1

Samsung vs. Apple

Wooyong Aiden Lee
Chadwick International School

Abstract

In this research paper, the long-standing competition in the smartphone market between Samsung and
Apple is investigated, with a critical analysis of each firm's strategies. Game and social theories such as Tit-
for-tat and Social Darwinism are used to examine each choice and strategy the companies implemented in
the legal dispute and market development stages. The paper investigates how the firms cooperating and
competing led to the overall growth of the phone industry and the construction of different market
structures. Economic theories regarding market structures are used to present how a duopoly was formed
in the mobile phone industry. As a mutual partner for both mobile phone providers, Google was able to
construct a monopoly in the search engine market. An evaluation of the market outcome and a potential
alternative scenario that would have led to a more equitable market is also explored.

Introduction joined to create a duopoly-styled market. With

Smartphones have become an essential part of Samsung now providing some of the most
our daily lives. Apple Inc. has been a powerhouse sophisticated hardware to Apple, both Apple and
in the phone industry for its unique design and Samsung are intertwined. They have joined in
creativeness since its launch. With Apple's first overpowering the smartphone market at the
iPhone in 2007, a new paradigm for smartphones expense of other emerging brands. At the same
was created, bringing excitement to the public time, Apple and Samsung have significantly
(Nichols 12). Soon after, Samsung, in 2009, diverged from each other. Samsung focuses a lot
created the Galaxy series, which was the first on hardware, and it specializes in a vast number
smartphone for the brand. The smartphone of products that extend far beyond just the
patent wars were about to begin. smartphone market. Apple, in contrast, has
There were many lawsuits as well as counter- focused on the development of software and
lawsuits between Apple and Samsung. Apple won more innovative tech. Thus, market decisions on
some, and Samsung won some. However, it how to expand in the mobile phone market made
didn't prove to be in the interest of the greater by each company have produced a status quo of
good for Samsung being hardware dominant and Apple
either of them as the two tech giants eventually focusing on software.
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The 3G telecommunication system allowed

Pre-Lawsuit Apple's innovative visions to become to reality
Background History (Mogal 1). The 3G internet access allowed
Samsung caused controversy concerning functions of the iPhone to come to life, such as
copyright issues because of the high similarity of web search, instant messaging, use of social media,
the designs of the phones to those of Apple after and countless applications. With Apple's success
the release of their Galaxy series (Albasoos and Al and subsequently Samsung's, a new era of
Musallami 1). The notable similarities were that Smartphones officially began, along with the
the phones both operate on touches of the users, rivalry of these two tech giants. 3G technology
the home buttons, and similar user interfaces. played a vital role in this development. However,
With all the similarities, Samsung was accused of the tension between the two rival companies
being the "copier" of the industry. increased until Apple finally sued Samsung in
Apple introduced some distinct functions and 2011 (O'Rourke 6).
designs with the iPhone, such as fully touchable
hardware without a keypad or a pen (Karlson and Samsung vs. Apple Lawsuit.
Bederson 324), minimalistic design, and a non- In 2011, Apple sued Samsung for allegedly
foldable screen. With the release of the first infringing their design patents (Guglielmo).
iPhone, there were public concerns about how Apple claimed that Samsung's smartphones and
effective it would be when using it as a tablets "slavishly" copied their product designs.
communication device. People were skeptical of Although the two companies shared
its efficiency. This skepticism was proven correct, technological aspects of their designs, the lawsuit
as the initial services the iPhone provided were was about the two brands' basic designs. However,
far from being perfect with severe errors in the it was speculated that this lawsuit was part of the
communication functions, almost no additional two companies' strategic plans to maintain
applications available, and an overpriced model dominance over the rising market.
with limited release. However, with the inception The specific terms of the lawsuit included several
of 3G services, a new opportunity opened for the small functions of the smartphone, including tap
iPhone. 3G is a 3rd Generation revolutionary to zoom and grid layout of applications, among
wireless mobile telecommunications technology many others. The grounds for the lawsuit seemed
("3G Technology and How It Affects the Mobile frivolous and shaky at best, as all those small
Landscape"). One of its key features is that it functions would not affect a customer's choice of
provides fast internet to users ("Silicon Press: smartphones. However, suing for such a
Third Generation (3G) Wireless"). significant amount of money created controversy
 3

