Back in late August Apple was awarded a $1.08 billion verdict in San Jose, CA court. It looked bad for Samsung. Since then, the Great Thermonuclear Patent War of the early 21st century between Samsung and Apple has gotten more nuanced with wins and loses for both parties.
Apple has lost in Japan, the Netherlands and the U.K. (including the appeal), with the U.K. loss being particularly irritating for Apple. Furthermore, the fight appears to have moved beyond the court and into supplier relationships, supply chain management, unit sales and marketing.
It’s common knowledge in the industry that not only is Samsung a major competitor to Apple in finished goods, but a major supplier of components such as logic chips, flash memory and screens. Recent tear downs of Apple product show a noticeable reduction of Samsung made components, particularly flash memory. However, Apple still buys a lot of screens and logic chips from Samsung. It appears there are very few companies that can supply as many logic chips to Apple for the quantity and quality requirements that Apple needs. Samsung, appears to know this and has apparently (and arbitrarily) raised logic chip prices by 20%. According to sources, Apple has no choice but to eat this. Some sources claim this is just Samsung’s way of “creatively” recouping their settlement losses to Apple. At the same time it is currently not written in stone that the San Jose court verdict will even stand, as Samsung’s lawyers move to declare a mistrial.
Turmoil with major suppliers has made timely availability of Apple’s brand new iPhone 5 spotty. There are reliable rumors that Apple forked over $2 billion to keep nearly bankrupt Sharp afloat as a somewhat reliable supplier for iPhone 5 screens. Without reliable supplies of the iPhone 5, Samsung’s Galaxy S3 has taken the lead as the most popular smartphone in the world by unit sales. Another hit? Apple has been declared a copier by losing a Texas federal court decision that they infringed on virtual-private-network technology patents of VirnetX, in the tone of $368 million.
Supplier issues, patent losses, competitive pressures and no dynamite announcements of blockbuster products for the holiday season has weighed heavily and since August, Apple stock has gone from just over $700/share to $540, a loss of over 23%. It’s been barely three months since the big San Jose verdict, however has the tide already begun to turned against Apple?