Samsung Hiking its Chips Prices: Time for Apple to Move On

On Monday, Market Watch reported that Samsung had raised the price of manufacturing its processor chip for Apple by 20 percent. Even though the iPad maker was not happy with the news according to an unnamed source, “finding no replacement supplier, it accepted the (increase).” Today, Gene Munster, analyst at Piper Jaffray, told investors that the increased cost would reduce Apple’s already-low profit margin by 1 to 2 percentage points.

Munster noted that the processor chips made by Samsung are “the core component of Apple’s iPhone and iPad.” His estimate would mean that the iPad maker would see a significant loss in profits.

Munster said he believes the rumored price hike on Samsung’s part, “given the legal tension” that the chipmaker and tech giant have been through recently. Munster also believes the rumor that Apple is looking for a new chipmaker to replace its frienemy and will eventually move the manufacturing contract to another supplier, like Taiwan Semiconductor Manufacturing Co.

“We believe that if Apple were to move to another vendor in the next year or two, they may be abler o negotiate better chip prices, which would roll back the impact from the Samsung price increase,” said Munster.

Piper Jaffray’s projection for Apple during the December quarter is low, but the investment firm said that the company’s margins will “quickly improve” in 2013. Munster estimates that Apple will earn gross margins of 41.5 percent between 2013 and 2014.

“It does not appear that new product launches for iPhone 5 and iPad mini carry significantly different margins than prior launch margins for the same product lines,” he said.

[Via: Apple Insider]

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About Lory: Writer of all things app related, traveler of the space-time continuum, baker of really great cookies. Follow me @appaholik