Lawsuit highlights risks for Chinese makers
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E-mail Shanghai Daily, August 29, 2012
The Apple vs Samsung lawsuit, probably the most high-profile case in the consumer electronics industry this year, wound up last week in California, with a jury ordering Samsung to pay Apple US$1.05 billion, the biggest sum so far awarded in an intellectual property case.
Samsung was found liable for illegally using Apple's design and creation patents related to the iPhone.
The global smartphone industry will be influenced for a long time to come by the verdict, especially Chinese smartphone makers who lack patents and innovation, industry experts predicted.
Still, the impact on the domestic market won't be felt immediately, they said.
"It's a clear warning signal for all Chinese phone makers," said Wang Ying, a mobile communications industry analyst at Analysys International.
"Patents are an 'empty space' for most domestic phone makers, and that poses a huge potential risk."
Raking in profits
By the end of the second quarter, Apple and Samsung had cornered more than 50 percent of the global smartphone market, raking in 90 percent of the industry's profits. The outcome of the patent dispute between the two tech giants can't help but change the whole industry, according to research firms, including Gartner.
For example, the jury found that several Samsung products illegally incorporated Apple innovations, such as the "bounce-back" feature used to scroll to the end of an image, and the zoom text function triggered by a tap of the finger.
Such functions were used not only in Samsung products, but are also widely used in all Android phones, including those made by Samsung, HTC, Motorola and Chinese mainland companies such as Huawei Technologies and Lenovo Mobile, experts said.
Samsung is appealing the verdict.
"The court of appeals will review both infringement and the validity of the patent claims," Google said in a statement after the verdict, indirectly acknowledging that some "no-core" functions are involved in the case. "Most of these don't relate to the core Android operating system."
Apple's US$1 billion legal victory still sends a warning to all Android phone makers, industry officials said.
Android, developed by Google, now has 70 percent of the smartphone market. Most brands, except Apple and Nokia, are highly dependent on the mobile operating system, and they probably will have to adapt the functions after the Apple-Samsung verdict.
That will push the research cost of an Android smartphone higher, placing more pressure on Chinese smartphone makers, who are relatively small players compared with the likes of Samsung, analysts said.
"It will lead to fewer choices, less innovation, and potentially higher prices," Samsung said in a statement.
In China, Samsung leads the smartphone market with a 21 percent market share, followed by Lenovo Mobile's 12 percent, Huawei's 11 percent and ZTE's 9 percent, according to Analysys, a Beijing-based research firm. Apple had 6 percent by the end of the second quarter,
The legal battle is expected to mainly affect top Chinese Android phone makers, including Lenovo Mobile and Huawei.
"In the consumer electronics industry, you can't raise prices and transfer costs to buyers," said Wang. "Therefore, you have to absorb the increased cost."
iPhone design copied
Besides the Android system, the jury also determined that Samsung "purposely" copied the design of the iPhone, the product of years of research by Apple.
Compared with overseas Android models from Motorola, HTC and Sony Mobile, China-brand designs are "nothing worth mentioning," said Wei Zhong, a veteran handset industry observer working for a professional consumer electronics magazine.
Samsung has upgraded its product portfolio and designed a totally new model Galaxy S3, which was released in May and surpassed iPhone 4S sales in the past two months.
HTC is well known for the oval design at the bottom of its phones.
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