Such a curious state of affairs. Apple writes checks in the billions of dollars to Samsung to purchase key components for a host of products, including LCD displays. At the same time, Apple and Samsung are embroiled in a worldwide barrage of lawsuits over intellectual property. Apple charges Samsung with slavish copying of the iPhone and iPad, while Samsung appears to want to counter with claims of violation of industry-standard patents.
Certainly Samsung has a multi-billion dollar incentive to want to keep Apple’s business, and that should have presented sufficient motivation to work out some sort of cross-listening deal to put an end to the lawsuits, but things haven’t quite worked out that way.
There’s also a published report that Apple has been steadily cutting down on the number of LCD panels acquired from Samsung, and will phase out such purchases by 2013. Even though the A6 processor is reportedly being fabricated at a Samsung plant, Apple appears to be moving that component to another company’s factory. It won’t be long before Samsung does no business with Apple, and it’s not as if other companies aren’t lining up to get some of those orders.
If the report is true, you have to wonder why Samsung’s CEO isn’t freaking out big time and seeking a solution. It’s not as if any company can afford to give up billions of dollars of business every single year. Just because Samsung makes a decent profit from selling tens of millions of smartphones shouldn’t prevent them from seeing the forest from the trees. To be fair, Samsung is denying the story, which may, at this point, mean little to nothing.
But maybe it serves Samsung right. I mean Apple was able to work out a satisfactory agreement with their former fiercest rival, Microsoft. Yes, they still compete on operating systems and mobile platforms, but at least they aren’t arguing the points in court. Clearly Samsung has smarter ways to spend money, maybe by changing some of the custom interface elements on their Android gear, so that Apple’s lawyers won’t bother them with legal threats.
A lot of those problems, however, might be blamed on Google, which developed Android to closely resemble the iOS while former CEO Eric Schmidt was sitting on Apple’s board. No wonder Steve Jobs felt betrayed, and it’s not as if Android has actually paid off in revenue. In the most recent financial quarter, Google reported lower revenue and profits than analysts expected, and the recently-acquired Motorola Mobility division continues to hemorrhage large sums of money.
Yes, this is a curious state of affairs. Microsoft, for example, appears to earn more money from Android than Google, because of payments to license certain patents. Now it’s not as if the validity of those patents has necessarily been tested in court, but the handset makers pay up anyway.
So you have to wonder whether Android, despite being the number one mobile platform on the planet, is really paying off for Google. Sure, they are getting an audience of millions to, they hope, click on targeted ads and keep the cash registers ringing. But what if Google exacted a modest fee from handset makers and ditched the ads except for search and and perhaps mapping? Would that, ultimately, yield more revenue? Or would handset makers consider other options? But what other options are there, other than the failed Windows Phone platform?
Of course, things in Android land are still as fragmented as ever. As before, only a tiny percentage of Android smartphone and tablet users are running the latest OS versions. Google doesn’t push the upgrades direct to consumers, so they have to deal with handset makers and wireless carriers who continue to modify the interface and add lots of junkware to promote various products and services. In contrast, some 60% of iOS users reportedly upgraded to iOS 6 in the very first month.
Then again, if customers aren’t protesting, I suppose there’s no harm, except for potential security lapses of course. How many Android users are clamoring for the latest and greatest, and how many simply use whatever they are given, without concerning themselves about whether a newer, more efficient and more secure OS is out there?
Returning to the Samsung situation, it’s clear the lawsuits will continue without letup for the foreseeable future. Even though Apple emerged victorious from that jury trial in northern California, it may take a while to see any final resolution, what with appeals and more appeals. Meantime, Samsung is losing lots of business from Apple. So even if, in the end, they conveniently workaround any potential patent abuses, that will not help them reclaim the lost contracts.
How many Galaxy S III smartphones must they sell to make up for not being able to ship LCD panels and other parts to Apple? Does it make any difference at all to them? Or perhaps they just don’t get it. But since Samsung is a company with many separate divisions, so long as total sales and profits appear to be moving in the right direction, maybe it won’t make a difference.
As far as Apple customers are concerned, only those who care about the geeky details will concern themselves about who makes what part. In the end, it doesn’t impact Apple, but, when they come to their senses, it may eventually matter to Samsung.
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