on who copied whom. The companies infringe the copyright and intellectual property of
incorporated the media generated as a result of Apple's iPad. Along with this challenge to the
the respective lawsuits into their business ruling, Apple also pursued an injunction against
strategies. They did not shy away from the Samsung products in the States. Samsung
headlines generated thanks to the case (Horwell). requested a new trial by claiming that the verdict
It was not just a legal battle but also a battle of was not supported by any testimony or evidence.
public relations. Whoever was portrayed well by Since the Samsung products Apple wanted to ban
the media would benefit from more sales and from sale were mostly off the market except for
profits as people sympathized with them. Also, Galaxy II, Apple began another lawsuit against
better coverage by media builds narratives, and Samsung, including more recent products as a
those narratives can indirectly influence court part of the lawsuit. By including more Samsung
cases. products, Apple increased the risks Samsung
As the lawsuit progressed, the battle spread to would take if they lost the lawsuit, putting
other countries, including South Korea, Japan, Samsung entirely on the defensive. Meanwhile,
Germany, France, and England. As the case Apple lost the intellectual property lawsuit in
moved overseas, it gained publicity worldwide as Japan.
the two biggest smartphone companies went head Samsung took a different approach towards the
to head in the courts (Lee 117). Thus this lawsuit lawsuit after the loss in the States. They took the
could be considered a marketing strategy to case online and appealed to the general public.
increase publicity. This strategy allowed Samsung to appeal to
netizens and sway their opinions. This was
First Verdicts and Later Developments. meaningful, especially given that in Korea, where
In August 2012, the first verdict of the US trial of Samsung is based, it has developed a loyal online
the Apple vs. Samsung lawsuit was issued. The community. Samsung intended to undo the
jury favored Apple and their case that Samsung negative criticism headed they were experiencing.
infringed their designs, awarding Apple 1.409 However, this strategy proved to be somewhat
billion USD. It directed Samsung to repay the ironic as Samsung tried to leak trial documents,
damages (Gallagher). As for the countersuit of which agitated the judge in the case.
Samsung against Apple, the jurors rejected Later in the year, Samsung won the lawsuit
Samsung's case that Apple also infringed regarding copyright infringement of the Samsung
Samsung's intellectual properties. Apple Galaxy Tab and iPad in the UK ("Apple Loses
challenged the part of the verdict in which the UK Tablet Design Appeal Versus Samsung").
jury decided that the Galaxy Tab does not Apple then received a court order to write an
 4

