How Apple And Samsung Became Rivals — Transcript

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1. 0:00If you’ve been following Apple for a while or know the company’s history, you’ll
2. 0:04probably remember them having quite a few rivals over the past thirty five years. In
3. 0:08the 80’s it was IBM, in the 90’s it was Microsoft, and in the 2000’s, it eventually
4. 0:13became Google. But the rivalry between Apple and Samsung is more recent, and more unique.
5. 0:19Since Samsung not only competes with Apple in the notebook, tablet, and smartphone markets,
6. 0:24but also supplies Apple with key components for their devices. Like the iPhone’s OLED
7. 0:28display and flash memory chip. So let’s explore how the two companies relationship
8. 0:33soured, and how they feel about each other today. This is Greg with Apple Explained and
9. 0:38if you want to help decide which video topics I cover, make sure you’re subscribed and
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12. 0:48THE EARLY DAYS
13. 0:51Now many of us today have become familiar with Samsung through the consumer electronics
14. 0:55they sell. But those business endeavors are actually a fairly recent development considering
15. 1:00the company’s long history. In the 80’s Samsung’s electronics division was focused
16. 1:05primarily on the semiconductor business. And their then CEO Lee Byung-chull spoke with
17. 1:10Steve Jobs on several occasions for advice or negotiations. In fact, the two met in person
18. 1:15in 1983 at Samsung’s offices in Seoul. Around the time the company decided to make a sizable
19. 1:21investment in a new chip plant in China. It’s unknown if Jobs encouraged Samsung to expand
20. 1:26their semiconductor business, but the two CEOs clearly had a friendly relationship.
21. 1:32Apple went on to become Samsung’s biggest client. Ordering billions of dollars worth
22. 1:36of electronic parts. But the friendly and cooperative relationship between Apple and
23. 1:40Samsung didn’t last forever. Before the original iPhone was announced, Samsung CEO
24. 1:46Lee Jae-Yong visited Apple’s headquarters to meet Jobs. It was then when Jobs revealed
25. 1:51the device to Jae-Yong and dissembled it, explaining how the iPhone’s technology worked.
26. 1:56And as you might expect, Samsung took the idea and ran. Releasing their own touchscreen
27. 2:01smartphone called the Galaxy just two years later, which ran on Google’s Android operating
28. 2:06system. As a result, Jobs asserted that Android was a stolen product and eventually called
29. 2:11Samsung a copycat. It was at this moment when Samsung went from being Apple’s ally, to
30. 2:17Apple’s enemy. And the lengthy legal battle that began between the two companies in 2011
31. 2:22was proof that Apple was prepared to protect it’s intellectual property at any cost.
32. 2:26FROM FRIEND TO FOE
33. 2:30The seven year lawsuit war started with Apple striking first in 2011. But it wasn’t something
34. 2:35that came out of the blue. In fact, Apple approached Samsung in 2010 and told them up
35. 2:40front that their smartphones and tablets were infringing on Apple’s patents. And because
36. 2:45the two companies had a long history of cooperation, Apple was willing to work out a deal. They
37. 2:49proposed a licensing agreement where Samsung would pay Apple up to $30 for every phone
38. 2:54sold, and up to $40 for every tablet. But the company declined, since they didn’t
39. 2:59believe their products had infringed on any of Apple’s patents. So the following year
40. 3:03Apple issued the lawsuit. Claiming, “Instead of pursuing independent product development,
41. 3:08Samsung has chosen to slavishly copy Apple’s innovative technology, distinctive user interfaces,
42. 3:15and elegant and distinctive product and packaging design, in violation of Apple’s valuable
43. 3:19intellectual property rights.” So was this true? Did Samsung really rip off the iPhone
44. 3:25and steal features that Apple had patented? Well, let’s see how Samsung smartphones
45. 3:29looked before the iPhone… and after the iPhone. I think it’s pretty obvious that
46. 3:34Samsung borrowed heavily from innovations the iPhone pioneered.
47. 3:38But what exactly were the offenses? After all, in a lawsuit a company has to point out
48. 3:43specific violations of their patents in order to successfully make their case. Well Apple
49. 3:48made a total of sixteen claims against Samsung, but I want to focus on three in particular:
50. 3:53Trade dress infringement, trademark infringement, and infringement of design patents. Let’s
51. 3:59start with the first one, trade dress infringement. Now what does that even mean? Well a trade
52. 4:04dress is the visual appearance of a product or its packaging that represents its source.
