While Samsung says it won't get involved with Sharp's business management in "any way or form," it will be getting a "steady" supply of LCD (liquid crystal display) panels used for smartphone and tablet displays. And it probably will get a line of sight into Sharp's future products and customers, as well as early access to Sharp's cutting-edge technology. It may even influence Sharp's future products.
None of these prospects are particularly comforting for the folks in Cupertino. Apple is believed to buy about a third of its LCD panels from Sharp, and it closely relies on the company for some of its most advanced products, according to analysts. When Sharp has problems, it can slow down the release of Apple devices. So if Sharp starts to favor Apple's chief rival, Samsung, that could have big implications for Apple.
"It's not like Samsung is going to write a memo to Sharp to have unfavorable terms with Apple," said Susquehanna analyst Mehdi Hosseini. "But they could influence Sharp or indirectly influence Sharp's relationship with Apple...and it gives them better market intelligence on their competitor and is a way of putting more pressure on Apple."
Samsung declined to comment. We've contacted Apple and will update the report when we hear back.
The concept of "frenemies" or "coopetition" -- competing with companies in certain areas while partnering in others -- is nothing new for the tech industry. Apple and Samsung are fiercely battling in court, but Apple still buys a lot of components from Samsung. There's talk that Apple is trying to move away from Samsung, including by having its processors built somewhere else, but it has yet to make any such moves (at least not publicly).
Apple may not see a big impact in the short term from Samsung's new partnership with Sharp, but issues could pop up longer term. Apple is known for tightly controlling its vendors, but it may one day find Samsung has priority when it comes to Sharp's LCD shipments. If a lot of Sharp's "steady" supply is going to Samsung, it could mean fewer panels for Apple. And that could result in delays, or shortages in new hit products, like the iPhone, which uses Sharp displays.
Also, Samsung executives won't be influencing business matters, but Sharp could still end up tailoring its road map to fall more in line with Samsung's needs than those of Apple.
And relying on Sharp for LCDs could free up Samsung to focus on its OLED business, an area where panel makers have the potential to actually make money.
All of this means Apple may need to beef up its display supply chain outside of Sharp or get contract manufacturer Foxconn to pull the trigger on an investment in Sharp. (Remember that? Foxconn was going to invest in Sharp but then backed out because of Sharp's falling value. The companies have since been talking, but their negotiations are reportedly scheduled to end this month.)
If Foxconn makes the investment in Sharp that it had planned, it would give Apple more heft over its vendor. Even if that doesn't happen, Sharp isn't likely to do anything that would hurt its biggest customer. After all, it needs Apple just as much (or possibly even more) than Apple needs Sharp.
Apple has brushed off concerns about its supply chain sources before, most recently during the company's latest quarterly earnings conference call in January. CEO Tim Cook attempted to assuage fears that the company had cut its order of iPhone 5 components, including screens, saying it used "multiple sources for things," and that any "single data point" was "not a great proxy for what is going on."
But if Samsung becomes an even bigger customer for Sharp and takes more market share in mobile, things could change. And with all the issues Apple has had in recent weeks, the new Samsung/Sharp tie-up is just something else it has to worry about. The top brass in Cupertino is likely looking at this situation pretty closely.
Your move, Apple.