Samsung may offer olive branch to Apple

Bloomberg

After years of battling Apple Inc. in courtrooms and retail stores, Samsung Electronics Co. may be ready to offer an olive branch. That’s expected to cost the Korean company almost $9 billion upfront.
Samsung is in close talks with Apple to be the exclusive supplier of displays for iPhone models scheduled for release next year, according to people with direct knowledge of the matter.
Samsung first needs to spend money expanding its capacity to manufacture the technology, which is thinner, brighter and less draining on the battery than those in most current smartphones.
The potential deal to supply Apple with OLED screens — first reported by the Maeil Business Newspaper — may help Samsung reverse two years of dwindling smartphone market share, revenue and net income. The consumer-electronics giant in January warned of a gloomy 2016, so
locking in Apple may attract Chinese smartphone vendors wanting to
upgrade their devices to stay more
competitive.

Falling Earnings
Subsidiary Samsung Display may spend at least 10 trillion won ($8.7 billion) beefing up OLED capacity, the Maeil reported, citing sources it didn’t identify. Apple sold more than 231 million iPhones last year, and Samsung Display made about 3 million screens a month. Just to keep pace, Samsung would have to boost production by a factor of at least six.
Samsung Electronics owns 85 percent of Samsung Display as part of an intricate web of cross-shareholdings in the conglomerate. Samsung Display, based in Yongin, declined to comment in an e-mail.
However, Apple didn’t respond to a request for comment.
Samsung Electronics will report audited first-quarter results, including net income and divisional performances, on Thursday.
Analysts estimate profit of 4.42 trillion won, or a 2 percent decline from a year earlier, according to data
compiled by Bloomberg.
Samsung rose 0.3 percent to 1,300,000 won Wednesday in Seoul. The stock has risen 3.2 percent this year after posting three straight annual declines.
Samsung posted better-than-expected preliminary operating profit of 6.6 trillion won on April 7 after
releasing its Galaxy S7 phones about a month earlier than usual to capitalize on the lull in new Apple products. First-quarter sales of 49 trillion won slightly exceeded analyst estimates.
In the past four weeks, eight analysts raised their profit estimates by an average of 281.1 billion won.
“It’s great news for Samsung,” Chung Won Suk, a Seoul-based analyst at HI Investment & Securities Co., said of the potential Apple supply deal. “Samsung will exclusively get the initial orders from Apple in late 2017 for the flagship lines, and it will get the price premium.”

Slowing Market
Samsung Vice Chairman Lee Jae Yong is trying to accelerate a diversification beyond phones, which depend on Google’s Android operating system and compete with hundreds of Chinese makers, including Huawei Technologies Co., Xiaomi Corp. and Lenovo Group Ltd.
The mobile division generated 103.6 trillion won in sales last year – or 52 percent of Samsung’s total, the company said.
Global smartphone sales are
expected to increase by just 7 percent this year, the slowest rate in the product’s history, according to the Gartner Inc.
About 150 million users in Asia will delay upgrading in the next three years while they wait for prices to come down, the researcher said.
Sales of another key product for Samsung — TVs — declined 0.3 percent last year and are only expected to grow by 3 percent this year, helped by the Summer Olympics in Rio de Janeiro. The sluggish growth is affecting Samsung shares, which have declined 6.8 percent during the past 12 months.
During the same period, Apple shares plunged 21 percent. Sales will fall for a second straight quarter, a forecast that missed analyst
estimates, as growth stalls in the smartphone market, the company said Tuesday. The lower-cost iPhone SE released in March targeted new customers in emerging markets such as China and India.
Samsung is a South Korean multinational conglomerate company headquartered in Samsung Town, Seoul. It comprises numerous subsidiaries and affiliated businesses, most of them united under the Samsung brand, and is the largest South Korean business conglomerate.
Notable Samsung industrial subsidiaries include Samsung Electronics (the world’s largest information technology company measured by 2012 revenues, and 4th in market value), Samsung Heavy Industries (the world’s 2nd-largestshipbuilder measured by 2010 revenues), and Samsung Engineering and Samsung C&T (respectively the world’s 13th and 36th-largest construction companies).
Other notable subsidiaries include Samsung Life Insurance (the world’s 14th-largest life insurance company),Samsung Everland (operator of Everland Resort, the oldest theme park in South Korea) and Cheil Worldwide (the world’s 15th-largest advertising agency measured by 2012 revenues).
While Apple Inc. is an American multinational technology company headquartered in Cupertino, California, that designs, develops, and sells consumer electronics, computer software, and online services.