apology. The apology included incorrect details request for the "Bounce-Back" patent, "the
on the copyright infringement claim and bouncing animation that takes place when a user
therefore was forced to write another apology. scrolls past the end of a page" ("US Apple
Furthermore, the UK court order made Apple Bounce-Back Patents Ruled Invalid") was lost as it
pay for most of Samsung's legal fees in the law lacked "dignity." Within several months, Samsung
dispute in the UK. was able to gain an advantage in the legal dispute.
Meanwhile, Apple and Samsung's lawsuit In June, Apple was also denied the right to add
included the iPhone 5 and Android 4.1 Jelly Samsung Galaxy IV to the patent lawsuit
Bean (Bishop). Samsung then used statements (Fekete).
from Apple and HTC to prevent a sales ban. As a Not long after, Samsung was blamed for leaking
result, Samsung was able to receive the settlement confidential legal documents from Apple
document between Apple and HTC. regarding its patent licensing agreements with
Apple and Samsung both added Galaxy Note II Nokia, Ericsson, Sharp, and Philips. These
and iPad Mini to the copyright infringement documents, labeled "Attorney Eyes Only," were
lawsuit. The scale of the case grew with the leaked through a report composed by expert Dr.
addition of few more recently launched products, David J. Teece. The report was initially created to
including the ones mentioned. Next, Apple was help Samsung evaluate "Samsung would be due if
denied their request to ban Samsung products Apple had infringed upon some of its patents"
permanently, and the court denied Samsung's (Bishop). This report then was shared with 90 of
request for another trial based on juror Samsung's employees, including executives and
misconduct. those who handle patent licensing and 130
The lawsuit slowly tilted in Samsung's favor. outside lawyers from various law firms.
Apple had to pull Samsung's Galaxy S III from Additionally, Samsung executive Dr. Seungho
the sales ban list as the judge accepted Samsung's Ahn used privileged information as leverage
appeal as "Samsung argued that the device had when negotiating a licensing deal with Nokia.
not been officially released in the United States, Apple and Nokia, therefore, put towards a
and therefore shouldn't be covered" (Bishop). motion to sanction Samsung. With a confidential
Furthermore, Apple's motion to revive the sales document that they weren't supposed to have
ban for Samsung Galaxy Nexus was lost in court access to, Samsung could create a competitive
as they failed to demonstrate the connection advantage in negotiations. Although it could be
between consumer demand of the Galaxy Nexus perceived as a strategy, it was a deal negotiated in
and the infringing feature. Adding on to the two bad faith. The judge overseeing the case told
losses Apple faced in court, Apple's patent them to explain why they shouldn't be fined. As a
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response, Samsung admitted that they did not the early Galaxy models. Promoting the image of
follow procedures and were "deeply sorry." Apple durability, Samsung promoted mobile products
and Nokia then gave recommendations for from its leading brands such as Galaxy S, Note, A,
Samsung's punishment. Later, it was found that and a few others that focused on their hardware.
Apple itself leaked the confidential documents Furthermore, Samsung products garnered the
they accused Samsung of leaking. reputation of a premium phone brand. With
Apple leaking their confidential documents to increased computing power for their latest
punish Samsung was a strategic move in the legal production, larger screen, and aesthetically
dispute. Furthermore, it made Samsung's use of pleasing designs, Samsung promoted the
these documents legitimate. The strategy Apple Premium image of its brand. Furthermore, using
employed to turn the tides of the lawsuit could be the advantages of android being the phone's
perceived as strategic. However, it was illegal and operating system, Samsung implemented a
executed in bad faith. strategy of focusing on increasing the
In 2015 the court reduced Apple's original 930 technological capabilities of the phone. Using the
million dollar win over Samsung, and the trial large number of services that the mother
progressed to the Supreme Court. A 400 million company of Samsung Electronics provides, the
dollar win for Apple in 2012 was overturned by mobile phone company can add functions/apps
the Supreme Court to reassess the damages done that work hand-in-hand with such features.
(Samsung Electronics Co., Ltd., Et Al. v. Apple Another strategy that could be found in Samsung
Inc.). In 2017, Samsung was able to drag Apple mobile products is the user-friendly interface.
back to a retrial over the patent dispute. And in The consumer experience of Samsung products
2018, the two smartphone giants were able to was vital in its establishment as the brand favored
settle their patent lawsuit, ending the 7-year long by elderly customers. By integrating top-quality
legal conflict. hardware products and a user-friendly interface,
Samsung exerted dominance in the smartphone
Post-Lawsuit Strategies of Samsung and Apple market.
After the lawsuit, the two companies set forward Apple differentiated their brand by focusing on
with different visions for their future. While the software aspects of the mobile market. Apple
Samsung focused their technological uses its independent platform (iOS) and
advancement on their hardware, Apple became application store and has specific products that
software-focused with additional luxury items. only work on its platform. For instance, their
Samsung initially gained a brand image centered applications like Logic Pro X, Final Cut Pro,
on its smartphones' durability when it released Garage Band, iMovie are some products targeted
 6

at amateurs and professionals for video and pay Samsung. This enables them to ensure
music production. With the development of financial security even when a stream of revenue
Apple Pay, Apple Music, and Apple TV, Apple is compromised. This strategy allows Samsung to
successfully expanded the software business. The benefit significantly in a situation where the
brand image they were able to create differs from market is in a slump.
Steve Jobs's original vision. Instead of minimizing Samsung and Apple during COVID-19
unnecessary functions and designs like their During the COVID-19 pandemic in February,
former CEO's vision, they instead endeavored to Apple had to suspend much of its productions
develop new services or functions that many and sales as its infrastructure is primarily based in
customers do not find critical in their daily lives. China, where the pandemic originated from
People did not think supplementary products (Clover). Most of Apple's suppliers could not
such as iPads pros, iPencil, and apple watches are operate their business due to the high risks the
important. workers faced. This resulted in a pronounced
decline in sales for the iPhone of 7%. However,
Current Relationships of Apple and Samsung they were able to gain a 17% increase in revenue
The current relationship between the two from the services they provide. Furthermore,
Smartphone giants is particularly interesting as Apple gained a 23% increase in sales from
Samsung is one of Apple's suppliers. Since wearables. The establishment of software services
Samsung is the only company that can make allowed the company to reduce losses of iPhone
OLED chips, NAND display, and DRAM chips, sales. In such times of hardship, the company's
even Apple, Samsung's biggest competitor, has to strategy to shift the main focus of sales from
get supplied from Samsung to maintain the high mobile phone products to software and wearable
quality of their products. Although Apple is devices proved successful.
becoming a more software-oriented company, the Samsung, on the other hand, was different from
main stream of revenue is still the iPhone. Apple. COVID-19 caused many workers and
Without the components Samsung provides for students to go online instead of the usual offline
them, they would not maintain high production workspace. This move online increased the
volume. On the other hand, as the only supplier demand for electronic products such as monitors,
of these particular technologies and critical parts cameras, and other technologies to access virtual
of smartphones, Samsung can make contracts workspaces and classrooms. Since Samsung has a
that significantly benefit them. The agreement monopoly over technology necessary in products
with Apple states that if Apple does not buy a for virtual communication such as NAND display
certain quota of components, it is obligated to and DRAM chips, they could turn a profit while
 7

