It was Apple Inc’s former CEO 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’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 about US$8 billion worth of parts from Samsung last year, analysts estimate.
Meanwhile, Samsung 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 Operations senior vice president Jeff Williams told reporters 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 WAY THEY WERE
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.