Apple needs Samsung

That is to say, Apple needs someone to manufacture in OLED screens on its brand new iPhone X, and Samsung, its biggest smartphone competitor, is the only company that can do it. Most people know Samsung as the company that sells smartphones, TVs, and even refrigerators. However, the strongest part of its business is actually the components it builds for other companies, namely memory chips and displays like the OLED display that’s going into the iPhone X. Samsung has the ability to supply products quickly to meet a gargantuan worldwide demand. The name of the game is market share – they of course supply their own devices with these components, but they want everyone else to turn to them too. What’s more, they’re investing almost $19 billion on new manufacturing plants in the next four years.

In July of this year, Samsung overtook Intel as the world’s number one chipmaker, and their dominance in OLED is even more extreme – as of the beginning of 2017, Samsung had over 90% of the OLED market share. When demand for OLED grows like it has with the iPhone, it makes for a conflicting situation; Samsung is the only OLED maker in the world who can handle the demand for new iPhones. As a result, Samsung gets to set the price. EGI Securities estimates that Samsung will charge Apple $120 to $130 for each OLED screen (compared to LCD screens which only cost Apple about 45 to 55 dollars). When Tim Cooks joined Apple in 1998, he was instrumental in overhauling the supply chain, and Apple began outsourcing its production to suppliers (mostly in Asia, who compete for their business) In the case of OLED screens, Apple has no other choice but to go with Samsung.

Samsung barely has the capacity to meet Apple’s demand, which is one of the reasons why the iPhone X comes out six weeks later than the iPhone 8. in order to bring its OLED costs down Apple needs for there to be a serious competitor, which is why it’s investing 2.7 billion dollars in LG Display (Google has the same idea as it invests 880 million dollars into LG to break the Samsung monopoly) For the near future though it doesn’t quite matter – Samsung is likely to be the major beneficiary of Apple’sOLED needs at least through 2019, not to mention that they’ll also be making a huge number of a series of chips for Apple - and it’s one of the strangest relationships in business. Apple and Samsung have been feuding for years ever since 2010 when Samsung was accused of copying the iPhone with the Galaxy S, leading to a seven-year legal war for that has cost Samsung $150 million so far. It seems silly because Apple is still shelling out millions upon millions to its archrival for parts, bolstering Samsung’s growth. In its own way, Samsung also needs Apple.

The iPhone X is the perfect symbol for the whole messy relationship and it captures how the tech business works at the very highest level – like a dysfunctional marriage.