Apple Facing 20 Percent Price Hike on Samsung Processors

Apple is going to have to dig a little deeper into its pockets for every iPhone and iPad it produces, according to a new report.

Apple Facing 20 Percent Price Hike on Samsung Processors

MarketWatch, citing South Korean daily newspaper Chosun Ilbo, reported on Sunday that Samsung has increased the price of mobile processors supplied to Apple for use in its iDevices by 20 percent. Chosun Ilbo apparently heard about the price hike from an unnamed person familiar with negotiations between Apple and Samsung.

"Samsung Electronics recently asked Apple for a significant price raise in (the mobile processor known as) application processor," the source said, according to MarketWatch.

As could be expected, the new price didn't initially sit well with Apple. "Apple first disapproved it, but finding no replacement supplier, it accepted the (increase)," the source added.

The new price has already taken effect. Apple buys all application processors used in the iPhone and iPad from Samsung, totaling about 130 million units last year and more than 200 million units this year, the report notes. Samsung has a long-term contract to supply the component to Apple until 2014.

According to a recent teardown analysis from IHS iSuppli, the iPhone 5 costs Apple approximately $207 to produce. The new A6 processor is $17.50 - up from $15 in the iPhone 4S $549.00 at Apple Store.

Apple and Samsung have a complicated a relationship, to say the least. As the firms battle it out in courts over patent issues, they continue to rely on each other when it comes to components: Samsung is one of Apple's biggest suppliers, while Apple is among Samsung's largest customers.

The drawn-out patent fight, however, appears to be souring the companies' once friendly relationship. Reports have been circulating that Apple is trying to distance itself from Samsung by going to other sources for components.

Back in September, it was reported that Samsung memory chips would not be inside the first shipment of new iPhones thanks to a fight over price. Also, just last week, rumors surfaced that Apple gave billions of dollars to Sharp, a financially struggling supplier of iPhone components, as part of an effort to avoid having to rely on Samsung for those parts.


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