Samsung vs. Apple's Business Model: An Overview

Is Samsung better than Apple, or is it just a wannabe? The question arises because Samsung Electronics Co. Ltd. () and Apple, Inc. (AAPL) have been engaging in a global pitched battle since at least 2014𝓰 when a leaked Samsu🌃ng memo declared that its Number One priority was "beating Apple."

It made sense that Samsung would try to incorporate elements of the Apple 澳洲幸运5开奖号码历史查询:business model, especially after the American technology giant passed Exxon Mobil Corporation as the world's most valuable company in 2011. Ask either company, however, and you are likely to hear there is too much emulation going on.

Apple is still at the top with a market cap of $3.54 trillion in October 2024. Samsung may be far behind, but it's no slouch at a market cap of about $290 billion.

Understanding the Samsung-Apple Wars

It is fair to say there is no love lost between Sams🐷ung and Apple. They are in a worldwide corporate battle that started in 2010 when Samsung, then an Apple supplier, released a suspiciously iPhone-like product through its Galaxy lineuꦡp.

Steve Jobs, Apple's late CEO, was furious and went on the offensive; Samsung, in turn, dug in its heels.

Consider the almost unprecedented ཧlegal wars taking place between Samsung and Apple, which span four continents and billions of dollars in awarded damages. Or the aggressive, po꧂litical election-style marketing campaigns that are reminiscent of the Ford versus Chevy attack ads.

From a business model perspective, the two companies are constantly converging and modifying, although stark contrasts remain. Samsung has been a global force longer and has its hands in more industries. Apple's rise has been comparatively meteoric and focused.

In March 2014, someone leaked a Samsung strategy document from 2012 in which the Korean-based tech company boldly stated, "Beating Apple is #1 Priority (everything must be in the context of beating Apple)."

It is a telling example of the animosity between two of the world's largest 澳洲幸运5开奖号码历史查询:smartphone producers𒆙, who are clearly modifying their respective business strategies with each other in mind.

Sam𓆏sung: Vertical Integration and Product Volume

Samsung operates like many other Asian producers, such as NEC Corporation or Sony Corporation, with an emphasis on 澳洲幸运5开奖号码历史查询:vertical integration and a flood of products. Samsung is present in dozens of markets, including flat panels, sensors, LED lights, batteries, gaming systems, cameras, TVs, appliances, cellphone carriers, tablets, smartphones, and even medical electronics.

Before aiming at Apple, Samsung competed with, and in many cases bested, Japanese technology companies throughout the 1980s and 1990s. The company spends a fortune on 澳洲幸运5开奖号码历史查询:research and development (R&D) and 澳洲幸运5开奖号码历史查询:capital expenditures (CapX).

This strategy paid off in the mid- and low-end markets. But Samsung's high-end products keep running into the juggernaut that is Apple.

Samsung relies on vertical integration as a chief competitive advantage. While Apple still imports billions of dollars worth of components from its rival every year, Samsung is accountable to nobody.

It is not a magical formula, Nokia was almost as integrated before being steamrolled🐬 by Apple and Samsung, but Samsung controls some logistical certainty in a way that Apple does not.

However, declining profit margins in 2014 and 2015 forced some introspective analysis within Samsung's executive team. Then-company Chairman 澳洲幸运5开奖号码历史查询:Lee Kun-hee saw his company's global share of smartphone sales drop from 35% in 2ꦑ013 to 24% in the third quarter of 2015.

His son and successor since late 2022, Lee Jae-Yong, reportedly wants to respond through 澳洲幸运5开奖号码历史查询:mergers and acquisitions (M&A) and partnerships. This would be a historic shift in focus, likely signaling a departure from self-funded R&D and into outsourced innovation, not unlike Apple.

Apple: Design, Integration, and Outsourcing

From the perspective of target marketing, research, and product design, Apple is a much more focused compa𓃲ny than Samsung. Apple succeeds in design and integration, taking no small degree of risk.

All of Apple's products include programs that work very well with each other but not with any of its competitors' products, which makes it easy for customers to keep buying Apple and difficult to switch brands.

Almost half of Apple's 2023 revenue came from the iPhone lineup, making the company highly dependent on a single product.

Able to suppress R&D costs by outsourcing hardware component production and assembly, Apple's CapEx looks radically different from Samsung's ($2.09 billion as of July 1, 2023).

This inflates margins, boosts AAPL stock, and is one of the chief reasons Apple can grow at astou⛎nd🗹ing clips.

Apple does not race to be first. It lets other companies spend time on R&D and early market development bღefore swooping in and improving everyt⛄hing.

Consider the iPod, the first breakthrough product during Jobs' second stint as CEO, which came out years after the Sony Walkman. Not content to just throw out an imitator product, Apple worked diligently with record labels to create a smaller, sleeker device.

There are similar stories with the smartphone and tablet markets, each considered a pillar of Apple innovation but neither of whꦿich the company invented.

Apple vs. Samsung: Endless Patent Lawsuits

Lawsuits are a common strategy from Ap♐ple, which is one of the most legally aggressive firms in the world.

The legal battle over intellectual property started in 2011 when Apple accused Samsung of “slavishly copying” the iPhone's design and software features. Samsung countered the allegation by suing Apple for infringing Samsung’s software patents. This went on with multiple cases being filed on multiple patents and each company claiming billions of dollars in damages.

In 2012, a U.S. jury ruled In favor of Apple, making Samsung pay more than $1.05 billion for copying various hardware and software of the iPhone and iPad. Although in 2013 the penalt⭕y was reduced to $600 million, the jury said that Samsung should pay Apple an additional $290 million for patent infringing.

In a different trial 💝in 2024, a U.S. jury found both companies infringed each others’ patents. Apple was awarded $120 million and Samsung $160,000.

By that year, both Samsung and Apple decided to drop all the patent cases ouꦡtside the U.S. In 2015, Samsung agreed to pay $548 million to Apple to settle the original༺ patent infringement from 2011. 

The case reached to Supreme Court in 2016 after Samsung challenged the lower court’s ruling that the company should pay Apple $399 million in damages for violating three of Apple's design patents on the iPhone's shape and icons. That was 100% of the profits earned from its smartphone business. However, the Supreme Court rejected the ruling and returned the case to lower courts.

In May 2018, a U.S. jury eventually found Samsung had infringed on the majority of the patents and ordered Samsung to pay Apple $539 in damages for “copying features of the original iPhone."

Apple was awarded $533.3 million for Samsung’s violation of three design patents on the iPhone and an extra $5.3 million for infringing utility patents.

The Bottom Line

Samsung and Apple are two multinational major appliance and consumer electronics corporations with different business models and strategies. It's also worth noting that while Samsung is currently more profitable,

Apple remains a much larger company overall. Samsung is valued at less than $290 billion, while Apple is the world's most valuable company with a market cap of $3.57 trillion as of September 2024.