Apple chip snub causes Samsung shares to slide by 6%

Shares in Samsung have fallen by more than 6 percent equal to around $11 billion - after news broke suggesting Apple has placed an order for DRAM chips with one of the firm's rivals, Japanese chipmaker Elpida.

The suggestion is, Apple is looking to decrease its reliance on Samsung as a supplier longterm.

That's a shift in strategy that investors clearly believe could have a major impact on Samsung's overall business, with Apple serving as the firm's largest customer for both chips and displays.

Overblown reaction

Analysts have been quick to dismiss the notion any such decision by Apple originally reported by DigiTimes would have a major impact on Samsung, however, describing Samsung as a "foundry" for Apple's iPhone and iPad businesses.

"The market is overreacting to the news. Mobile DRAM accounts for only 10 percent of Samsung's overall operating profit," NH Investment & Securities analyst Lee Sun-tae told Reuters.

"(There's) nothing new in our view given Elpida usually assigns about 40-60 percent of its mobile DRAM capacity for Apple according to our channel checks," added Merrill Lynch analyst Simon Woo.

No snub

Samsung's DRAM chips are widely regarded as being superior to Elpida's a company that's currently in bankruptcy protection following what it branded tough market conditions.

Commentators believe Apple's move is more likely one designed to help meet demand for both iPhone and iPad rather than a direct snub, with the firm having sold 35.1 million iPhones and 11.8 million iPads in the second quarter of 2012.

"No company wants to have just one supplier. Just on that basis I think they're probably just shifting the (DRAM) balance, looking for equilibrium between two or three suppliers," concluded Pacific Crest analyst Monika Garg.

"I don't think Apple would want to spoil their relationship with Samsung. They are their foundry."

[source: Reuters]