Apple Investors Can Relax a Little Bit (Update 1)
NEW YORK (TheStreet) -- Apple (AAPL) shareholders have plenty of concerns but a price raise from Samsung isn't one of them.
After reports earlier in the week that the South Korean technology giant was raising application processor (AP) prices on Apple by as much as 20%, a Samsung Electronics official denied the reports to The Hankyoreh, a Seoul-based newspaper.
The unnamed official noted that prices are set at the beginning of the year and aren't changed easily.
Apple and Samsung have a very strenuous relationship, with Apple having successfully sued Samsung for patent infringement. The case has gone back and forth in the courts, but the contentious relationship between the two companies has continued to remain strained, at best.
On Apple's fourth-quarter earnings call, CEO Tim Cook was asked a question by Duetsche Bank analyst Chris Whitmore, specifically concerning Apple's relationship with Samsung on LCDs, and Cook responded in a candid, albeit somewhat cold manner. "And Samsung, we continue to be a customer of Samsung and continue to have a commercial relationship," Cook said in response.
If Samsung were to raise prices by 20%, Piper Jaffray analyst Gene Munster noted it would be a 1% to 2% hit to gross margins, but that Apple would eventually move to another supplier, and negotiate more favorable rates. "Apple may eventually shift production to another vendor (TSMC has been mentioned in various news reports), but in the meantime, they appear to have no other avenue," Munster wrote in the research note. "We believe that if Apple were to move to another vendor in the next year or two, they may be able to negotiate better chip prices, which would roll back the impact from the Samsung price increase."
Munster rates Apple "overweight" with a $900 price target.
As Apple and Samsung battle for mobile dominance, there is proof that Samsung is gaining market share, particularly with its Galaxy S III smartphone which recently overtook the iPhone 4S for top smartphone. Samsung uses Google's (GOOG) Android operating system, whereas Apple uses its proprietary iOS operating system.
Apple recently released the iPhone 5 as it looks to regain that crown in the all-important holiday quarter.