Korean MP3 manufacturers peeved with Samsung over flash memory discounts to Apple

Well, this was bound to happen: Korean MP3 player manufacturers are none too pleased with Samsung's decision to sell out its compatriots and give archrival Apple a super excellent discount on those 2GB and 4GB flash memory modules used in the new iPod nano. Samsung gave Apple such a sweet deal (supposedly in the area of 50%) that now no one else can expect to compete on price, with a spokesperson from ReignCom, the company behind the iRiver brand, dejectedly declaring that since they can, "hardly declare a price war with Apple. We'll counter Apple's challenge by releasing new concept products." A Samsung Electronics exec defended the move, saying that volume buyers get better deals, and that his company, "didn't mean to do any harm to domestic MP3 manufacturers." Hey, business is business, right?

[Thanks, Ken C.]

[nolan @ Dec 19th 2005 12:19AM]

Fair enough if Samsung wanted to screw over creative... But they should have given the deal to native son iRiver

[Tupper @ Dec 19th 2005 12:19AM]

I smell a flame war coming... nice job Peter.

Don't you have to sell at least 99 units to get a discount?

;)

[Scoobydoo @ Dec 19th 2005 12:19AM]

When iriver can ship millions of players a year I'm sure they too will get a discount. Apple has been very nice to Samsung, it only makes sense that it is a two way street.

[james hare @ Dec 19th 2005 12:19AM]

Apple==more business than iRiver.
Simple as that. Samsung makes more money by selling many many more flash memory units to Apple than to iRiver. Sucks to be number 2 in this market (because Apple's got almost Microsoft-like control over DAPs) but Apple made that happen. On top of that, the nano will only increase Apple's dominance.

[TZK @ Dec 19th 2005 12:19AM]

the ipod is the only product MP3 plater they sell that is flash - they must buy solely from samsung and a TON of it. ITs a brand name, and hey.. if hey buy 5 million units up front - why not give them a discount.

I dont own one apple product, so dont hate me
;) like someone said... business is business.

[Dave @ Dec 19th 2005 12:19AM]

Such is the way of business. Sometimes you get the good deal, sometimes you don't. Why couldn't Creative get the same deal? Is Samsung now locked out of providing memory to Creative as well?

[asher @ Dec 19th 2005 12:19AM]

Darwin would be proud to see his theory proven so well.

[lli @ Dec 19th 2005 12:19AM]

agree with #4

[Steven @ Dec 19th 2005 12:19AM]

I wonder when they say "new concept products" if they mean "iPod knockoffs."

[Tino @ Dec 19th 2005 12:19AM]

Does it matter? Regardless of Apple's price and feature, Korean will only buy Korean mp3 players and cars anyway. Ask my Korean co-worker.

Plus iRiver and iAudio has always been more expensive than iPods to begin with.

[ebp2k2 @ Dec 19th 2005 12:19AM]

#4, i dont know about nano increasing the apple's market share...

i think the market, as far as DAP is concerned is mature enough so that no single product will make significant changes to the way pies are sliced...

nano is clearly a derivative product, it's a repackaged product replacing an existing product (mini)...

on the other hand, if apple had come out with a PVP with tight itunes integration, that would have been something else...

[mingistech @ Dec 19th 2005 12:19AM]

Reminds me of the discount Dell gets on Intel CPUs.

It's just buisness.

[CJ @ Dec 19th 2005 12:19AM]

Samsung having their name associated with the iPod is also going to effect their decision in trying to get the contract to supply the memory, hence the discount

[Eric @ Dec 19th 2005 12:19AM]

I can't blame the Koreans for complaining - for Apple to sell the 4GB Nano profitably, the deal must've been exceptional. It's almost impossible to find a 4GB CompactFlash card for $250, yet Apple (not a company known for squeezing its margins too thin) is offering a fully-fledged 4GB iPod, replete with scroll wheel, color screen, and at least some innovation in terms of miniaturization and power management, at that price.

[IT_Slave @ Dec 19th 2005 12:19AM]

#11 i don't agree.

the nano is a first.

there has yet to be a digital music player with such a small form factor to size ratio like this.

just in my circle of friends that were anti-pod pepole that have now changed their minds on the music player with this new release.

i belive apple will take more of the pie and really put the hurt even more on competitors.

[MyFirst Ipod @ Dec 19th 2005 12:19AM]

I have never owned any Apple products, but after seeing the Nano I went ahead and ordered one.
I'm proof that Apple expanded their market because of the Nano, and I'll bet there are plenty others like me.

