Samsung vs. Apple: Comparing Business Models

Samsung vs. Apple's Business Model: An Overview

It is fair to say there is no love lost between Apple, Inc. (AAPL) and Samsung Electronics Co. Ltd. (SSNLF). They are in a worldwide corporate battle that started in 2010 when Samsung, then an Apple supplier, released a very iPhone-like product through its Galaxy lineup. Steve Jobs, Apple's late CEO, was furious and went on the offensive; Samsung, in turn, dug in its heels.

It made sense that Samsung would try to incorporate elements of the Apple 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.

Consider the almost unprecedented legal wars taking place between Samsung and Apple, which span four continents and billions of dollars in awarded damages. Or the aggressive, political 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 blankly 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 smartphone producers, who are clearly modifying their respective business strategies with each other in mind.

Key Takeaways

  • Samsung and Apple are two consumer electronics giants with global reach and loyal customer bases.
  • Samsung's business model has focused on vertically integrating supply chains and ramping up production volume.
  • Apple has made a business strategy of focusing on design and user experience while outsourcing elements such as manufacturing.
  • The two companies have found themselves engaged in legal battles over intellectual property and patent fights.

Samsung: Vertical Integration and Product Volume

Samsung operates like many other Asian producers, such as NEC Corporation or Sony Corporation, with an emphasis on 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 turning its sights to Apple, Samsung competed with, and in many cases bested, Japanese technology companies in the 1980s and 1990s. The company spends a fortune on research and development (R&D) and capital expenditures (CapEx). This pays off in the mid- and low-end markets, but the 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. Chair Lee Kun-hee saw his company's global share of smartphone sales drop from 35% in 2013 to 24% in the third quarter of 2015, and his son, Lee Jae-Yong, reportedly wants to respond through 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 its target marketing, research, and product design, Apple is a much more focused company than Samsung. Apple succeeds in design and integration, and 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 to someone else. Over half of Apple's revenue comes from the iPhone lineup, making the firm single product-dependent.

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 and boosts AAPL stock, and is one of the chief reasons Apple can grow at astounding clips.

Apple does not race to be first; it lets other companies spend time on R&D and early market development before swooping in and improving everything. 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 and created a small, sleek-looking replacement. There are similar stories with the smartphone and tablet markets, each considered a pillar of Apple innovation but neither of which the company invented.

Apple vs. Samsung: Endless Patent Lawsuits

The two companies have been fighting over patent infringement since 2011 and took their case all the way to the Supreme Court. Lawsuits are a common strategy from Apple, which is one of the most legally aggressive firms in the world

The battle on intellectual property started in 2011 when Apple accused Samsung of “slavishly copying” the iPhone's design and software features. Samsung then 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 penalty 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 infringing upon 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 outside 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 (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.

Which One Sells More, Samsung or Apple?

With the launch of the Galaxy S23, Samsung sold the most smartphones worldwide during Q1 2023, thus reclaiming the top spot from Apple during the quarter. The company ended Q1 2023 with a 22% share of the global smartphone market, followed by Apple at 21%.

Which One Is Best, iPhone or Samsung Smartphones?

The Apple iPhone design is generally more minimalist and sleek. It's easy to use, has a good camera, and lasts a long time on a charge. Samsung's smartphones, on the other hand, have more features and customization options, and a bigger screen.

Samsung smartphones are available at various prices. while Apple iPhones are only available at one price point (usually high).

How Are Apple and Samsung's Business Models Different?

Samsung's business model focuses on vertically integrating supply chains, ramping up production volume, and diversifying product offerings (electronic devices, appliances, and services) for a global customer base.

Apple's business model focuses on design and user experience, continuous innovation, branding excellence, strategic partnerships, outsourcing, and long-term vision.

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 $200 billion, while Apple is the world's most valuable technology company with a market cap of nearly $500 billion.

Article Sources
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