Following Apple, HTC cuts component orders from Samsung

After Apple Inc slashed its orders for memory chips for its new iPhone from major supplier and competitor, Samsung Electronics Co Ltd, HTC too has reportedly cut down on its smartphone component orders from the South Korean company. According to a report by DigiTimes, HTC has reduced its orders from Samsung, and instead opted to order CMOS image sensors from OmniVision and Sony. The company has also chosen to move part of its AMOLED panel orders to AU Optronics, DigiTimes reported citing ‘sources’.

The report quoted the sources as saying that HTC’s move comes after Apple’s new buying strategy was implemented for reducing its reliance on Samsung for component orders. However, as AU Optronics’ AMOLED panel yield rates and production volumes are of some concern to HTC and the company has therefore maintained part of its AMOLED panel orders from Samsung, the sources added.

The new HTC One X+ might have components manufactured by OmniVision or Sony.

Apple cut down its orders for components from Samsung following a strenuous patent infringement battle between Apple and Samsung, which resulted in the famous $1 billion verdict against Samsung.

Samsung is the sole supplier of Apple-designed chips that power the iPhone and iPad. Samsung also supplies DRAM and NAND-type memory chips and flat screens used in popular Apple gadgets. Samsung products comprise 26 percent of the component cost of the iPhone, Samsung's lead counsel Charles Verhoeven was quoted as saying in the media.

It may seem the relationship between the two is souring following the court case, but Reuters cites an anonymous source as saying that Apple is only looking to diversify its memory chip supply chain. The source added that the South Korean firm remains on the list of initial suppliers for the new iPhone. "Samsung is still in the list of initial memory chip suppliers (for new iPhones). But Apple orders have been trending down and Samsung is making up for the reduced order from others, notably Samsung's handset business," the Reuters source said.

Apple has been known to face supply crunches in the past following highly-anticipated releases of its popular products. Reuters reported earlier this year that Elpida Memory was selling more than half of its mobile DRAM chips to Apple.

However, experts and analysts said the symbiotic business relationship between Samsung and Apple is too important for either to put at risk. "Apple needs Samsung to make the iPhone and iPad. Period. Samsung is the sole supplier of Apple's processing chips and without Samsung, they can't make these products," said James Song, an analyst at KDB Daewoo Securities in Seoul. "Samsung might be considering lots of options to leverage its components business' importance and pressure Apple, and Apple could be also well aware of this."

Samsung has around 70 percent global market share in mobile DRAMs, but Apple sources only 40 percent of its mobile DRAM chip requirement from Samsung, a boon to the likes of Elpida and SK Hynix, analysts say.