other companies were facing significant financial Huawei benefits from the cheap labor costs
difficulties. offered by the Chinese workforce. Using their
Each company's vision enabled them to work lower labor costs as a competitive advantage,
around the hardships presented to them by Huawei is emerging as a mobile phone
COVID. Apple's approach to monopolize the powerhouse that could threaten Samsung and
market through innovative software updates and Apple's position in the current market. By having
services allowed them to fill in the revenue lost access to some of the Chinese government's
from phone sales and find creative ways to technical information, they can catch up rapidly
expand the business. Through these methods, with their great rivals, Apple and Samsung.
Apple hit 4 billion USD in company value.
Samsung, on the contrary, used their dominance Game Theory, Social Darwinism, and the
in the technological aspect of the market to meet iPhone-Samsung Rivalry
the market demands and thus expand its position Game Theory is the study of behavioral
in the technology market. These are two notable economics by creating a "game" situation where
strategies that were opted for survival as Apple is the "players" compete against each other
firmly branded around the iPhone and IOS while (Osborne 1). It is a mathematical study of
Samsung Electronics is a portion of a larger decision-making ("What exactly is 'game theory'").
international company. Apple solely depends on A sub-game from the game theory that can be
its line of products and services to self-sustain. used to represent the case of Apple and Samsung
And keeping users hooked on their platform and is the prisoner's dilemma (Rapoport 199). Each
services while using their products can solidify a firm has the choice to either cooperate or
customer base that is unlikely to change phones compete. If both parties cooperate, both parties
or services due to the comfort and efficiency will benefit, but if one party competes or deceives
Apple currently provides. Samsung Electronics is the other while the other party does not compete,
a subsidiary of Samsung and thus has access to it gains a higher benefit than when both parties
information and knowledge gathered in other cooperate. If both parties compete, they both get
fields. Furthermore, their business depends on a penalty. Although not identical to the game's
their mobile phone brand to succeed as they own setup, the situation that Samsung and Apple put
many patents and products aside from mobile themselves in, while competing for monopoly in
phones. The different backgrounds of each the mobile phone market, is quite similar to the
company created different market strategies. prisoner's dilemma. The unique condition in the
A rising competitor in the mobile phone industry relationship between these two is that Samsung is
is the Chinese mobile phone company Huawei. both Apple's supplier and competitor. So the
 8

growth of Apple is both beneficial yet threatening survive (Rogers 268). The idea behind Social
to Samsung's posterity. Darwinism in the context of Apple and Samsung
When Apple sued Samsung for copyright is that more powerful companies will survive.
infringement, both parties could have enjoyed Following this theory, Samsung and Apple have
the rewards of cooperating in expanding the to cooperate in order to survive. With
smartphone market. Apple, however, competed competitors like Huawei, LG, and other
(legally) to gain control over the growing market. emerging tech powers in the mobile phone
However, Samsung's retaliation in court (which industry, the importance of Samsung and Apple
can be considered competition) created a lose- maintaining their dominance in the industry is
lose situation for both companies. The rivalry paramount. However, these new smartphone
Apple had against Samsung's successful products companies have been taking over these
brought a counterintuitive result. Due to the traditional brands (Mawad). To maintain this
longevity of the court-dispute, Apple failed to position, Apple was forced to cooperate with
benefit from its aggressiveness, as well as Samsung and use their advanced products to
Samsung. The loss of trust Apple caused resulted manufacture iPhones. Samsung also had the
in the failed cooperation between the two rising incentives to cooperate with Apple to maximize
competitors. However, this relationship was potential revenue. Furthermore, the cooperation
altered as Samsung has become the only of the two companies led to the increased size of
manufacturer of LCD displays and DRAM, both the overall phone market, which benefits both
critical for the production of Apple products parties.
(Ojo). The cooperation began again as they both
benefited from the sales of Apple products either New Emerging Smartphone Brands and the
through direct revenue or supplying parts for the Apple-Samsung Strategy to maintain Duopoly
products. Apple and Samsung together have virtually
In game theory, the choice of cooperation monopolized the mobile phone industry since
provides a lower return with minimal risk, while the release of smartphones. This duopoly of the
the defection provides high returns with higher two companies has caused friendly competition
risks (Mcnulty). The unique relationship between between Samsung and Apple. Both companies
Samsung and Apple can also be explained benefited from the rapid development in
through Social Darwinism. technology and the growth that followed from
Social Darwinism is a theory that adapted the competition. However, the development
Darwin's original theory that that stronger stopped without the entry of new competitors in
individuals or groups are naturally selected to the market, and the quality of products reached
 9