53. 4:09In other words, it prevents companies from imitating other products in the marketplace
54. 4:13as to prevent confusion among consumers. Who may believe they’re buying a product from
55. 4:17a certain brand, when in reality it’s just a knock-off. And that’s why we see so many
56. 4:22knock-off Apple products sold in China, but rarely in America. Because our trade dress
57. 4:27laws protect companies from imitators. In fact, the very first iMac was imitated by
58. 4:32an American company called eMachines with a product called the eOne. It was clearly
59. 4:37a knockoff of the wildly popular iMac, but it didn’t do well since Apple successfully
60. 4:42sued the company through a trade dress claim. Now clearly Apple felt Samsung was doing the
61. 4:47same thing by ripping off the iPhone and iPad’s trade dress for their various devices. And
62. 4:52as you can see from this picture, there are quite a few striking similarities that likely
63. 4:57aren’t due to sheer coincidence.
64. 4:59Next is trademark infringement, and this is where things get a little obvious. Because
65. 5:03while Samsung may have been able to argue that the similarity in hardware design was
66. 5:07incidental, the similarities in software elements like the icons became much more difficult
67. 5:12to defend. There are literally hundreds of ways to design any given icon, and in many
68. 5:17cases, Samsung just so happened to choose the same visuals as Apple.
69. 5:22And third, was infringement of design patents. These included the home screen icon layout,
70. 5:27the form factor of the iPhone’s chassis, and the screen and button designs. So if we
71. 5:31add all of that up, we have claims ranging from branding, to software design, to hardware
72. 5:36design. Essentially every major component of these select Samsung devices Apple claimed
73. 5:42were copied from their iPhone. And what did the court think of all this? Well they ruled
74. 5:46in Apple’s favor. They ordered Samsung to compensate Apple one billion dollars for their
75. 5:51infringements and to never do it again in the future. But this wasn’t the end of the
76. 5:55story. In fact, the two companies were just getting warmed up.
77. 6:00Samsung ended up appealing the verdict and countersued. Claiming some of Apple’s products
78. 6:04were infringing on their patents. This legal back and forth continued for years, with both
79. 6:09sides enjoying some wins and suffering some losses. Apple managed to ban Samsung’s Galaxy
80. 6:14Tab from Germany which forced the company to redesign the device. But Apple was also
81. 6:19found guilty of infringing on Samsung’s cellular data patent with the AT&T iPhone
82. 6:244, 3GS, and 3G, as well as models of the original iPad and iPad 2 with 3G data radios. Which
83. 6:31meant Apple would be banned from selling AT&T models of some iPhones and iPads in the US,
84. 6:36but the white house had a chance to veto the decision which was exactly what President
85. 6:40Obama did.
86. 6:42Now the seven-year-long lawsuit war came to an end in June 2018 when Apple and Samsung
87. 6:47agreed on an undisclosed settlement. Although it’s unknown what that settlement was, it’s
88. 6:52worth considering how much damage the entire ordeal had on both companies, and how little
89. 6:57each were compensated in return. But Apple clearly saw the legal battle as a victory
90. 7:02when they released this statement: “We believe deeply in the value of design, and our teams
91. 7:07work tirelessly to create innovative products that delight our customers. This case has
92. 7:12always been about more than money. Apple ignited the smartphone revolution with iPhone and
93. 7:17it is a fact that Samsung blatantly copied our design. It is important that we continue
94. 7:21to protect the hard work and innovation of so many people at Apple. We’re grateful
95. 7:26to the jury for their service and pleased they agree that Samsung should pay for copying
96. 7:30our products.” Samsung declined to comment.
97. 7:34THE AFTERMATH
98. 7:36Now you’d probably imagine that after all those lawsuits Apple and Samsung would want
99. 7:41nothing to do with each other, but it turned out to be quite the opposite. Because Samsung
100. 7:45still provides Apple with crucial components for their most popular products. The iPhone
101. 7:49X’s beautiful OLED display was brought to you by Samsung, as well as it’s memory chip.
