Apple Has Blown A $US1 Billion Hole In Samsung's Business

Tim CookAPApple CEO Tim Cook

Apple is blowing a billion dollar sized hole in Samsung’s business this year, the Wall Street Journal reports.

While most people think of Samsung as a company that just makes smartphones, TVs, refrigerators, washers, dryers, etc., it also manufactures chips for those devices for other companies.

Until recently, Apple was one of its biggest customers for the chip-making business. Samsung made the chips inside the iPhone and iPad. Apple calls its chips A7, or A8, or Awhatever. Apple designs the chips using architecture from ARM, a British chip company, but Samsung would then manufacture those custom-built Apple designs.

Apple has reportedly switched away from Samsung to Taiwan-based TSMC for its chip manufacturing. This is due, in part, to Apple and Samsung’s bitter rivalry. Apple has accused Samsung of stealing its designs. Samsung has bashed Apple in TV ads.

As a result of Apple’s switch, Samsung’s chip making business is expected to have an 877 billion won, or ~$851 million, operating loss this year. That would be down from a 203 billion won, or ~$197 million operating profit, last year, according to the Wall Street Journal.

Samsung’s head of investor relations said, “Sales and profitability from System LSI (logic chip business) worsened as demand from main customers continued to decline.” The Journal says, “his comments confirmed, albeit indirectly, how Apple’s gradual shift away from Samsung as a customer of microprocessors was eating into its profits.”

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