Which Company Does Apple Fear the Most?

Apple Inc. (Nasdaq: AAPL) may be the top dog in most of its market segments, but even the biggest, fiercest, and most competitive company has a secret list of companies it knows has a fair chance of displacing it. Without a doubt, Korea's Samsung Electronics Co. Ltd. (Korea: SEC) is probably the most likely contender for Apple's crown as the world's biggest consumer electronics company.

I didn't speak with Apple about this (the world's biggest electronics company by market value hardly returns phone calls, and certainly won't comment on a question like "Which company do you fear the most?"), but recent actions demonstrate, unequivocally, which of its closest rivals it might be more concerned about.

On Monday, for instance, Apple filed a complaint asking the US International Trade Commission to "block imports of Samsung Electronics Co. smartphone and tablet computers," according to a Bloomberg News report. The move was in continuation of tit-for-tat actions by the two companies, which have filed patent infringement lawsuits against each other in various courts.

Apple wants the ITC to "conduct an investigation" into the activities of Samsung Electronics and its subsidiaries in the United States. The goal is to increase pressure on Samsung and potentially cripple its ability to make inroads into some of Apple's more lucrative markets. In turn, Samsung has requested the ITC halt the importation of Apple's iPhone and iPads, both of which the Korean company claim violate certain of its patents.

Imagine the consequences for the opposing company if either party were to prevail. Apple's iPad and iPhone dominate the market and are racing ahead of rival devices, while Samsung is making steady gains -- albeit at the expense of competitors such as Motorola Mobility, Nokia, and Research in Motion. Eventually, Samsung's Galaxy series products, including its tablet PCs and smartphones, will make a dent on Apple's market share, even if only by slowing down the rival products' adoption rate.

This may already be happening. In recent months, Google (Nasdaq: GOOG) Android operating system smartphones have leaped ahead of competing devices in the United States and have surpassed the closest rival, Apple iOS, by more than 10 percentage points, according to researcher ComScore. In the three months ended May 31, Android accounted for 38.1 percent of all US smartphone platforms, up from 33 percent in the three months ended February 28. Apple followed with 26.6 percent, up from 25.2 percent. RIM's share fell during the same period to 24.7 percent from 28.9 percent, while Microsoft's also declined to 5.8 percent from 7.7 percent. (Click here for details of the ComScore report.)

Samsung actually has more mobile subscribers in the US than Apple. In fact, Apple trailed LG and Motorola in the period covered by ComScore. Samsung had a market-leading 24.8 percent during the three months ended May 31 and was followed by LG with 21.1 percent, Motorola with 15.1 percent, and Apple with 8.7 percent.

Samsung's decision to enter the tablet PC market is no doubt a source of concern at Apple, considering the Korean company's equally deep pocket and position as a component supplier to its equipment businesses. While Apple must source all components externally, Samsung is able to secure electronics parts directly through some of its business units, and may be in a better position to guarantee supply, which is a source of constant worry at its American counterpart.

Why should any of this concern the supply chain? The struggle of these two elephants will squeeze smaller players that may not have sufficient resources, and the rivalry is certain to poison the procurement environment. Component pricing will go up, and shortages may also result.

I don't think Apple executives spend much time worrying about BlackBerry (Nasdaq: RIMM; Toronto: RIM) and Motorola Mobility Inc. (NYSE: MMI). Apple CEO Steve Jobs had in the past dismissed the Blackberry maker, noting during a conference call with analysts several quarters ago that RIM was unlikely to catch up again. He is right. Not only has RIM slipped badly in the smartphone sector, but its Playbook tablet hasn't exactly wowed the market.

Motorola, too, hasn't made any impact on Apple's market share, although it is a better rival today than it was only two years ago. Meanwhile, Nokia is in the throes of a major reorganization, from which it may or may not emerge as strong as it used to be. That leaves Samsung as the company Apple should be most worried about. And the Korean company knows this. Responding to the latest regulatory and courtroom offensive from its US rival, the company said the case "will not affect by one minute Samsung's ability to continue selling competing products," according to Bloomberg.

Even Apple must know this, but the company will press on with its product innovation strategy and courtroom maneuvers; merely slowing down Samsung might be worth a toast.