Samsung Has Aces Up One's Sleeve in Fight Against Apple

  on September 03 2011 3:49 PM

[ANALYSIS] 

After Hewlett-Packard decided to cease production of webOS devices, including the TouchPad, eyes were on Samsung Electronics.  Samsung is the largest seller of devices that run on the Android platform and is Apple Inc.'s biggest supplier-turned-rival.  

But recent events have given logic to Samsung's possible acquisition of HP's webOS platform or mobile devices business: the Android is involved in legal issues with Oracle and Apple, and Motorola now has a distinct advantage over its Android peers as it is about to be sold to Android's developer, Google, Inc., for $12.5 billion.

At this year's IFA, the world's largest consumer electronics and home appliances show, Samsung CEO Choi Gee Sung said Samsung would never acquire webOS.  Korea-based Samsung already has the Bada mobile OS, which is popular in China and other parts of Asia, and it's relying on Google's assurances that it remains committed to Android partners.  Motorola also has a deep portfolio of patents that can be used for Google's counterstrike against Apple and others.

At the IFA, Samsung was due for an embarrassment, at least in the tablet arena, after Apple obtained an injunction against the display and sale of the Samsung Galaxy Tab 10.1 in Berlin, which is hosting the IFA extravaganza.

But Samsung has laid cards on its sleeve: it unveiled at the IFA three new tabs that aim to trample Apple's devices.  Samsung has the Galaxy Note, the Galaxy Tab 7.7, and the Galaxy S WiFi.

Owning a Galaxy Note is cheaper than buying an iPad and iPhone altogether.  The Galaxy Note has a 5.3-inch screen (bigger than the 3.5-inch screen of the iPhone 4), and is powered by 1.4GHz dual core processor (faster than the iPad2's processor), 1GB of RAM, runs on Android 2.3 (Gingerbread).  For a bigger screen, but more portable than an iPad 2, there's the Galaxy Tab 7.7 -- it's thin (only 7.89mm), light (at 335 grams) and features the same Super AMOLED Plus screen technology used in the Galaxy S 2.  For those looking for the iPod touch-like devices, Samsung is offering the Galaxy S WiFi 3.6.

The three new devices plus the September release in the U.S. for the Galaxy S II (it's fastest selling Samsung smartphone ever) will be a major threat to Apple's dominance in the mobile devices market.  Apple has not yet released the highly anticipated iPhone 5 due to production problems and will only launch the iPad 3 next year.

Samsung has been the manufacturer of integral parts of Apple devices, including the A5 processor for the iPad 2 and the iPhone 5.  But due to the ongoing hostilities, Samsung is said to be cutting ties with Apple, and now Apple is scrambling to look for a new manufacturer for the A6 multi-core processors, which will power the iPad 3 and the sixth edition of the iPhone.

Notwithstanding Samsung's ammunition, Apple could still distance itself against its rivals when and if it launches the "iPhone 5" and the device meets high expectations.  

And in the tablet market, Apple will likely continue to dominate with the $499 iPad.  HP is liquidating the TouchPad at $99 and other rivals are cutting prices: Research in Motion is cutting prices of the PlayBook by $50 (to $449 for the 16GB variant) and Lenovo is launching the IdeaPad tablet at only $199.  This does not bode well for Samsung: while Apple has been able to record high margins with the iPad, its rivals would have to settle with low margins (or at a loss, in HP's case) just to sell their tablets.

As its LCD/LED panels unit sales has seen softening this year, Samsung needs the margins and the cash from its mobile devices unit in order to fund its defense against the barrage of lawsuits filed by Apple all over the world.  Apple on the other hand has enough cash with $76.2 billion in cash and marketable securities as June 25 and has no outstanding debt.

But it doesn't mean that Samsung is backing down, and that Apple has been victorious in its suits.  While Apple has obtained temporary bans of Samsung devices in Australia and some parts of Europe, Samsung has managed to put up an adequate defense.  In the Netherlands, for example, a court dismissed Apple's claims that Samsung devices were infringing on Apple's designs.  The Dutch court only found that Samsung infringed on a software-related issue (the way the Galaxy S phones is scrolled), but this can be easily addressed with a software update.  The Dutch court's decision denying Apple's "look and feel" claims could set precedent for similar rulings in the European Union and other countries.

"Apple's strategy amounts to little more than an attempt to smother its most prominent rival and the largest manufacturer of Android smartphones and to intimidate mobile phone carriers under an avalanche of meritless, rapidly evolving legal threats, rather than fairly competing in the marketplace," Samsung said in a court filing in U.S. district court.

Samsung has a deeper patent portfolio than Apple.  Sooner rather than later this Korean electronics giant will strike back against Apple.

FOR THE TOP TABLETS AT IFA, READ "IFA 2011: Setting Stage for iPad's Ultimate Downfall [PHOTOS]"

ALSO READ "IFA 2011: Top 10 Things We'd Love to See But Won't" 

Join the Discussion