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Apple May Pay Billions To Samsung For New iPad

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Image by AFP/Getty Images via @daylife

Apple may end up paying billions to Samsung (SSNGY) for the new iPad.

Apple euphoria is in full swing. Some Apple fans have made their investment far more than an investment; it is a love affair and personal. From the emails I receive it is obvious that the love affair with Apple has turned some fan boys into Samsung haters.

On one level it makes sense because not only Samsung has emerged as the main competitor to Apple, there are bitter legal battles raging between the two across the globe. Samsung is the most successful vendor of Google (GOOG) Android devices.

Lost in the litigation is the fact that Apple and Samsung are "frenemies." Apple has long been dependent on Samsung for lots of technology. The new iPad is no exception.

iSuppli reports that Samsung is the sole supplier of screens  for the new iPad. The new iPad is the first tablet with super high resolution of 2048 by 1536 pixels. According to iSuppli, LG and Sharp could not meet Apple’s requirements.

There are also other reports that contradict iSuppli and claim that LG is supplying some panels for the new iPad. There is also a report that Sharp and LG are planning to ramp up production of screens in April.

In any case, if Apple sells 50 million iPads and Samsung ends up supplying screens for only 25 million, it is still quite lucrative for Samsung.

No pricing details are available. A speculation of $50 per screen means $1.25 billion for Samsung from the new iPad.

Further, it is widely believed that Samsung is the foundry for the new quad core Apple A5X processor in the new iPad. A picture of the logic board containing the processor has been leaked by a Chinese web site, but there is no independent verification.

At the speculative price of $30 for each A5X, the new iPad may generate a cool $1.5 billion from Apple.

Even if the speculative estimates are wrong, and iSuppli report is in error, there is little doubt that Samsung will make at least a billion dollars from the new iPad.

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Apple depends on its main competitor for the brains and the display of its newest device! How could this simple fact be a risk when the love of Apple pushes its stock price $20 everyday? Love is blind.

About Me: I am an engineer and nuclear physicist by background. I have founded two Inc. 500 companies, and have been involved in over 50 entrepreneurial ventures. I am the Chief Investment Officer at The Arora Report, which publishes four newsletters to help investors profit from change. Please feel free to write me at Nigam@TheAroraReport.com. You can follow me here and get email notification when I publish a new article.

Full disclosure: Subscribers to The Arora Report are long Apple from $131 and have taken partial profits at $360, and $525.