adequate volumes to satisfy its needs, but Sharp seems to have recently gotten its act together, and others like Sony have reportedly joined Apple’s stable of potential supply sources.
The question will be whether or not the timeline Samsung gave of next year will give Apple enough time to stabilize its alternate source. Still, it looks like both have been preparing for this moment for a while, so we could see each walk away relatively unscathed.