updated 09:40 am EST, Mon November 12, 2012
Lack of alternative supplier said to have forced Apple's hand
Samsung is raising the cost of the processors it supplies to Apple by 20 percent, according to MarketWatch, citing the Korean publication Chosun Ilbo. "Samsung Electronics recently asked Apple for a significant price raise in (the mobile processor known as) application processor," a source familiar with the negotiations is quoted as saying. "Apple first disapproved it, but finding no replacement supplier, it accepted the (increase.)" The person adds that the new prices should already be in effect.
Although Apple custom-designs the A-series chips used devices like iPhones and iPads, they're based on ARM templates and manufactured entirely by Samsung. Chosun indicates that Samsung has a contract to supply application processors to Apple until 2014; even then however Apple could choose to stick with Samsung, since few if any other companies may be able to produce chips on the scale Apple demands.
The reason for the price increase hasn't been reported, but is likely Samsung taking advantage of a captive market and/or trying to offset expenses. Earlier this year Apple won a $1.05 billion judgment against Samsung, and that combined with the potential outcomes of other legal battles between the two companies could be incentive for Samsung to try to reclaim money or exert strategic pressure.