South Korea Reassesses Samsung After Battle With Apple

WORLD NEWS TOMORROW – SEOUL –  When a jury in San Jose, California, slapped Samsung Electronics with a bill for $1.05 billion in damages for violating Apple’s patents for the iPhone and iPad, it did more than decide who had infringed upon whose intellectual property. To South Koreans, the legal battles the two giants are waging across continents have highlighted both the biggest strength and the worst weakness of Samsung in particular and of their economy in general.

“The ruling makes us reconsider the brand value of Samsung because it depicts Samsung as a copycat,” said James Song, who monitors Samsung for KDB Daewoo Securities in Seoul. “But a copycat or not, what Samsung has done with its smartphones was a brilliant move.”

“Look what has happened to companies like Nokia, Motorola and BlackBerry, which didn’t do as Samsung did,” Mr. Song added, referring to competitors whose failures to adapt quickly to the smartphone boom driven by iPhones have drastically reduced their market shares. “Samsung may lack in innovation, but right now, no one can beat Samsung in playing catch-up.”

For months, the South Korean media have billed the patent lawsuits being fought in 10 countries as “the trial of the century”: Samsung, the world’s largest technology company by sales, clashing with Apple, the world’s No. 1 company by market value.

South Koreans took pride in the fact that Samsung, having already overtaken Sony and other Japanese companies it once mimicked, has now grown powerful enough to make Apple, the current icon of consumer electronics, feel threatened. But Samsung’s legal trouble was also seen as a referendum on the way Samsung — and, by extension, the South Korean economy — has done business.

Calling Samsung South Korea’s biggest, most profitable and most globally recognized brand barely explains the intense and often mixed emotions the name evokes among South Koreans. In Samsung, they see the crown jewel of their country’s transformation from a war-torn agrarian society into a global technology powerhouse.

Once an assembler of clunky transistor radios, Samsung is now the world’s top seller of smartphones and high-resolution television sets, as well as memory chips and flat-panel displays that let those devices and others store and display data. When they travel abroad, South Koreans say they feel proud to see advertisements for Samsung phones.

But Samsung always had an image problem, a stereotype that it tried to dispel through a patent tussle with Apple, the epitome of American innovation. Although Samsung may be raking in more cash than ever — 6.7 trillion won, or $5.9 billion, in profit on 47.6 trillion won in sales in the second quarter of this year — it was seen not as an innovator but as an imitator, though a very efficient one, in products that it has eventually dominated.

Japanese companies have beaten rivals to the market with hardware innovations like flat-panel televisions and high-end mobile phones. Samsung waited for the others to test the market, and when it determined the time was right, it joined the fray to cash in.

Samsung’s strategy was to build something similar to another company’s product but to make it better, faster and at lower cost. When it pounced, it flooded the market with a wide range of models that were constantly updated with incremental improvements at a speed its rivals found hard to keep up with — a strategy best illustrated by its smartphone business. Heavy investments are not a problem; it once secured low-cost loans from a government-controlled banking sector friendly to big businesses and now draws on its own coffers, which are sloshing with cash.

Several years ago, Sony, Sharp and Panasonic were the first companies to market flat-panel televisions. But they obsessed over craftsmanship or held onto the old cathode-ray tube while dithering over the rival flat-panel technologies of plasma screen and liquid crystal displays, or LCDs. Samsung placed billion-dollar bets on mass production of television-size LCDs. Its economies of scale helped it drive down prices to create, then clinch the LCD television market.

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