102. 7:55And the revenue generated by these component sales are staggering. Samsung earned $110
103. 8:01for each iPhone X sold, and since Apple sold an estimated 130 million units, that adds
104. 8:07up to over 14 billion dollars for Samsung. Compare that to the component revenue of their
105. 8:12own Galaxy S8 at $10 billion, and you begin to understand how symbiotic the relationship
106. 8:18is between the two companies. Apple relies on Samsung to provide high quality components
107. 8:23that can be mass produced at scale, while Samsung relies on Apple to buy the components
108. 8:28they make. So the destruction of either company would be detrimental to the other.
109. 8:33I think that’s why Tim Cook dialed back on the aggressive stance Steve Jobs took on
110. 8:37the Android and Samsung case back in 2010. Jobs said, “I will spend my last dying breath
111. 8:42if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right
112. 8:46this wrong, I’m going to destroy Android, because it’s a stolen product. I’m willing
113. 8:51to go thermonuclear war on this.” And although he was referring to Android in that specific
114. 8:57quote, those feelings extended to other companies like Samsung who he also thought were copying
115. 9:02Apple’s products. But in 2012 Tim Cook made it clear that he preferred a different approach.
116. 9:09He said, “I’d highly prefer to settle versus battle. But you know the key thing
117. 9:14that’s very important is that Apple doesn’t become the developer to the world. I’ve
118. 9:18always hated litigation. We need people to invent their own stuff.”
119. 9:22So although Cook wasn’t interested in dragging out Apple’s legal disputes against Samsung,
120. 9:27he was interested in relying on Samsung less for components. Because in 2018 Apple reportedly
121. 9:33added LG as a supplier of OLED displays, who began test runs of mass-produced panels near
122. 9:38the end of 2018, and may believe Apple will begin using LG panels in the new iPhones released
123. 9:44later this year. This will improve supply-chain reliability and give Apple negotiating power
124. 9:50with both suppliers, hopefully resulting in less expensive panels.
125. 9:55But that isn’t to say Apple and Samsung are growing apart, because just a couple months
126. 9:58ago the companies announced a deal that took many tech fans by surprise. And it was that
127. 10:03Apple would bring iTunes Movies and TV Shows to Samsung Smart TVs in addition to AirPlay
128. 10:092 support. Which means not only will users be able to access their existing iTunes library
129. 10:14and buy or rent movies and tv shows from the iTunes Store, but they’ll also be able to
130. 10:18play videos, photos, music, podcasts and more from Apple devices directly to Samsung Smart
131. 10:24TVs. Something that was previously only possible with the Apple TV set top box. And this is
132. 10:30another great example of Apple and Samsung working together in a way that benefits both
133. 10:35companies. Samsung will likely sell more TVs since they’ll have iTunes and AirPlay, and
134. 10:40Apple will likely sell more movies and TV shows since there’ll be more people shopping
135. 10:44on the iTunes Store.
136. 10:46MOVING FORWARD
137. 10:48So we’ve recognized that Apple’s relationship with Samsung has had its ups and down. And
138. 10:52it’s true that they’re direct competitors in a number of markets. But moving forward,
139. 10:56I think we’ll see more cooperation between these two companies rather than conflict.
140. 11:01Mainly because they’ve both been challenged by a new rival: Hauwei. They’re a Chinese-based
141. 11:06consumer electronics company that has been exploding in popularity, thanks to their inexpensive,
142. 11:11high-quality smartphones. Apple and Samsung both made a concerted effort to expand their
143. 11:16presence in China to take advantage of their large consumer market and growing economy.
144. 11:20But things didn’t go as planned for either company, since Chinese manufacturers like
145. 11:24Huawei disrupted the market by undercutting the iPhone and Galaxy while still offering
146. 11:29full-featured premium phones. In fact, in the last quarter of 2018 Apple’s worldwide
147. 11:35smartphone marketshare dropped two percentage points, and Samsung’s dropped one percentage
148. 11:40point. All while Huawei managed to grow their hold on the smartphone market by four percentage
149. 11:45points, which means they’re one of the only companies not experiencing slowing smartphone
150. 11:49sales.
151. 11:50So it seems as if Apple and Samsung have more or less become natural allies in the last
152. 11:55couple years. They ended the lawsuit war, they’re striking deals to help each other
153. 11:59access more paying customers, and they still cooperate on component manufacturing. But
154. 12:04only time will tell if this trend toward friendliness will continue, or if a new disagreement will
155. 12:09cause a divide between the two companies yet again.
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158. 12:22Thanks for watching and I’ll see you next time.