Apple vs. Samsung - What’s At Stake?
I’ve been following, like pretty much everyone in our sphere, the quite uneventful - dare I say Hollywood-like - debates of the Apple vs. Samsung patent trial, and have appreciated the few pearls that came out of it this past week. Sure, as an engineer who has built machines before software, I enjoyed the insight into the creation process at Apple, and the exhibits of prototypes. I was shocked by the rather low number of prototypes, by the way, that seem to indicate that the industrial design team is indeed quite small in numbers. That would warrant a detailed analysis, but basically it reveals that a tight team is working all these prototypes, and the small number shows (no surprise here) that very strong opinions are at play when it comes to choosing a direction.
Everything else, to be honest, was closer to a circus than a patent case, that is perhaps why 99% of those never reach court. I am not even going to discuss the so-called insights into the inner-workings of Apple, as anyone who has been following this company in the press already knew much of those “informations”. Let’s leave it at sensational titles put up to increase blogs page-counts.
Now, what is indeed more interesting and has not received much attention, is what is at stake in this trial. For a little time, one could think that the passing of Steve Jobs, a rather “sanguine” character, would lead to a settlement. Yet, we get the confirmation that Tim Cook is pursuing on that hard line, with a much better chance to get a favorable issue to these matters. First, Samsung and other competitors have learnt, or will soon, that Steve Jobs’ replacement by Mr Cook is not going their way at all. Mr Cook is more likely to coldly execute the plan to the end, with a few interesting variations. That is the second point: it is odd that Apple sues its biggest third party component manufacturer! Where Mr Cook excels is at sourcing the various components and manufacturers to assemble the magical devices, so it should come as no surprise to see the beginning of a diversification of these providers. This will benefit other manufacturers, and may tip the scales to extents yet unknown. We are talking about contracts of several billions of dollars, and losing even parts of those will hurt deeply. If you add the law-related troubles to cost-efficiency issues, we can expect major movements in the electronics manufacturing industry within the next 3 years. This is exciting because the past decade has been mainly about mergers, reducing the number of fabs and sharing their ever increasing development and running costs. So, anything that disturbs this somewhat conservative industry, is bound to be exciting and produce some major shifts in the electronics industry.
The other matter not really discussed is: what if Samsung loses the case, completely? In a catastrophe scenario for the Korean manufacturer, $2.6b go to increase Apple’s war chest, and their devices are out of the US market. To be followed by other countries as the cases develop here and there. Both are big problems. The cash is a large amount, and even for a company the size of Samsung, will be felt. Removing all the devices from the US market is a way bigger problem, as Samsung would default its contracts with its business partners, the carriers. My best guess is that those settlements would be hurting way more that the $2.6b, as these contracts usually involve medium to long time frames. Leaving aside the fact that Apple could use this case as a step-stone to effectively pursue other manufacturers of Android devices, and that this system that so well aped the iOS would have to go back to the drawing board, the damage to Samsung’s reputation would be even more costly. Samsung is a Korean, and therefore Asian, conglomerate. A huge slap in the face like that is a public humiliation, not one that is easy to recover from by any means. I wouldn’t go to the extent of saying that it would damage the image and pride of the whole country, but this may not be far from the truth. Samsung is one of the huge conglomerates that dominate Korea, with LG and a few others. I am not sure of the number of employees they have in Korea, particularly if you want to count the indirect jobs they generate. It can be thought about in this way: if you are a Samsung engineer, it is very likely that you got married in a Samsung church, got your child in a Samsung hospital, sent him/her to a Samsung school, live in a Samsung tower set in a Samsung-manufactured town, and so on and so forth (your child is likely to work for Samsung later in his/her life, yes). And those big conglomerates, together with the education and health systems, are an incredible achievement and a legitimate pride of the Koreans, who have built their country from scratch after the Korean war.
One thing I fail to understand, is why? I visited Samsung research center some 12 years ago, and was positively impressed by their results and their organization. Everything was streamlined ideally, with the electronics research center at the center of an onion structure, where the second layer - literally, a ring of buildings - was hosting 10-20 times as many engineers and workers as the research center, and in charge of implementation and industrialization of the products that came out of research. A larger ring of building was further devoted to manufacturing. The high adaptivity of this structure and the units constituting it was truly impressive. And so was the content of the research I was shown. I don’t think any stone was left unturned, my field of interest (nanotechnology) was well represented, although a young discipline in Europe, and the research was well in advance in that field. To give an example, where we were still exploring the electronic properties of carbon nanotubes, and trying to tweak them for novel molecular electronics, Samsung was already using them in pre-prod as pastes of various uses. Anyway, there was a lot of innovation coming out of these labs. Yet, I did not see any industrial design lab in there, and perhaps wrongly concluded that it may be located elsewhere (actually, I got word that most of the design teams were in the outer layers of the onion). But, this is the main blue sky research facility, and it appeared that Samsung was driven by the performance of its electronic components and their assembly, not driven by design. And that’s the sad fact about this case. I do not see how they can win this one, honestly, and the best they can hope for now is to limit the damages. It is evident that they “ripped-off” the designs of Apple, as they did for all the phones they produced in the previous decade. Remember the clam phones? The sliding ones? The keyboard ones? Go ask Motorola, Ericsson, Nokia, HP/Compaq and a few others what they think about Samsung designs’ originality…
As a conclusion, as we will be waiting for the verdict, I do have the feeling that “it’s going to hurt in the morning, Son!”