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BLOG: Apple, Samsung tablet war could be good for consumers

Jonny Evans | Aug. 31, 2012
The Apple versus Samsung spat's certainly grown partisan, but the connection between the two firms remains symbiotic.

The Apple [AAPLversus Samsung spat's certainly grown partisan, but the connection between the two firms remains symbiotic -- Samsung needs Apple's money, and Apple needs to ensure it keeps its grip on Samsung's ample supply of parts.

Status update: 'It's complicated'

The way the firms talk about each other you'd think this was a hate affair, but the two sides are remaining fairly pragmatic in their relationships, with the Korean company making sure there's an internal wall between the fate of its mobile arm and that of its component supply business.

A Reuters report reveals the depth of Samsung's divide between its two business units, for example at an emergency meeting following last week's ruling against it, Samsung's CEO -- the man in charge of the components business -- didn't take a seat at the panel. That's despite one Samsung executive saying the judgement was the "worst possible" outcome for the firm.

That divide between Samsung's internal units lends an interesting light on the complex relationship between it and Apple.

Some highlights:

  • Samsung products comprise 26 percent of the component cost of the iPhone. These include the processor, memory and displays used within the device.
  • Apple's components business contributes 8 percent to Samsung's estimated group profit for next year, says Morgan Stanley.
  • Samsung and Apple made attempts to negotiate a peace deal, but these have so far been unsuccessful. 

It seems important to note that, despite the partisan nature of so much public debate on the matter, the situation is extraordinarily complex. As FOSS Patents' Florian Mueller (often castigated for his advisory links to big firms, but also a frequent source of pragmatic industry analysis) notes: "Apple isn't that stupid (to risk its Samsung parts deal). Apple's agreements with Samsung will ensure that Samsung has no choice but to comply and supply."

There's some critics of the court decision who seem to have decided it would be in Samsung's best interests to simply deny component supplies to Apple. It wouldn't be a good decision at all, it would decimate its supply business. As Mueller puts it:

"Samsung's other customers would lose faith if it turned out unreliable. And since Apple threatened Samsung with litigation two years ago, it's had plenty of time to identify alternatives."

Should the legal battle continue?

And that's the point. Some may argue that the licensing deal Apple offered its ally was set at levels that were too high. Perhaps that's true (I've seen figures between $30-50 per handset discussed), but surely a deal could have been reached? That's assuming Apple's statement that it wanted to avoid litigation were true, but CEO's of globally valuable firms tend to speak something like truth when they make public statements. This leads me to think it safe to presume Apple was willing to negotiate some form of deal, but Samsung felt -- or was, perhaps, poorly advised -- that it might prevail in litigation. 

 

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