Economics is a funny thing in which sometimes, losers can be winners in another sense. That is the feeling I got last week after Apple won an intellectual property case in the US against Samsung involving a series of patents.
The award of $1 billion in damages to Apple will only make a
teeny addition to the iPad and iPhone maker’s huge cash chest, but it clearly established the company founded by the late Steve Jobs as the King of Cool in the gadget market. However, in market economics, two other things also matter. One is the return one gets on investments made, and the other the market share. The basic market wisdom is that there is always room for two in the same product category. Going by that logic, it seems Samsung stays in the reckoning for at least the No. 2 slot in high-end smartphones in the foreseeable future.
Respected technology site Arstechnica citing IDC and NPC data, said last month that in the April-June quarter, Samsung held a 30% share worldwide, while Apple held 17%. But in the US, Apple led with 31% while Samsung held 24%.
Google’s Android mobile platform is what enabled Samsung to win the global market at low costs, unlike Apple, which has invested huge amounts in developing and nurturing its own iOS platform.
Samsung has been in the dock for mimicking Apple in its design features like the curved rectangle interface and the “pinch” zoom on the touchscreen. But beyond cool factors like these, smartphones are about various utilities and applications (apps)
My argument is that Apple will remain the premium product, but the second premium slot (even if it loses some money and market share now) is something Samsung has gained at much lower costs by riding piggyback on Android. Meanwhile, Samsung is also keeping its options open. It quietly launched its own Windows-based smartphone last week, ahead of a September 5 unveiling of the next big Windows gizmo from the Nokia-Microsoft partnership.
Cash-rich Google has initiated quiet talks to settle some patent disputes with Apple on the Android platform. If Google picks up the tab for some of the potential disputes (Apple has sued Samsung again in a fresh dispute), it could contain Samsung’s damages.
Sure, the Korean company has lost some of its premium sheen in the court dispute, but there is plenty of room left in value-for-money markets in Asia, which as a whole is much bigger than the US. India alone has 900 million mobile connections
Just as Microsoft’s IBM-PC compatible and Windows desktops stole the thunder from Apple outside the US, other brands including HTC, Samsung and Nokia do stand a chance in taking on Asia. For this, they must realise a basic lesson: you cannot be charging a fat premium for copycat features. If they drop the prices a little while innovating a little more, Samsung, HTC and Nokia can have a great time in Asia.
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