How Apple And Samsung Became Rivals - YouTube

If you’ve been following Apple for a while or know the company’s history, you’ll

probably remember them having quite a few rivals over the past thirty five years. In

the 80’s it was IBM, in the 90’s it was Microsoft, and in the 2000’s, it eventually

became Google. But the rivalry between Apple and Samsung is more recent, and more unique.

Since Samsung not only competes with Apple in the notebook, tablet, and smartphone markets,

but also supplies Apple with key components for their devices. Like the iPhone’s OLED

display and flash memory chip. So let’s explore how the two companies relationship

soured, and how they feel about each other today. This is Greg with Apple Explained and

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THE EARLY DAYS

Now many of us today have become familiar with Samsung through the consumer electronics

they sell. But those business endeavors are actually a fairly recent development considering

the company’s long history. In the 80’s Samsung’s electronics division was focused

primarily on the semiconductor business. And their then CEO Lee Byung-chull spoke with

Steve Jobs on several occasions for advice or negotiations. In fact, the two met in person

in 1983 at Samsung’s offices in Seoul. Around the time the company decided to make a sizable

investment in a new chip plant in China. It’s unknown if Jobs encouraged Samsung to expand

their semiconductor business, but the two CEOs clearly had a friendly relationship.

Apple went on to become Samsung’s biggest client. Ordering billions of dollars worth

of electronic parts. But the friendly and cooperative relationship between Apple and

Samsung didn’t last forever. Before the original iPhone was announced, Samsung CEO

Lee Jae-Yong visited Apple’s headquarters to meet Jobs. It was then when Jobs revealed

the device to Jae-Yong and dissembled it, explaining how the iPhone’s technology worked.

And as you might expect, Samsung took the idea and ran. Releasing their own touchscreen

smartphone called the Galaxy just two years later, which ran on Google’s Android operating

system. As a result, Jobs asserted that Android was a stolen product and eventually called

Samsung a copycat. It was at this moment when Samsung went from being Apple’s ally, to

Apple’s enemy. And the lengthy legal battle that began between the two companies in 2011

was proof that Apple was prepared to protect it’s intellectual property at any cost.

FROM FRIEND TO FOE

The seven year lawsuit war started with Apple striking first in 2011. But it wasn’t something

that came out of the blue. In fact, Apple approached Samsung in 2010 and told them up

front that their smartphones and tablets were infringing on Apple’s patents. And because

the two companies had a long history of cooperation, Apple was willing to work out a deal. They

proposed a licensing agreement where Samsung would pay Apple up to $30 for every phone

sold, and up to $40 for every tablet. But the company declined, since they didn’t

believe their products had infringed on any of Apple’s patents. So the following year

Apple issued the lawsuit. Claiming, “Instead of pursuing independent product development,

Samsung has chosen to slavishly copy Apple’s innovative technology, distinctive user interfaces,

and elegant and distinctive product and packaging design, in violation of Apple’s valuable

intellectual property rights.” So was this true? Did Samsung really rip off the iPhone

and steal features that Apple had patented? Well, let’s see how Samsung smartphones

looked before the iPhone… and after the iPhone. I think it’s pretty obvious that

Samsung borrowed heavily from innovations the iPhone pioneered.

But what exactly were the offenses? After all, in a lawsuit a company has to point out

specific violations of their patents in order to successfully make their case. Well Apple

made a total of sixteen claims against Samsung, but I want to focus on three in particular:

Trade dress infringement, trademark infringement, and infringement of design patents. Let’s

start with the first one, trade dress infringement. Now what does that even mean? Well a trade

dress is the visual appearance of a product or its packaging that represents its source.

In other words, it prevents companies from imitating other products in the marketplace

as to prevent confusion among consumers. Who may believe they’re buying a product from

a certain brand, when in reality it’s just a knock-off. And that’s why we see so many

knock-off Apple products sold in China, but rarely in America. Because our trade dress

laws protect companies from imitators. In fact, the very first iMac was imitated by

an American company called eMachines with a product called the eOne. It was clearly

a knockoff of the wildly popular iMac, but it didn’t do well since Apple successfully

sued the company through a trade dress claim. Now clearly Apple felt Samsung was doing the

same thing by ripping off the iPhone and iPad’s trade dress for their various devices. And

as you can see from this picture, there are quite a few striking similarities that likely

aren’t due to sheer coincidence.

Next is trademark infringement, and this is where things get a little obvious. Because

while Samsung may have been able to argue that the similarity in hardware design was

incidental, the similarities in software elements like the icons became much more difficult

to defend. There are literally hundreds of ways to design any given icon, and in many

cases, Samsung just so happened to choose the same visuals as Apple.

And third, was infringement of design patents. These included the home screen icon layout,

the form factor of the iPhone’s chassis, and the screen and button designs. So if we

add all of that up, we have claims ranging from branding, to software design, to hardware

design. Essentially every major component of these select Samsung devices Apple claimed

were copied from their iPhone. And what did the court think of all this? Well they ruled

in Apple’s favor. They ordered Samsung to compensate Apple one billion dollars for their

infringements and to never do it again in the future. But this wasn’t the end of the

story. In fact, the two companies were just getting warmed up.

