Apple vs Samsung may end up helping the Samsung brand

Following the US patent lawsuit, in which a jury ruled Friday to award six of seven points and more than $1 billion in damages to Apple, Apple has filed a preliminary injunction to ban eight Samsung devices in the US, four of which are versions of the Galaxy S2.

While surely painful, Samsung can probably bear the fiscal sting of this ruling as the South Korean manufacturer made US$12 billion (13.73 trillion won) in net profit in FY2011, and the eight products Apple has named don’t include its newest models.

Mark Newman, an analyst with Sanford C Bernstein, who used to work at Samsung, told Bloomberg that the effect on Samsung’s sales would be “negligible”, accounting for less than 1.4 per cent of Samsung’s profits next year. Overall, Bloomberg estimates that the US represents 16 per cent of Samsung’s smartphone sales as of 30 June.

Nevertheless, Samsung’s shares have taken a hit, falling 4.2 per cent yesterday based on lowered forecasts.

When contacted for figures, IDC refused to forecast volumes or shares for individual vendors,and so could not estimate the potential impact Apple's victory could have on Samsung's sales. However, Ramon T. Llamas, senior research analyst of IDC Mobile Devices Technology and Trends, told Campaign Asia-Pacific that the case was "far from over". 

"For now, we are maintaining our outlook for Android as a whole in the United States, which is to say that we expect Android to be the market leader throughout our forecast," Llamas said, referring to the operating system Samsung uses in all its phones. 

From a brand perspective though, the legal battle could end up being a boost for Samsung’s brand and damaging to Apple. Derek Tan, research director at Ipsos Hong Kong, pointed out that the Korean brand may benefit from the free media coverage leading to higher brand awareness globally.

An article by The Verge argued that Apple has essentially proven in court that Samsung’s products were the equal of their own—at half the price, a fact that may even serve to boost sales for Samsung’s newest products in the US, which have not been affected by the ruling. According to James Hacking, vice-president, Blue Current Hong Kong, it may not be until 2014 that Samsung’s latest models come before a court. “By which time, who knows who will be producing the ‘must-have’ device,” he said.

Apple’s victory in the US may go so far as to hurt its sales in Samsung’s home-base of South Korea, where courts ruled mostly in favour of Samsung in a similar patent battle. The verdict, which came in a few hours before the US court made its ruling, found that Samsung did not imitate the look and feel of Apple’s iPhones but did transgress in using Apple’s technology to create the “bounce-back” effect seen when the user scrolls to the end of the screen.

The court also ordered Apple to withdraw the iPhone 3Gs, the iPhone 4 and the original iPad and iPad 2 from sales in South Korea, based on the ruling that these products infringed two of five Samsung patents.  

According to Steve Yi, chief strategy officer for Grey Korea, Apple should expect some backlash from Samsung in south Korea. For one thing, if the soon-to-be-launched iPhone 5 is LTE (4G) compatible, Samsung is likely to use its longer list of LTE patents to ban sales of that Apple phone in South Korea, the UK and even the US, according to an article in The Korea Times.

“I was in ‘Samsung-land’ [South Korea] when the news broke that Apple had been awarded a billion dollars in compensation, and most people were amazed that there was a clear decision in Apple’s favour,” said Alan Couldrey, CEO, The Brand Union Asia-Pacific. “There was a feeling that the decision was an ‘American decision’,” he added, commenting that brand loyalties in Korea remain unchanged.

“Asia’s loyal Samsung users are now more loyal than ever, which is probably not what Apple had in mind,” he said.

In Hong Kong, Samsung users are unfazed by the ruling, observed Hacking. “As far as they’re concerned, no one can take their existing phone off them, and when they next upgrade their devices they will simply evaluate what devices are available to them at a particular time.”

Brand loyalty doesn’t go far in gadget-obsessed Hong Kong, he added. “Many smartphone users are more concerned with product form, functionality and individual product lines or versions and less concerned with the mother brand.”

In its official statement following the US court verdict, Samsung called it a “loss for the American consumer”:

It will lead to fewer choices, less innovation, and potentially higher prices. It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies. Consumers have the right to choices, and they know what they are buying when they purchase Samsung products. This is not the final word in this case or in battles being waged in courts and tribunals around the world, some of which have already rejected many of Apple’s claims.

Ipsos’ Tan, however, feels that the ongoing patent war may actually be beneficial to technology consumers worldwide, as it forces not only Samsung but all companies, including Apple, to innovate away from each other.

“From a smartphone user point of view, there’s much to gain since Samsung has always been fast in introducing new products," Tan said. "The verdict from this case will push Samsung further to think out of the box, moving further away from being stereotyped as ‘copycat.’”

While Apple’s hardcore fans will continue to remain true to the brand, its other rivals will take a lesson from Samsung and push their R&D departments to innovate away from future litigation, he added. “This would mean that smartphone design will only get better, so that’s good for consumers after all.”