[Walter @ Dec 19th 2005 12:19AM]

[quote]Sucks to be number 2 in this market (because Apple's got almost Microsoft-like control over DAPs) but Apple made that happen.[/quote]

Almost?? Heck, it's exactly the same as Microsoft's "monopoly" on the OS side, and the funny thing is they take advantage of it just as ruthelessly (see fighting to keep itunes and ipods inaccessable to anyone else), but strangely the apple worshippers don't have a problem with it when the shoe is on the other foot.

But in the end, business is business, and the market decides who wins. Can't blame Samsung for offering vollume discounts, that's the way the game is played.

[super_structure @ Dec 19th 2005 12:19AM]

Koreans do like to buy Korean products, but that's no different than anywhere else. It's a real source of pride for them to see their once beleaguered country now on the cutting edge of technology. They've got some of the real heavy hitters in the industry right now, even if they are only no.2 in the DAP market. Just read any post on here about their LCD's and phones. Generally very nice products with higher quality that some of the other rock-bottom Asian markets (I'm looking at you, Taiwan).

However, it's been said and we all know it's true: this is just business. Hopefully, rather than complain about being shafted, iRiver's manufacturer's will just come out with a better product. The main reason the iPod is No.1 is quality and style. There's no market law that says iRiver can't beat that. Korea has the tech and designers to do it, we've seen it before.

[Hassan @ Dec 19th 2005 12:19AM]

I knew these was something werd with the nano. I simply couldn't understan how it could be that cheap when usb memory sticks with 4gb cost around $300-$400 a pop. I guess that this deal will enure that other companies won't be albe to produce ipod nono knock offs without doing some butt kissing for samsung.

[John Laur @ Dec 19th 2005 12:19AM]

Oh please! Cry me an iRiver. Publiclly whining about how your company can't get a big discount because it doesnt even ship 1/10 the number of units is beyond reproach. Sure I wish that I could go out and buy even a 4GB compact flash card for what an iPod nano costs, but I can't, and since I can't stuff an iPod into my digital camera's card slot either, I'm out of luck too.

In the end, if Apple ships a ton of units, they will help drive increased demand for large flash memory and after the boom is over everyone's prices ought to come down a little bit.

Apple did their time with the hard sell of $500 5GB players with abysmal battery life against plenty of worthy less expensive competitors. It remains possible to compete on features other than price!

[Norton Chia @ Dec 19th 2005 12:19AM]

More interesting to note if Samsung's own Yepp would be able to compete.

So how much was Samsung making on the flash memory in the first place?

[Pooh @ Dec 19th 2005 12:19AM]

"Darwin would be proud to see his theory proven so well."

You should pay more attention in class because this has absolutely nothing to do with Darwin.

On the other hand, I see no problem with what Apple has done. Either the competitors will go under or they'll offer us similar great deals on flash products. That's what capitalism is all about.

[asher @ Dec 19th 2005 12:19AM]

This is not JUST LIKE MS. MS did a lil song and dance and got IBM and then others to sign very manipulative contracts that guaranteed MS market share. Apple just competed on an open playing field. My first MP3 player was a Rio 20gb before Apple offered a size/$ ratio that was comparable. I now own an ipod. Apple won because they made a product consumers wanted. MS won because they strong armed ppl into using their products.

[jesse @ Dec 19th 2005 12:19AM]

i have to agree with tino. i had a couple korean roommates and they only bought korean stuff. even if it was shitty. one bought an early '90s hyundai and ended up have to spend $900 a few days after he bought it for repairs.

i don't think citizens of any country have as much national pride as koreans do.

[Joel @ Dec 19th 2005 12:19AM]

If I'm remembering the article I read recently correctly, Apple contracted with Samsung to buy a minimum of 50% of their flash memory output with this deal. That's a good deal for Samsung as well if it is true.

It also works to drive up the price of the remaining stocks of flash memory (the other 40-50% or whatever Apple ends up not buying, because available supplies for these other uses are cut in half, and scarcity drives prices.

[kay @ Dec 19th 2005 12:19AM]

You guys should know,
Samsung want to knock off all the small MP3P.
This year,they said only BIG3 (samsung-apple-sony) will survive in mp3 buisiness. Samsung don't sell 2GB flash memory to another company but Apple. After all small company dies, Samsung might increase the price of flash memory.
That's how Samsung getting bigger in Korea and many Koreans hate Samsung. Samsung is kinda crazy hungry dinosaur in Korea.

[REY2K7 @ Dec 19th 2005 12:19AM]

I think Apple should buy all of Samsungs flash modules so no one can try to make "iPod nano killers"

[icerabbit @ Dec 19th 2005 12:19AM]

A japanese site dissected the nano, and the 4GB model contains 2x2GB. This was covered on TUAW:

http://www.tuaw.com/2005/09/08/inside-the-ipod-nano/

[jxj @ Dec 19th 2005 12:19AM]

"Samsung is kinda crazy hungry dinosaur in Korea"

LOL best tech related quote I've read in a while.

