Why Apple Rival Samsung Also Wins If iPhone X Is a Hit
By Timothy W. Martin and Tripp Mickle
Smartphone titans Apple Inc. and Samsung Electronics Co. are arch rivals in one of the biggest consumer-product arenas.
But when Apple's iPhone X debuts next month, both companies will be hoping it succeeds.
The twist reflects a love-hate dynamic that is one of the more unusual relationships in business. While each company vies to get consumers to buy its gadgets, Samsung's giant components operation also stands to make billions of dollars supplying screens and memory chips for the highest-end new iPhone -- parts that Apple relies on for its most important product.
Indeed, an analysis conducted by Counterpoint Technology Market Research for The Wall Street Journal finds Samsung is likely to earn about $4 billion more in revenue making parts for the iPhone X than from the parts it makes for its own flagship Galaxy S8 handset in the 20 months after the new iPhones go on sale Nov. 3. The majority of sales for a new smartphone occur in the first 20 months after its debut.
Counterpoint expects Apple will sell 130 million iPhone X units, earning Samsung $110 on each through the summer of 2019, while Galaxy S8's global sales are expected to be 50 million, earning Samsung $202 each from components such as displays and chips in its first 20 months of sales, according to estimates based on a projected bill of materials. The Counterpoint analysis includes parts sales from Samsung Electronics plus two Samsung affiliates that make batteries and capacitors.
The findings show a highly dependent corporate relationship that dominates the top tier of the global market for mobile devices.
"These are two of the largest companies on the planet deeply tied at the hip and directly competitive," said David Yoffie, a professor at Harvard Business School, who has studied Apple and serves on Intel Corp.'s board. "That makes this stand out compared with almost any relationship you can think of."
Apple and Samsung are expected to be the world's two most profitable companies in 2017, excluding Chinese banks, according to S&P Global Market Intelligence. And they will depend on each other to get there. Apple needs Samsung's parts to make the iPhones that accounted for two-thirds of the Cupertino, Calif., company's $215.64 billion in revenue in fiscal 2016, according to investment bank CLSA. Samsung needs Apple's orders to fuel a component business that delivered about 35% of the South Korean firm's total revenue of about $195 billion last year.