Reuters Story Profiles Apple and Samsung as “Frenemies” for Life

In a report published last night, Reuters profiles the Apple versus Samsung saga that provides interesting insight into the now troubled business relationship between both companies, given the complicated legal wars currently being waged.

The late former Apple CEO Steve Jobs wanted to go “thermonuclear” on Android and Samsung for copying Apple’s designs. However, sources reveal Tim Cook was opposed to litigation due to Samsung’s relationship with Apple as a crucial supplier:

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.

The report goes on to detail Apple’s operations chief, Jeff Williams told Reuters last month Samsung “was an important partner and they had a strong relationship on the supply side.”

As for Cook wanting to settle instead of litigate, this information isn’t surprising given how Tim Cook met with Samsung CEO Gee-Sung Choi in May of last year to discuss possible settlements to longstanding patent disputes between both companies.

The piece also details how Steve Jobs in 2005 stressed the importance of the NAND flash memory market, which Samsung had an iron grip on at the time with 50 percent marketshare:

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.

As the iPhone gained in popularity, Samsung downplayed its success publicly but privately had alterior motives:

“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.

[…]

“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.

As Apple complained to Samsung executives when they were on a visit to Cupertino, Jobs and Cook assumed the latter would modify their designs, according to sources. That of course, never happened.

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 has continued to move away from its reliance on Samsung as a chip supplier and towards Taiwan-based TSMC for its chip requirements, signalling a move their business relationship is no longer guaranteed. Although the feud between both companies smell of drama in the media, one attorney who observed executives from Apple and Samsung says it’s being overplayed:

“People play this stuff up because it shows a kind of drama, but the business reality is that the temperature isn’t that high,”

Samsung’s business model is to flood the market with a plethora of smartphones from cheap dumb phones to the high end (37 total phone device offerings according to Mirae Asset Securities), while Apple has remained consistent with just one line up of the iPhone, across a few models (although rumours of a larger iPhone persist).

Regardless of their different approaches, both companies continue to dominate smartphone marketshare but Apple is the one with the most profit.

Founder and Editor-in-Chief of iPhoneinCanada.ca. Follow me on Twitter, and @iPhoneinCanada, and on Google+.

  • http://www.facebook.com/juett.andrew Andrew Juett

    Apple is smart to keep 1 phone design at a time. Samsung just fragments the Android market ever further by releasing cheap to half decent phones. Just imagine if Samsung cut down their line up to 3 phones and optimized the OS to the hardware, then things would get interesting.

  • http://www.iphoneincanada.ca Gary

    What I find impressive is how Samsung is able to scale so many different models around the world all the time. Definitely different strategies at play, Apple’s strategy is the most profitable by far.

    Crazy to see how Samsung’s popularity has grown significantly in just a few short years…but that happens when you spend more on marketing than Coca Cola.