If Apple and Samsung were a couple in the process of separating, this might be the point where they sign leases on separate apartments. Today, sources in Korea said that Apple is going to stop buying the flat panel LCD displays from Samsung that are central to its iPad and iPad Mini tablets. Those contracts will instead go to LG Display, Sharp, Japan Display and AU Optronics.
Apple had already been trimming its orders from Samsung. In 2012 Apple was buying 800,000 9.7″ iPad displays from Samsung each month, while LG was supplying about 2 million a month. For the next version of the iPad, it’s expected that LG will reap even more business from Apple, while Samsung’s proportion will drop to zero.
Samsung is a perfectly competent maker of displays, so why the change? It’s almost certainly related to the larger spat between the two companies, expressed most concretely in Apple’s multiple lawsuits against Samsung for copying the design of the iPhone and iPad.
It’s also telling that this comes not long after Apple reduced orders from Samsung for the kind of memory that goes into mobile devices. There’s something way deeper than spite going on here. As analysts like Horace Dediu have pointed out, by purchasing critical components from Samsung, Apple is effectively giving its most potent competitor a 12-18 month look ahead into what Apple is rolling out next, down to the smallest detail. Because that’s how far in advance Apple has to order components in order to have enough ready for launch.
Ever since the launch of Samsung’s line of Android smartphones, Apple’s executives must have known that this nasty split was coming. But setting up supply chains of the scale required to satisfy Apple’s global market—not to mention finding suppliers with enough capacity—is hard enough that it’s taken this long to make the shift complete.
So what’s next in the Apple/Samsung divorce? The crown jewels: Apple’s entirely custom microchips that are the brains of its latest-generation iPhone and iPads. Currently, they’re fabricated in a plant in Austin, Texas, by Samsung. But there is plenty of evidence that Apple is trying to shift that fabrication to Taiwan Semiconductor Manufacturing Company, and perhaps even Intel.
Once Apple is no longer buying memory, displays or microchips from Samsung, the divorce will be complete. And then the two can really go at it.
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