Apple just put in a significant order of DRAM chips from Elpida, according to a report by the DigiTimes on Tuesday. In turn, this report caused Samsung stock to plummet by six-percent to $1,100 — that six-percent is equal to $10 billion on the market. This marks the steepest daily drop in the last four years, and it signals a nine-week low for the company.
The report also caused SK hynix — the second largest chip maker — shares to face an even larger drop of nine-percent, hitting the biggest daily drop for the company in nine months.
Speculation regarding the order from Apple appear to differ from analyst to analyst.
Choi Do-Yeon, an analyst at LIG Investment & Securities, said, “It looks like Apple doesn’t want to see Samsung and hynix dominate the chip market. Apple wants to maintain its bargaining power by keeping Elpida running.”
Elpida filed for bankruptcy back in February, but Micron Technology recently began discussions to acquire Elpida. The merger of these two chip makers would pose a serious threat to Samsung not only in bargaining power, but also with their financial outlook.
However, Monika Garg of Pacific Crest said, “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. I don’t think Apple would want to spoil their relationship with Samsung. They are their foundry.”
Both Do-Yeon and Garg make good points, and the truth could fall somewhere in-between the two.
Samsung and SK hynix make chips superior to anything Elpida produces, so it doesn’t make a lot of sense for the Cupertino-based company to jeopardize their relationship with either South Korean manufacturer, even if Samsung is a fierce rival in the mobile market. But like any company, it’s smart for Apple to have options available to negotiate for better prices at the bargaining table.
Samsung is sitting pretty right now despite the recent drop off in shares as they expanded their share of the global DRAM market in Q1 of 2012 to a whopping 70.9-percent, and they combine with SK hynix to take up a dominant 85.9-percent of the market.
Perhaps concerns regarding the report were overblown as shares for both Samsung and SK hynix are trading up, with SK hynix rebounding significantly.
[via Reuters 1, 2]