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Which Company Does Apple Fear the Most?

{complink 379|Apple Inc.} 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 {complink 4751|Samsung Electronics Co. Ltd.} 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, {complink 2294|Google} 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 {complink 4644|Research In Motion Ltd. (RIM)} and {complink 12925|Motorola Mobility Inc.}. 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.

12 comments on “Which Company Does Apple Fear the Most?

  1. Anand
    July 7, 2011

     Apple filed a complaint asking the US International Trade Commission to “block imports of Samsung Electronics Co. smartphone and tablet computers,”

    Bolaji,

     What are the chances of APPLE winning this legal battle ? Its known fact that Apple A4 was using processor which was manufactured in Samsung, is it possible that APPLE's claims might be true ?

  2. Parser
    July 7, 2011

    In iPhone 4 Apple is using memory chips from Samsung. It seems to be simple and easy for Samsung to start a war of parts availability and slow down Apple. I think Apple will replace those chips in model 5 assuring public that Samsung is the biggest competitor. 

  3. elctrnx_lyf
    July 7, 2011

    I don't think the Apple can win this legal battle over samsung because Apple is only complaining on the look and feel of the samsung phones and tablets is similar to iphone n ipad. But suddenly it feels like apple is feeling the heat of samsung eating the share of apple. Asusual apple would be working on something for the future.

  4. Jay_Bond
    July 7, 2011

    This is going to be an interesting time for Samsung and Apple. Assuming this latest issue is even seen in the courts, it will obviously put a slight damper on sales. I always found it odd when a company used a competitors parts in their product. It would seem like they could do some damage to sales by not meeting demand. I'm sure Apple is already working on changing this and many other upgrades for the new Iphone. They are definitely proving that Samsung is their biggest competitor and possible heir to the throne.

  5. bolaji ojo
    July 7, 2011

    @Anandvy, The two companies have a relationship that goes deeper than the rivalry in the mobile phone and tablet PC industry. Samsung supplies components to Apple and I don't believe that relationship is in jeopardy. Of course, Apple is free to evaluate its procurement strategy and this may in future exclude Samsung. For now, I agree with Samsung that the legal roadblocks will not deter the company from competing with Apple. Apple may slow it down and Samsung may also slow down Apple but neither company will exit the smartphone and tablet markets as a result of the legal wrangling.

    What do I think will happen? They'll settle for cross-licensing or one party will agree to pay the other a substantial amount. They'll agree to continue competing in certain areas and collaborate in others. That's more likely than continued litigation.

  6. Ashu001
    July 7, 2011

    Bolaji,

    You are quite right to Say Apple should be very worried about the companies which is it up against.

    But I feel that Google is right up there with both Samsung and LG as major rivals for Apple.

    Lets face the facts if it were'nt for the Kick-Ass software coming out of Google,LG and Samsung would both have never been able to sell half as many Phones and Tablets as they are now.

    So Google deserves its place in Sun as well.

    As for Apple worrying that one of its competitors as a competitive advantage(procuring materials from its own company)-I have a solution.Use its burgeoning cashpile(USD 40 Billion) to buy out one of the contract manufacturers in Taiwan/China.

    That for sure will help them secure enough inventory.

    But won't be an about-turn for Apple? Yes it would  but it would also reflect the fact that we live in an uncertain world today and the best companies have to be prepared for any eventuality and especially unexpected Bottlenecks in supply.

    Regards

    Ashish.

     

  7. Ashu001
    July 7, 2011

    Bolaji,

    Right you are! Cross-licensing is the way to go here.

    By collaborating wherever they see the best syngergies,Both companies can actually save cash while continuing to produce awesome products.

    After all,R&D costs money too!!!

    Its about time someone figured ways to stop simply enriching all the Lawyers.

    regards

    Ashish.

  8. AnalyzeThis
    July 7, 2011

    While I agree Apple would be wise to keep an eye on Samsung, I don't think Apple fears anyone.

    And here's something to keep in mind: Apple has only a few products. They're very focused. They can spend tremendous effort ensuring the iPhone and the iPad are amazing products. Meanwhile, here's a short list of just some of the products Samsung makes, besides phones and tablets:

    TVs
    Blu-ray players
    Projectors
    Home Theater Systems
    Cameras
    Printer Toner
    Camcorders
    Washers & Dryers
    Refrigerators
    Microwaves

    Samsung obviously has a completely different approach and philosophy than Apple. So what do they have to truly fear?

  9. itguyphil
    July 8, 2011

    You know what that means, it's just the opposite, Apple's trying to be like Samsung… (DUN DUHHHH)

    Soon, there's going to be an iFridge and iWave

    Apple will have a pulse on our everyday lives even more. You'll be able to make your breakfast in bed by transmitting your desires from your iPhone/iPad while laying in bed…

  10. Ms. Daisy
    July 9, 2011

    Bolaji; I suspect the rivalry also helps to get the 2 giants added visibility which helps to keep other competitors at bay. If I might add, your conclusion about financial settlements is often the solution to corporate wrangling, but cross licensing is a win-win for both organizations.

  11. stochastic excursion
    July 9, 2011

    Apple has a big challenge ahead of it if it wants to take away a significant portion of Samsung's market share.  South Korea is heavily invested in key national industries.  In 2000 they successfully went through the WTO to get the U.S. to drop import restrictions on Korean DRAMS.  Maybe this is why Samsung feels confident using the legal arena to challenge a major rival in mobile phones.

  12. JADEN
    July 19, 2011

    Apple need to do more on products innovation, with their ios5, Apple is copycatting Android.

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