stagnation. Apple, for instance, purposely slowed A duopoly is a form of Oligopoly where a few
down the operation of the iPhone a fixed time firms control the market. Apple and Samsung are
after purchase so that customers would buy new contesting each other to prevent a monopolistic
iPhones. This allowed Apple to consistently make market from happening. However, these two
revenue even after the rate of development of companies can drive prices up for smartphone
technology for mobile phones was slowed down. products and cause price inflation. A duopolistic
Considering how Apple products have their own market is dangerous; unlike a competitive market
system and work best with other Apple products, where the prices are driven down, the two market
the Apple users are more than likely to return to leaders can drive the prices up, which Apple and
Apple products when their current mobile phone Samsung did by increasing prices on their newer
malfunctions. Through this strategy, Apple models.
maintained/bolstered its revenue without Apple and Samsung have established another
significant changes or innovations in its products. common ground with Google. Google provides
Through the revenue generated with this strategy, critical services for both Apple and Samsung. For
Apple could integrate other services into their Samsung, Google provides the Android system
business and thus expand to different markets. that Samsung phones need to operate.
With new competitors like Huawei and other Furthermore, the Google Play store offers a
Chinese competition, the cooperation between significant portion of the services available on
Apple and Samsung is of more significance than Samsung smartphones. Google is the default
ever. With the Chinese market behind them, online search engine for Apple products, and
Huawei and other Chinese companies are while Google may have paid for this privilege,
developing at high speed. With leakages of this arrangement also benefits Apple. For Google,
technology from Samsung, Chinese companies being the default search engine for such a vast
might be slow starters but are catching up. number of internet-enabled devices further
Furthermore, political issues between the US and secures its position as the world's most used
China, and South Korea and China, are causing search engine. Google is also the most advanced
changes to the mobile phone market in China. and reliable search engine in the world (Shaw).
Due to the changes in the industry, the By establishing a firm status as the base internet
cooperation of Samsung and Apple will be platform in the two biggest mobile phone
critical in maintaining the status quo of Apple providers, Google can solidify its position as a
and Samsung's duopoly. Duopoly is a structure market leader in the internet search industry.
where two companies control the market and With the increasing usage of smartphones in the
prevent others from gaining influence (Puu 573). modern era, internet service providers and phone
 10

providers' interdependence is significant. market and provide better products. The

Without cooperation, both parties will not cooperation, for instance, would be a merger or a
benefit. collaborative product that brings together the
strengths of the firms. However, other firms may
An Alternative Scenario select to defect and take over other competing
An alternative scenario to the Apple and firms of smaller sizes to increase the market share.
Samsung smartphone market, since the Such strategies would significantly alter the
introduction of the iPhone and the smartphone outlook of the market.
era, the conventional 2G phone providers, such
as Blackberry and Nokia, could have entered the
market following those trends. If brands such as Conclusion
Blackberry did not fail, things could have been The Apple vs. Samsung patent war was one of the
different (Holla et al. 1). If they entered the most important developments in the tech world
market with Samsung and Apple, it would have as it established the future of this industry.
become a perfectly competitive market, and the Without a doubt, Apple had come up with
prices would have been driven down. Apple revolutionary technology and was highly
would likely still have become a market leader as protective of its copyrights. Steve Jobs had been
they brought the innovation and created trends. especially vocal about protecting what was theirs.
Samsung would cooperate with other competitors The touch screen that spanned the entire phone
in the market and gain a higher market share. was revolutionary, as most phones previously had
With other firms sharing the oligopoly market, analog buttons on them for typing. Those
positive competition would be promoted, and buttons took up a lot of space at the expense of
firms would discover their method of survival cell-phone screens, so the phones were primarily
(Mazzeo 24). The more evenly spread out market limited to being used for communication only.
would encourage the higher quality products to With the introduction of the first iPhones, the
be sold at lower prices. Thus the equilibrium phone industry was changed for the better. It
price of smartphones would be significantly lower became was revolutionized even more with the
with better quality products. The increased emergence of 3G technology as the iPhone could
quality of smartphones would also improve do so many tasks and become a real
quality of life. “smartphone.” All this was not without risks for
To survive in a perfectly competitive market, Apple Inc. as other phone brands copied this
brands would cooperate with others. Through revolutionary technology into their phones.
cooperation, they would gain advantages in the Samsung was the only competitor that could
 11

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