Samsung to Apple: Our chips will cost you more

Samsung has hiked the price of its chips, but seemingly to only one customer, Apple, its archrival in the smartphone and tablet space, MarketWatch reports.

The A6 chip is used in the iPhone 5. James Martin/CNET

Samsung has hiked the price of its mobile processors by 20 percent, but to only one of the Korean technology giant's customers: Apple.

The report comes from The Wall Street Journal's MarketWatch, citing a person familiar with the negotiations between the two smartphone and tablet makers.

According to the report, Samsung requested an increase in the price of the mobile "application" processor supplied to Apple, which the Cupertino, Calif.-based technology giant was forced to swallow as only Samsung provides the specific hardware required to make the shiny rectangles of various sizes work properly. 

Citing the source:

Samsung Electronics recently asked Apple for a significant price raise in [the mobile processor known as] application processor. Apple first disapproved it, but finding no replacement supplier, it accepted the [increase].

The price hike has already gone into effect, the report said. Apple bought in the region of 130 million Samsung-made mobile processors last year and more than 200 million chips this year to keep up with demand for the iPhone 5 and the new iPads, such as the 7-inch iPad Mini.

Samsung's contract to provide chips to Apple expires in 2014.

By then, it may be likely that Apple designs its own chips, gaining further control on its iPhone and iPad supply chain. Late last month, former Apple hardware chief Bob Mansfield was appointed a senior vice president of technologies, where he is charged with bringing the firm's semiconductor and chip-making efforts in-house, cutting out third-party suppliers such as Samsung. 

Also, Cupertino recently hired former Samsung and AMD chip veteran Jim Mergard, suggesting Apple wants to retain much of the functionality as provided by Samsung chips -- which would make sense as it would allow backward compatibility with previous device versions.

We reached out to Samsung and Apple for a comment but did not hear back at the time of writing. We'll update the piece if we hear back.

This story originally appeared at ZDNet's Between the Lines under the headline "Samsung hikes Apple chip prices by 20 percent: report."

About the author

Zack Whittaker writes for ZDNet, CNET and CBS News. He is based in New York City.

 

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