[Jada @ Dec 19th 2005 12:19AM]

Flash memory discounts to Apple = less copycat products. Companies just don't have original ideas! look at iPod mini and the numerous copycat products that came out, with the most obvious being the Zen micro

[greg @ Dec 19th 2005 12:19AM]

the Zen micro is much different than the mini. where are you coming from, Jada? completely different shape, FM radio, different features...

[atomb @ Dec 19th 2005 12:19AM]

you all do realize that if Samsung had given iRiver this deal, Apple would have cried "unfair competition practices", then the US goverment would have screamed 'unfair subsidies!' and then slapped massive tariffs on anything else coming out of Korea....take a look at any other industry!

On a side note: I really wish many of you would do the 'shoe on other foot' thought before belching your remarks.

[asher's older brother who beats him up @ Dec 19th 2005 12:19AM]

----
"This is not JUST LIKE MS. MS did a lil song and dance and got IBM and then others to sign very manipulative contracts that guaranteed MS market share."
----

What are you? 7 years old? What kind of revisionist crap is this? Reading too much Howard Zinn for christ's sake? I have toe jam with a better sense of history than you.

[Jada @ Dec 19th 2005 12:19AM]

"the Zen micro is much different than the mini. where are you coming from, Jada? completely different shape, FM radio, different features..."
please, the additional features like FM were superficial. shape? come on! The Zen micro was obviously intended at the same target buyers as the mini. A scroll bar (instead of scroll wheel), practically identical UI, availability in different colors, very similar size and capacity, etc. Even the remote that you could get for the Zen micro was identical to the iPod remote. Obviously they look different, but the micro was created as a response to iPod mini due to how well the mini was selling. It is so obvious.I won't be surprised if Creative comes out in October and announce something like Zen slim that is "1/3 the thickness of the Zen micro" or something along those lines.

[King @ Dec 19th 2005 12:19AM]

samsung will use apple to kill all other flash mp3 player makers. then jack up the price to kill apple.

evil >:

[mike @ Dec 19th 2005 12:19AM]

Windows apologists keep claiming that Apple was never the first to market with the iPod.. which is true.. but didn't they have a contract with Toshiba for the longest time meaning the tiny HDs in the original iPod were exclusive to Apple for the longest time..

It seems this 'exclusivity' deal has been an edge for Apple for a while... the iPod's early lead was not due to hipness or design, but this Toshiba deal was very big for Apple..

The other exclusivity deal they had was the clickwheel, of course..

Now with the AAC+ (iTMS) exclusivity, they're untouchable.

[tennis guy @ Dec 19th 2005 12:19AM]

.
This is called "economy of scale." It's what keeps no more than 5 companies profitable in cell phones right now. I'd say Apple is the only company making a decent profit in MP3 players these days. Everyone else is bottom feeding, losing money because they can't buy components as cheaply as Apple can.
.
.

[Alan Erickson @ Dec 19th 2005 12:19AM]

Sure they're loosing money on each unit, but at least they're making it up on volume. ;)

[tpp @ Dec 19th 2005 12:19AM]

Ya'll missing the real interesting aspect of this article. It's not that Apple used their market advantage to gain even a bigger advantage. Walmart does that all the time by squeezing their suppliers.

The most interesting aspect of the article is whether or not the Koreans think Samsung acted "in an unpatriotic way" and whether or not that's going to have any negative impact on Samsung in Korea.

If a Russian company did something like that, you could bet your pants on the CEO being "invited" to have a chat with Vladimir Putin quite urgently.

[mike @ Dec 19th 2005 12:19AM]

samsung will use apple to kill all other flash mp3 player makers. then jack up the price to kill apple.

evil >:

---------

When you have no competitors, you have suppliers fighting for your business..

..and when your prices go up, it's called PROFIT...

moron

[Steve @ Dec 19th 2005 12:19AM]

atomb is right on. It's funny how many americans say "it's just business" when it comes to US companies getting an advantage vis-a-vis other companies, and then get all nationalistic when it comes to foreign companies doing the same. It's not an exact parallel, but the IBM/Lenovo deal was followed by americans wringing their hands about thinkpads getting ruined by the Chinese, etc., and the attempted takeovers of the oil company (I forget the name) and Maytag were similarly followed by Americans getting worked up over the nationalistic implications of this.

can't have it both ways, folks.

[Marian @ Dec 19th 2005 12:19AM]

What Samsung is selling in flash to Apple is much more than what corean companies are able to sell as DAP in US. And I don't call unpatriotic to boost the exports.

