jump to navigation


// Insight: Apple and Samsung, frenemies for life

By Poornima Gupta and Miyoung Kim and Dan Levine | Reuters – 14 hrs ago

Reuters/Reuters – An employee holds Apple’s iPhone 4s (L) and Samsung’s Galaxy S III at a store in Seoul in this file photo from August 24, 2012. REUTERS/Lee Jae-Won/Files

SAN FRANCISCO/SEOUL (Reuters) – It was the late Steve Jobs’ worst nightmare. A powerful Asian manufacturer, Samsung Electronics Co Ltd, uses Google Inc’s Android software to create smartphones and tablets that closely resemble the iPhone and the iPad. Samsung starts gaining market share, hurting Apple Inc’s margins and stock price and threatening its reign as the king of cool in consumer electronics.

Jobs, of course, had an answer to all this: a “thermo-nuclear” legal war that would keep clones off the market. Yet nearly two years after Apple first filed a patent-infringement lawsuit against Samsung, and six months after it won a huge legal victory over its South Korean rival, Apple’s chances of blocking the sale of Samsung products are growing dimmer by the day.

Indeed, a series of recent court rulings suggests that the smartphone patent wars are now grinding toward a stalemate, with Apple unable to show that its sales have been seriously damaged when rivals, notably Samsung, imitated its products.

That, in turn, may usher in a new phase in the complex relationship between the two dominant companies in the growing mobile computing business.

Tim Cook, Jobs’ successor as Apple chief executive, was opposed to suing Samsung in the first place, according to people with knowledge of the matter, largely because of that company’s critical role as a supplier of components for the iPhone and the iPad. Apple bought some $8 billion worth of parts from Samsung last year, analysts estimate.

Samsung, meanwhile, has benefited immensely from the market insight it gained from the Apple relationship, and from producing smartphones and tablets that closely resemble Apple’s.

While the two companies compete fiercely in the high-end smartphone business – where together they control half the sales and virtually all of the profits – their strengths and weaknesses are in many ways complementary. Apple’s operations chief, Jeff Williams, told Reuters last month that Samsung was an important partner and they had a strong relationship on the supply side, but declined to elaborate.

As their legal war winds down, it is increasingly clear that Apple and Samsung have plenty of common interests as they work to beat back other potential challengers, such as BlackBerry or Microsoft.

The contrast with other historic tech industry rivalries is stark. When Apple accused Microsoft in the 1980s of ripping off the Macintosh to create the Windows operating system, Apple’s very existence was at stake. Apple lost, the Mac became a niche product, and the company came close to extinction before Jobs returned to Apple in late 1996 and saved it with the iPod and the iPhone. Jobs died in October 2011.

Similarly, the Internet browser wars of the late 1990s that pitted Microsoft against Netscape ended with Netscape being sold for scrap and its flagship product abandoned.

Apple and Samsung, on the other hand, are not engaged in a corporate death match so much as a multi-layered rivalry that is by turns both friendly and hard-edged. For competitors like Nokia, BlackBerry, Sony, HTC and even Google – whose Motorola unit is expected to launch new smartphones later this year – they are a formidable duo.


The partnership piece of the Apple-Samsung relationship dates to 2005, when the Cupertino, California-based giant was looking for a stable supplier of flash memory. Apple had decided to jettison the hard disc drive in creating the iPod shuffle, iPod nano and then-upcoming iPhone, and it needed huge volumes of flash memory chips to provide storage for the devices.

The memory market in 2005 was extremely unstable, and Apple wanted to lock in a supplier that was rock-solid financially, people familiar with the relationship said. Samsung held about 50 percent of the NAND flash memory market at that time.

“Whoever controls flash is going to control this space in consumer electronics,” Jobs said at the time, according to a source familiar with the discussions.

The success of that deal led to Samsung supplying the crucial application processors for the iPhone and iPad. Initially, the two companies jointly developed the processors based on a design from ARM Holdings Plc, but Apple gradually took full control over development of the chip. Now Samsungmerely builds the components at a Texas factory.

