Apple (AAPL)suing Samsung over, well, who really cares anymore, is probably the dumbest thing that Apple could do. It could have more serious blowback than most pundits realize, including sinking the iGadgetmaker.
The situation goes something like this. Mobile phones are a brutally cutthroat business, with basically nothing to differentiate one company from another any more. There are only so many things you can do in a phone the size of a cigarette pack, and most of those have been done by someone or something in the past few years. Barring that, someone did it on a UNIX box in the 60’s, and there is a video out there to prove it. Nothing in computing is new.
Thanks to the best government money can buy, the US has a system of rather bogus software patent laws that allow things that any idiot would find blindingly obvious to be patented. Atari’s bitmap patents, Amazon’s ‘one click‘, and any of 73,000 Microsoft ‘innovations’ spring to mind. All these do is subvert the patent system in order to shut out competition, innovation, and anyone with pockets not deep enough to enrich a large legal firm. The system itself is broken and thoroughly gamed.
With the wonderful combination of nothing new under the sun, and a system where the wheel can be re-patented if there is any software used in designing, manufacturing, selling, or using it. This sets the stage for enough lawsuits to tie up the court system for decades. If you don’t think things have gotten to the level of ‘stupid’ yet, take a look at these charts. One thing to think about, there have been a lot more filed since those were made, so they don’t quite show how complex things currently are.
Through it all, there is one thing you don’t see, or at least didn’t, Apple suing Samsung. Most people in the know thought it would not happen, using terms like ‘suicide’ and ‘monumental stupidity’ to describe Apple suing Samsung. Why? Because every single iDevice out there now is made using Samsung based and Samsung fabbed CPUs.
If Samsung makes the brains for all of the Apple parts, there are some serious problems with Apple suing Samsung. Contracts tend to be big, hefty, and have enough rules and penalties to cover the majority of cases, but in the end, they can be broken.
If Samsung wanted to, they could simply stop making Apple’s CPUs. Yes, they would pay some penalties, but those are unlikely to make up for the complete removal of Apple’s iStuff from the market. Samsung is also a good candidate for ‘best of the rest’ in phones and tablets, so they could very well make up most if not all of the penalty with increased sales. Apple would be, in the vernacular, SOL.
Why? Chips are complex, and even if Apple had their own design, which I doubt they do at this point in time, where would they make it? The complete list of foundries that have the ability to make the chips is TSMC, Samsung, Global Foundries, and possibly IBM. Discounting IBM for volume and yield reasons, that leaves three possibilities. If Apple takes Samsung out of the picture, or Samsung takes Apple out of it’s picture, that leaves TSMC and Global Foundries.
TSMC has already received Apple test tape outs, we hear they are A5 based, but that is about as far as it goes for now. Global Foundries is very compatible with Samsung, so they are likely more of a possibility than TSMC to make fruity designs in silicon. Even if both could start making the chips that Apple needs at there drop of a hat, there is still a huge stopping point.
That is capacity. Apple needs a HUGE number of wafers. The upcoming Samsung Austin fab is bigger than anyone realizes, and coming sooner too, with the intent of basically satisfying one single customer, Apple. The capacity is said to be 40,000 wafers/month, and there is also a top secret second fab being built in Korea as well, but please pretend you didn’t hear about it yet.
If Apple wanted to move it’s orders to Global Foundries or TSMC, they would need a huge percentage of either company’s capacity. Even if the capacity was there, both TSMC and GloFo would not dump current customers to pick up a large but rather fickle partner like Apple. There is really no place for Apple to go.
With that in mind, Big Fruit suing Samsung could be tantamount to suicide. All Samsung needs to do is suspend wafer starts for Apple and say, “See you in court Steve”. By the time it gets there, 2016 or so, will Apple be in business? How many months of no iAnything do you think it would take for Apple to dry up and blow away? Unlike graphics cards or memory, each ARM SoC is unique, needs a unique board, unique software, and has unique capabilities. The painful flip side of custom chips is that Apple can not make an iDevice with another part, period.
Samsung holds all the cards here, all that can come of this is pain for Apple. If Apple stops making iThings, Samsung probably fills the majority of the void with their gadgets. If they have to pay a penalty, the increased sales will probably make up for that too. If Samsung loses a lawsuit and three rounds of appeals, they will be prepared to restart A5 production in 17 years. Suing Samsung is probably the dumbest thing that Apple could have done, then again, they are rarely accused of being rational.S|A
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