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Apple and Samsung: Bad Blood Gets Badder

Apple and Samsung: Bad Blood Gets Badder

There are dozens of smartphone makers out there, but only two control 95 percent of the market's profit, according to a recent study: Apple and Samsung. The situation adds just that much more heat to an already blazing rivalry between the two, with battles fought on store shelves, balance sheets, TV ads and courtrooms around the world.

By Rachelle Dragani MacNewsWorld ECT News Network
04/04/12 5:00 AM PT

The smartphone war is often depicted as a battle between iOS and a world of Android phonemakers, but a report released this week suggests that in terms of profit, Apple really has one main challenger -- Samsung.

The South Korean manufacturer and Apple together account for 95 percent of the Q4 2011 profit in the handset industry, according to a report from Canaccord Genuity. Apple accounted for 80 percent of the industry's profit in that time frame, outselling all other smartphones combined at AT&T and Sprint, the report states. Samsung has stepped up to the plate and captured 15 percent of the remaining profit.

Thanks in part to strong sales for the iPhone 4S, Apple has been on an upward climb so steep that some analysts told Forbes this week that a US$1,000-per-share price point for AAPL wasn't out of the question. The stock closed Tuesday at just under $630 -- hitting more than $1,000 would make one Apple share pricier than some of its laptops.

Battle Heating Up

The Android army has usually managed to occupy a large chunk of the smartphone market, partly because the Android platform is spread over so many phone makers. Samsung's Galaxy S franchise has especially given it a boost. With Samsung as a main competitor, Apple can focus its attack against a single challenger.

"Samsung has increased their market share significantly in the Android space with a number of simultaneous attacks," Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told MacNewsWorld.

The competition for profit is only going to worsen the blood feud between the two companies. The two are already engaged in multiple heated legal battles over patents.

"Every market share point Samsung drives to get closer to Apple's share increases the tension between the two companies," said Moorhead. "One of these battle grounds is the court room, which is only intensifying."

Labor and Samsung

Another field Samsung and Apple are battling over is the TV market. Rumors of an Apple TV set have never been confirmed, although that doesn't stop them from spreading. Because of Samsung's experience in the TV space, the company has been talked about as a possible partner to which Apple would turn for TV set production, especially with its LCD and AMOLED screens.

With the fierce rivalry growing between the two, though, a supply chain deal between them might be a nonstarter. That could explain why Apple is apparently shopping a deal with Foxconn's parent company, Hon Hai Precision Industry, to buy a stake in Sharp, the LCD maker, according to a report from Forbes.

That would mean deepening Apple's relationship with a company that's been the focus of much concern recently. An Apple-commissioned report on Foxconn recently found labor violations in some of its China-based factories. Both Apple and Foxconn responded to the reports by pledging to make sure conditions improved.

"It is a PR problem," Shad Dowlatshahi, professor of operations and supply chain management at the University of Missouri-Kansas City, told MacNewsWorld. "But it will not be enduring if it does not repeat itself. People will continue to buy Apple products and will soon forget about Foxconn if it does not repeat itself."

If it happens again, though, Dowlatshahi said the stakes are high not just for Foxconn and other major suppliers on the chain, but for Apple as well.

"The general public will eventually hold Apple accountable," he said. "This requires more work and more intervention on the part of Apple."

Outside of the labor issue, business as usual continues at Foxconn -- which means product rumors are as abundant as ever. In the latest one, a Foxconn recruiter apparently told a Japanese media outlet that the iPhone 5 was coming out in June. The recruiter claimed Foxconn would be hiring 18,000 new employees to cover the manufacturing demand.

Apple didn't confirm the rumor and didn't return our requests for comment on the story.


Rachelle Dragani is a freelance reporter based in Brooklyn, NY. She enjoys staying on top of e-commerce deals, reporting on what new gadget is coming your way, and keeping tabs on anyone trying to hack into your info. Feel free to e-mail her at rachelle.dragani@newsroom.ectnews.com.


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