The companies built a close relationship that extended to the very top: in 2005, Jay Y. Lee, whose grandfather founded the Samsung Group, visited Jobs’ home in Palo Alto, California, after the two signed the flash memory deal.

The partnership gave Apple and Samsung insight into each other’s strategies and operations. In particular, Samsung’s position as the sole supplier of iPhone processors gave it valuable data on just how big Apple thought the smartphone market was going to be.

“Having a relationship with Apple as a supplier, I am sure, helped the whole group see where the puck was going,” said Horace Dediu, a former analyst at Nokia who now works as a consultant and runs an influential blog. “It’s a very important advantage in this business if you know where to commit capital.”

Samsung declined to comment on its relationship with a specific customer.

As for Apple, it reaped the benefit of Samsung’s heavy investments in research and development, tooling equipment and production facilities. Samsung spent $21 billion (23 trillion won) on capital expenditures in 2012 alone, and plans to spend a similar amount this year.

By comparison, Intel Corp spent around $11 billion in 2012, and Taiwan Semiconductor Manufacturing Co Ltd (TSMC) expects to spend $9 billion in 2013.

But component expertise, cash and good market intelligence did not assure success when Samsung launched its own foray into the smartphone market. The Omnia, a Windows-based product introduced in 2009, was so reviled that some customers hammered it to bits in public displays of dissatisfaction.

Meanwhile, Samsung publicly dismissed the iPhone’s success.

“The popularity of iPhone is a mere result of excitement caused by some (Apple) fanatics,” Samsung’s then-president, G.S. Choi, told reporters in January 2010.

Privately, though, Samsung had other plans.

“The iPhone’s emergence means the time we have to change our methods has arrived,” Samsung mobile business head J.K. Shin told his staff in early 2010, according to an internal email filed in U.S. court.

Later that year, Samsung launched the Galaxy S, which sported the Android operating system and a look and feel very similar to the iPhone.


Jobs and Cook complained to top Samsung executives when they were visiting Cupertino. Appleexpected, incorrectly, that Samsung would modify its design in response to the concerns, people familiar with the situation said.

Apple’s worst fears were confirmed with the early 2011 release of the Galaxy Tab, which Jobs and others regarded as a clear rip-off of the iPad.

Cook, worried about the critical supplier relationship, was opposed to suing Samsung. But Jobs had run out of patience, suspecting that Samsung was counting on the supplier relationship to shield it from retribution.

Apple filed suit in April 2011, and the conflagration soon spread to courts in Europe, Asia and Australia. When Apple won its blockbuster billion-dollar jury verdict against Samsung last August, it appeared that it might be able to achieve an outright ban on the offending products – which would have dramatically altered the smartphone competition.

But Apple has failed to convince U.S. judges to uphold those crucial sales bans – in large part because the extraordinary profitability and market power of the iPhone made it all but impossible for Appleto show it was suffering irreparable harm.

“Samsung may have cut into Apple’s customer base somewhat, but there is no suggestion that Samsung will wipe out Apple’s customer base, or force Apple out of the business of making smartphones,” U.S. District Judge Lucy Koh wrote. “The present case involves lost sales – not a lost ability to be a viable market participant.”

Samsung, meanwhile, came under pressure from antitrust regulators and pulled back on its effort to shut down Apple sales in Europe over a related patent dispute.

A U.S. appeals court recently rejected Apple’s bid to fast-track its case, meaning its hopes for a sales ban are now stuck in months-long appeals, during which time Samsung may very well release the next version of its hot-selling Galaxy phone.


The legal battles have been less poisonous to the relationship than some of the rhetoric suggests.

“People play this stuff up because it shows a kind of drama, but the business reality is that the temperature isn’t that high,” said one attorney who has observed executives from both companies.