Samsung ended up appealing the verdict and countersued. Claiming some of Apple’s products

were infringing on their patents. This legal back and forth continued for years, with both

sides enjoying some wins and suffering some losses. Apple managed to ban Samsung’s Galaxy

Tab from Germany which forced the company to redesign the device. But Apple was also

found guilty of infringing on Samsung’s cellular data patent with the AT&T iPhone

4, 3GS, and 3G, as well as models of the original iPad and iPad 2 with 3G data radios. Which

meant Apple would be banned from selling AT&T models of some iPhones and iPads in the US,

but the white house had a chance to veto the decision which was exactly what President

Obama did.

Now the seven-year-long lawsuit war came to an end in June 2018 when Apple and Samsung

agreed on an undisclosed settlement. Although it’s unknown what that settlement was, it’s

worth considering how much damage the entire ordeal had on both companies, and how little

each were compensated in return. But Apple clearly saw the legal battle as a victory

when they released this statement: “We believe deeply in the value of design, and our teams

work tirelessly to create innovative products that delight our customers. This case has

always been about more than money. Apple ignited the smartphone revolution with iPhone and

it is a fact that Samsung blatantly copied our design. It is important that we continue

to protect the hard work and innovation of so many people at Apple. We’re grateful

to the jury for their service and pleased they agree that Samsung should pay for copying

our products.” Samsung declined to comment.

THE AFTERMATH

Now you’d probably imagine that after all those lawsuits Apple and Samsung would want

nothing to do with each other, but it turned out to be quite the opposite. Because Samsung

still provides Apple with crucial components for their most popular products. The iPhone

X’s beautiful OLED display was brought to you by Samsung, as well as it’s memory chip.

And the revenue generated by these component sales are staggering. Samsung earned $110

for each iPhone X sold, and since Apple sold an estimated 130 million units, that adds

up to over 14 billion dollars for Samsung. Compare that to the component revenue of their

own Galaxy S8 at $10 billion, and you begin to understand how symbiotic the relationship

is between the two companies. Apple relies on Samsung to provide high quality components

that can be mass produced at scale, while Samsung relies on Apple to buy the components

they make. So the destruction of either company would be detrimental to the other.

I think that’s why Tim Cook dialed back on the aggressive stance Steve Jobs took on

the Android and Samsung case back in 2010. Jobs said, “I will spend my last dying breath

if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right

this wrong, I’m going to destroy Android, because it’s a stolen product. I’m willing

to go thermonuclear war on this.” And although he was referring to Android in that specific

quote, those feelings extended to other companies like Samsung who he also thought were copying

Apple’s products. But in 2012 Tim Cook made it clear that he preferred a different approach.

He said, “I’d highly prefer to settle versus battle. But you know the key thing

that’s very important is that Apple doesn’t become the developer to the world. I’ve

always hated litigation. We need people to invent their own stuff.”

So although Cook wasn’t interested in dragging out Apple’s legal disputes against Samsung,

he was interested in relying on Samsung less for components. Because in 2018 Apple reportedly

added LG as a supplier of OLED displays, who began test runs of mass-produced panels near

the end of 2018, and may believe Apple will begin using LG panels in the new iPhones released

later this year. This will improve supply-chain reliability and give Apple negotiating power

with both suppliers, hopefully resulting in less expensive panels.

But that isn’t to say Apple and Samsung are growing apart, because just a couple months

ago the companies announced a deal that took many tech fans by surprise. And it was that

Apple would bring iTunes Movies and TV Shows to Samsung Smart TVs in addition to AirPlay

2 support. Which means not only will users be able to access their existing iTunes library

and buy or rent movies and tv shows from the iTunes Store, but they’ll also be able to

play videos, photos, music, podcasts and more from Apple devices directly to Samsung Smart

TVs. Something that was previously only possible with the Apple TV set top box. And this is

another great example of Apple and Samsung working together in a way that benefits both

companies. Samsung will likely sell more TVs since they’ll have iTunes and AirPlay, and

Apple will likely sell more movies and TV shows since there’ll be more people shopping

on the iTunes Store.

MOVING FORWARD

So we’ve recognized that Apple’s relationship with Samsung has had its ups and down. And

it’s true that they’re direct competitors in a number of markets. But moving forward,

I think we’ll see more cooperation between these two companies rather than conflict.

Mainly because they’ve both been challenged by a new rival: Hauwei. They’re a Chinese-based

consumer electronics company that has been exploding in popularity, thanks to their inexpensive,

high-quality smartphones. Apple and Samsung both made a concerted effort to expand their

presence in China to take advantage of their large consumer market and growing economy.

But things didn’t go as planned for either company, since Chinese manufacturers like

Huawei disrupted the market by undercutting the iPhone and Galaxy while still offering

full-featured premium phones. In fact, in the last quarter of 2018 Apple’s worldwide

smartphone marketshare dropped two percentage points, and Samsung’s dropped one percentage

point. All while Huawei managed to grow their hold on the smartphone market by four percentage

points, which means they’re one of the only companies not experiencing slowing smartphone

sales.

So it seems as if Apple and Samsung have more or less become natural allies in the last

couple years. They ended the lawsuit war, they’re striking deals to help each other

access more paying customers, and they still cooperate on component manufacturing. But

only time will tell if this trend toward friendliness will continue, or if a new disagreement will

cause a divide between the two companies yet again.

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Thanks for watching and I’ll see you next time.