Daily Trust (Abuja)

18 February 2013

Nigeria: Apple, Samsung, and Tech Preeminence

In the middle of the third quarter of last year, a US court ruling, in an intellectual property infringement lawsuit filed by Apple against Samsung Electronics, made a "fat scapegoat" out of Samsung, the South Korean company. Scapegoat because all the tech companies seem to copy from each other so unrestrainedly, leading to frequent patent lawsuits and shakedowns. Samsung was found guilty of infringing on 6 patents owned by Apple, and the jury identified a whopping 28 Samsung devices that violated Apple's intellectual property.

The court ordered Samsung to pay Apple $1.05 billion in damages. At the time, the court ruling was a shot in the arm for Apple's already healthy finances, shoring up its share price to a world record high of $675.68 on 27 August 2012, which in turn boosted the value of a company that was already the world's most capitalized by $11 billion to a total of $633 billion. Apple surely had an enviable position.

But the tech landscape seems to be evolving quite rapidly and somewhat in favour of Samsung. It is no longer clear-cut whether or not Apple will continue to lead for much longer. If the essence of Apple's lawsuit still holds water, then Samsung must have been forging ahead to its current competitive position of tech preeminence by hook and crook.

I will take a cursory look at the ways that these two companies are similar and the way that they differ, using some bits of information from the 11 February 2013 New York Times article by Brian Chen, and interpreting them within the context of the present article.

Products

Apple develops operating system (OS) software, but only for the desktops, laptops, smart phones, and tablets that the company manufactures in its own brand names, although using hardware components from companies such as Samsung, Toshiba, and Sharp. Samsung Electronics is a part of South Korea's Samsung Group. It manufactures computers, computer chips, flat panel displays, tablets, smartphones, and consumer products such as cameras, dryers, personal computers, printers, TVs, vacuum cleaners, and washers. Samsung's consumer products are as sophisticated as they come. For example, its T9000 refrigerator is Wi-Fi-enabled, tempting one to associate Samsung's competitors in consumer products with the word "obsolescence." Conspicuously absent in Samsung's list of products is the software to drive its computers, smartphones, and tablets. Samsung relies on other companies (Microsoft, Google) for this. An example is Samsung's highly popular Galaxy Tab, which is driven by Google's Android OS. Note that only Apple's devices use Apple's operating systems.

Innovation Quotient

While Apple is the ultimate innovator of electronic gadgets and the software engines to drive them, Samsung is the "improver," carefully and extensively studying existing technologies through market research and improving them.

Market research

Samsung outspends Apple on research and product development. According to Chen, Samsung spends 5.7% of its last fiscal year revenue of US$183.5 billion on R&D, whereas the corresponding figures for Apple are 2.2% and US$156.5 billion, respectively. However, unlike Apple, who probably spends mostly on scientific and engineering research, Samsung is very heavy on market research. Apple's founder, the late Steve Jobs, did not believe in market research to drive its company's products because he assumed that consumers "don't know what they want." In contrast, Samsung thrives on the results of market research for its product development. The company's executive vice president Kim Hyun-Suk is credited with the statement that "the market is the driver, so we don't intend to drive the market in a certain direction." Samsung has up to 34 research centres world-wide. Market trends, cultural preferences, expert advice of psychologists, sociologists, economists, and engineers working on Samsung's products or on products by competitors, appear to drive product improvement at Samsung.

Of course, not everyone thinks very highly of Samsung's research, as some believe that the company spends a lot of money to study and copy Apple's products in the areas of smartphones and tablets. At least that was the conviction of the jury in the judgment alluded to earlier in this article. While this may be true, some product enhancements at Samsung seem to have actually been advised by the results of market research. As Chen reminded us, "before Apple released the iPhone 5, which had a larger screen than earlier models, Samsung had already been selling phones with even bigger displays, like the 5.3-inch screen Galaxy Note, a smartphone so wide that blogs call it a phablet."

Samsung also spends heavily on ads, for example, when compared with Apple and Microsoft.

Team player

Unlike Apple, who embraces the philosophy of an integrated business model, where a company makes it all - OS, hardware, browser, etc., Samsung is the ultimate partner. The company willingly works with carriers for the phones it manufactures. For example, my Galaxy Infuse phone uses Android OS, the carrier is AT&T, and the phone was manufactured by Samsung. As an Apple product, the phone would have used iOS by Apple and would have been designed and manufactured by Apple. Moreover, the app store would also be owned and controlled by Apple. Samsung's two-way business model is refreshing. There is another advantage for Samsung in working with other companies in the manner just described. Chen describes this as follows: "By working with so many companies, it gets insight into how to plan investments for successful products. And it can use the same resources to build its own products. This is why Samsung has long had a reputation of being a "fast follower"."

Whether or not Apple continues to lead in high technology business will depend to a great extent on its ability to continuously innovate, and do so at a fast turnaround.

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