Still, the hostilities appear to have put some dents in the partnership. Apple is likely to switch to TSMC for the building of application processors, according to analysts at Goldman Sachs, Sanford Bernstein and other firms. But analysts at Korea Investment & Securities and HMC Securities point out that Apple will not be able to eliminate Samsung as a flash supplier because it remains the dominant producer of the crucial chips.

Apple declined to comment on the details of its relationships with any one supplier.

Meanwhile, both companies are deploying strategies out of the other’s playbook as they seek to maintain and extend their lead over the pack.

Samsung has developed a cheeky, memorable TV ad that mocks Apple customers, and dramatically ramped up spending on marketing and advertising, a cornerstone of Apple’s success. U.S. ad spending on the Galaxy alone leaped to nearly $202 million in the first nine months of 2012, from $66.6 million in 2011, according to Kantar Media.

For its part, Apple is investing in manufacturing by helping its suppliers procure the machinery needed to build large-scale plants devoted exclusively to the company.

Apple spent about $10 billion in fiscal 2012 on capital expenditures, and it expects to spend a further $10 billion this year. By contrast, the company spent only $4.6 billion in fiscal 2011 and $2.6 billion in fiscal 2010.

But Apple and Samsung retain very different strategies. Apple has just one smartphone and only four product lines in total, and tries to keep variations to a bare minimum while focusing on the high end of the market.

Samsung, by contrast, has 37 phone products that are tweaked for regional tastes and run the gamut from very cheap to very expensive, according to Mirae Asset Securities. The company also makes chips, TVs, appliances and a host of other products (and its brethren in the Samsung Group sell everything from ships to insurance policies).

Apple devices are hugely popular in the United States; Samsung enjoys supremacy in developing countries like India and China. Apple keeps its core staff lean – it has only 60,000 employees worldwide – and relies on partners for manufacturing and other functions. Samsung Electronics, part of a sprawling “chaebol,” or conglomerate, that includes some 80 companies employing 369,000 people worldwide, is far more vertically integrated.

It is those differences, combined with the formidable strengths that both companies bring to the market, that may render quiet cooperation a better strategy than all-out war for some time to come.

Said Brad Silverberg, a former Microsoft executive who was involved in the Mac vs. Windows wars, “Apple had learnt a lot of lessons from those days.”

(Reporting by Dan Levine and Poornima Gupta in San Francisco, and Miyoung Kim in Seoul; Editing by Jonathan Weber, Tiffany Wu and Peter Cooney)


1 – 4 of 20



Exxon Passes Apple As Most Valuable Company


Commuters use their smartphones in a train in Singapore

o Samsung puts lid on capex for the first time since financial crisis


SEOUL (Reuters) – Samsung Electronics Co turned cautious on spending for the first time since the …


Apple Shares Tumble After Earnings Report



Apple CEO Tim Cook speaks about the iPhone 4S at Apple headquarters in Cupertino

o Tim Cook reportedly opposed suing Samsung but was overruled by Steve Jobs in 2011


When Apple (AAPL) CEO Tim Cook says that he hates patent litigation, he’s apparently not bluffing. …


Crystal Apple Award


An Apple IPhone 4s and Samsung Galaxy S are seen in this illustration photo


o U.S. court rejects Apple’s bid to raise damages in Samsung case


(Reuters) – South Korea’s Samsung Electronics Co did not willfully infringe on some of Apple Inc’s …


CNET Editor On Pros-Cons Of New iPad


Samsung Electronics’ Galaxy tablet computers are displayed at a store in Seoul

o Samsung 4Q profits top forecasts on Galaxy sales


Samsung Electronics Co. said quarterly profit soared 76 percent, boosted by the popularity of its …



Why Apple Is Still A Buy


A man uses his mobile phone at a promotional event of Samsung Galaxy smart phone in Seoul

o Samsung profits top forecast as mobile biz doubles


SEOUL, South Korea (AP) — Samsung Electronics Co. reported Friday forecast-beating results for the …


Hazmat Call Cleared At Apple Facility In Elk Grove



A student looks at works created with Samsung Galaxy Note smart phones at a promotional event of Samsung Galaxy in Seoul

o Apple shares slide by most in over four years on disappointing iPhone sales


(Reuters) – Apple Inc’s shares fell by as much as 12 percent on Thursday, staging their biggest percentage …


Is Google the Next Apple?


