Samsung To Benefit If iPhone X Is a Success -- WSJ
By Timothy W. Martin and Tripp Mickle
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 3, 2017).
When the iPhone X goes on sale next month, Apple's Inc.'s rival, Samsung Electronics Co., has good reason to hope it is a roaring success.
The South Korean company's giant components division stands to make $110 from the parts it sells Apple for each top-of-the-line, $1,000 iPhone X sold.
The fact reflects a love-hate dynamic between the phone makers that is one of the more unusual relationships in business. While each company vies to get consumers to buy its gadgets, Samsung's parts operation also stands to make billions of dollars supplying screens and memory chips for the new iPhone -- parts that Apple relies on for its most important product.
"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."
An analysis conducted by Counterpoint Technology Market Research for The Wall Street Journal finds Samsung is likely to earn roughly $4 billion more in revenue from iPhone X parts than from components made for the Galaxy S8 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.
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 and more than half of its $25.6 annual operating profit.
Samsung and Apple declined to comment for this article.