[Mikey @ Dec 19th 2005 12:19AM]

I know about 16 people who have already ordered thier shiny new iPod Nano's. Its all about the money.

[jwon @ Dec 19th 2005 12:19AM]

It is hillarious what globalization has done. The article really shows how Apple has become world class in cornering the market and being a sly competitor. This would've been unheard of 10 years ago but this is the third time in 5 years Apple has corned the market to further their MP3 business.

You think the Koreans were caught off guard? Yesterday's Sony announcement behind Apple shows how dramaticlly everyone was caught off guard by the Nano. We blog and bitch about what Apple is doing recreationally but a huge Fortune 100 company with billions in resources was caught off guard by the Nano. That says something.

[Jonathan Marks @ Dec 19th 2005 12:19AM]

I have a IRiver T-20 IGB, a tiny MP3 player, and voice recorder (which also has an excellent line in). The thing can only be charged through the USB port and has truly the worst human interface I have ever encountered...they must have been smoking something when they figured this out. If only I-pod would record in better audio quality, this Iriver would be In the River. And when it comes to packaging the device, I would argue that Iriver is copying Apple. Oh, and Iriver needs to fire its sales team in Europe (outside Germany). It took me 90 minutes to order one from the Benelux distributor. No wonder you can't find iriver at either Amsterdam, Dubai or Singapore airports.

[derrick @ Dec 19th 2005 12:19AM]

I think what's interesting about the Samsung-Apple deal is its larger implications. A 40% production allocation to one customer is a defacto joint venture.

The question is what will come from this joint venture in the long term? hmmm...Apple is the number one mp3 device and online music retailer...Samsung is the new Sony and has a strong mobile phone offering.

I would speculate seeing Apple and Samsung collaborating on making an iPhone for release in the next year; a much more Apple-like device. I consider the Motorola ROKR a bastard of a product and blight on Apple's brand. I would guess Apple made a short term deal with Motorola to get on the mobile phone/mp3 market and learn from an industry leading player.

Looking at the form factor of the new iPod nano, it's not difficult to imagine mobile phone hardware and a larger and removable battery being melded to such a device to create a REAL Apple iPhone with manufacturing help and parts from Samsung.

[Andy @ Dec 19th 2005 12:19AM]

concept ideas huh? Apple hasn't exactly needed to best anyone on price to completely blow the competition away. Concept is where all the competition fails miserably.... i find that comment funny. If it were that easy why haven't the competition just blown consumers away with their concepts already?

My prediction: Man we though Apple had a hold on the MP3 market before.... Now they will have utter and complete domination. This product is too good. Seeing it online blew me away...once i held it i was in utter amazement. Its an experience.

[Matt @ Dec 19th 2005 12:19AM]

"It seems this 'exclusivity' deal has been an edge for Apple for a while... the iPod's early lead was not due to hipness or design, but this Toshiba deal was very big for Apple.."
Ok, I guess this disproves Asher's point that the iPod isn't like Windows.
Also, I don't really want flash memory devices. I want a hard drive. 6 GB is not enough to store all my music.

[Holy Moses @ Dec 19th 2005 12:19AM]

With the Samsumg/Apple deal capturing a major part of the flash memory market, the only significant player that could pressure on Apple is Dell.

If they have their wits about them, they would buy Rio now that it has gone down the pan & use its massive buying power to revive the company, force down the price of components & kick Apples ass in audio quality.

Samsung already has a deep relationship with Dell, they may have a good deal with Apple but Dell has greater potential with notebooks, Plasmas etc , etc.

Michael D or his top exec in Japan ( Joanne P?) should be on the phone on Monday to Sigmatel if they are serious about playing in the MP3 space. Selling Rio through the Dell channel has serious potential.

[Nuno @ Dec 19th 2005 12:19AM]

I have 107 gb�s (18133files) of music. In a normal day i listen 8 to 10 hours of music, well i had my minidisc wich i liked very much because it allowed me to record my sets with an good quality. It was a very nice lookink md, it had no need for sonicstage because it didn�t support mp3(lol).

One day i f*ck*ng broke it. So i looked into the market and there was nothing that i liked. Bad design, bad interface...

A friend of mine showed me an ipod and i just felt i had to have one, good design good interface the only problem was that it wasn�t a recorder. Well 250 euros is to much money for me so i didn�t bought it, recently i just had a great deal, bought an 4gb mini for 150 euros. 4gb�s are more than enough for a normal person, unless you spend 24 hours changing musics, you don�t want more (... it�s my opinion).

Ipod�s may not have the best audio, but they have the best design, interface and support.

For keeping ontopic, we now live in a globle village, just forget the patriosm thing, today your company maybe in your country, tomorow it will be on another if they have better deals.