Banners advertising Samsung Electronics’ Galaxy Note II and Apple’s iPhone 5 are displayed on a door at a mobile phone shop in Seoul, South Korea Friday, Jan. 25, 2013. Samsung Electronics Co. said quarterly profit soared 76 percent, boosted by the popularity of its Galaxy smartphones, which outsold the iPhone for a fourth straight quarter. But the company said Friday it expects earnings to decline during the current quarter because of seasonally low demand for consumer electronics. (AP Photo/Ahn Young-joon)


· Square scandal highlights growing pains at tech start-ups Reuters – 1 hr 46 mins ago

· Insight: Has Volkswagen discovered the Holy Grail of carmakers? Reuters – 2 hrs 13 mins ago

· U.S. Air, AMR near $11 billion merger, deal seen within week : sources Reuters – 4 hrs ago

· Australia to grill Apple, others on pricing Reuters – 3 hrs ago

· Analysis: Accounting risk clouds big U.S. business bets in China Reuters – 16 hrs ago

· “Revolving door” may have hurt SEC money fund reforms: report Reuters – 4 hrs ago

· EADS unit could face FBI probe over Saudi deal: report Reuters – 2 hrs 23 mins ago

· All Comments

Leave a comment…Comment Guidelines

Post As


· Popular Now

· Newest

· Oldest

· Most Replied


27users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down3users disliked this comment

SkywardSword • 20 hrs ago Report Abuse

Samsung makes TV’s, cellphones, DVD players, laptops, washing machines, etc….While Apple only makes computers and a iphone……..

5 Replies


9users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down0users disliked this comment

John • 13 hrs ago Report Abuse

Samsung makes parts in Texas while Apple, an American company, manufactures theirs in China. And their products are better and they support and reward their customers whim they treat with gratitude and respect, which is why I support them and have a GS3 and a Samsung TV.

5 Replies


20users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down2users disliked this comment

Wayne Jackson • 19 hrs ago Report Abuse

Apple reminds me of BestBuy, good merchandise but costs entirely too much.



1users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down0users disliked this comment

Phillip • 4 hrs ago Report Abuse

Instead of concerning themselves with the knockoffs, they should improve their product while at the same time not stoke the consumer’s ire by taking away the things they like. *cough* google maps *cough*.



10users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down2users disliked this comment

Naomi • 9 hrs ago Report Abuse

Samsung does more than Apple…and that says a lot…

1 Reply


18users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down3users disliked this comment

David • 14 hrs ago Report Abuse

In fact Apples constant lawsuits against its competitors has caused far more damage to the company.

2 Replies


15users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down2users disliked this comment

Sum1 • 22 hrs ago Report Abuse

Suggesting anything is permanent for life is the most idiotic argument in journalism.

1 Reply


0users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down0users disliked this comment

Tony • 3 hrs ago Report Abuse

Apple’s Macintosh became a niche product back in the 1990s because the hardware and operating system software was not originally designed for expansion – and programmers had all kinds of grief trying to write software. The PowerPC was supposed to end that, but I was not surprised when Steve Jobs… More

1 Reply


5users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down2users disliked this comment

A Yahoo! User • 9 hrs ago Report Abuse

Apple makes a fine product. But for the money it isn’t worth it. My Galaxy 3 is more than just fine and it cost me a hundred bucks. It compares in every way with my daughter’s I Phone. My carrier even charges 10 bucks extra a month for an I Phone.



0users liked this commentPlease sign in to rate a Thumb UpPlease sign in to rate a Thumb Down0users disliked this comment

A Yahoo! User • 6 hrs ago Report Abuse

you played too much facebook games

Source: http://news.yahoo.com/insight-apple-samsung-frenemies-life-061340528–finance.html



No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: