Samsung demands Apple hand over iPad 3 and iPhone 5

By Jonny Evans

The Apple [AAPL] Samsung relationship continues to unravel, and while reports last week claim COO, Tim Cook, took a trip to South Korea to negotiate displays for Apple products, it looks like the battle between Samsung's mobile arm and the iPhone company is scuppering friendly relations.


[ABOVE: A detail from the Apple filing illustrating alleged similarities between Apple and Samsung's mobile products.]

Show and...sue

Apple last week demanded and won a California court order that Samsung turn over a variety of its unreleased Galaxy mobile products to Apple's legal team. They want to check these products and their packaging to see if there are any offending similarities between these and Apple's own designs. Apple has demanded access to the Galaxy Tab 10.1 and 8.9 tablets, and smartphones like the Galaxy S II, Droid Charge and Infuse 4G.

"Instead of pursuing independent product development, Samsung has chosen to slavishly copy Apple's innovative technology, distinctive user interfaces, and elegant and distinctive product and packaging design, in violation of Apple's valuable intellectual property rights. As alleged below in detail, Samsung has made its Galaxy phones and computer tablet work and look like Apple's products through widespread patent and trade dress infringement. Samsung has even misappropriated Apple's distinctive product packaging," Apple's filing claimed.

A secret shared

In an unusual counterattack, Samsung is demanding that Apple hand it pre-production prototypes of the iPhone 5 and iPad 3, along with the product packaging. Only Samsung's external lawyers will win the chance to take a pre-release glance -- but they are demanding this access by 17 June 2011, and this does fly in the face of Apple's customary corporate secrecy.

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Samsung says it wants these to help it, "prepare its defense against any preliminary injunction motion brought against Samsung by Apple for trademark or trade dress infringement."

The big problem here is that Apple is one of Samsung's biggest customers, and depends on the firm for a swathe of components, including flash memory, displays and for production of the A5 and A4 processors used in Apple's iDevice series.

"We are Samsung's largest customer, and Samsung is a very valued component supplier to us. I expect a strong relationship will continue," Apple COO Tim Cook said during the company's just-gone financial call.

Apple spent $5.68 billion with Samsung last year, accounting for 4 percent of its revenue.

Seeking Samsung replacements

Apple will play every card it has available. For example, Intel has said it would be very interested in producing custom chips for Apple. "We believe that Intel has also stepped up its efforts to get into the foundry business. In particular, Intel is vying for Apple's foundry business," Piper Jaffray analyst Gus Richard has said.

Earlier this year a report claimed that Apple is working with Taiwan Semiconductor Manufacturing Co. to get that firm to manufacture A5 processors for its devices.

Apple has reportedly been talking with Samsung with a view to sourcing AMOLED displays. Now it seems the firm may not land the contract, as Apple may choose to work with LG, assuming that manufacturer can make these displays.

Compounding problems

However, all Apple's moves to protect itself against Samsung come as the industry continues to resurrect itself following the triple disasters of Japan's earthquake, tsunami and nuclear meltdown. These events have created component supply problems which are certainly impacting across the industry in the current quarter.

Apple's Mac sales are also exploding. The firm recently entered the top five PC makers in the UK for the first time, booting Samsung off that list.

With billions in the bank, Apple executives must be considering financing one or more of their existing manufacturing partners in creating new production lines for product components. Take Foxconn's expansion into Brazil as an example of this. However, these things won't happen overnight, and the problem with Samsung cannot be good for Apple's future product plans.

The situation is certainly a test for Apple's COO, Tim Cook. Cook has a reputation for being a smart business manager with tight control over components and inventory. How this puzzle is resolved will perhaps be seen as indicative of his potential as a future Apple CEO, though to be fair, some of these events are completely beyond his control.

What can Apple do to out-maneuver its South Korean war? How can the company replace arguable its most important component manufacturer? Let us know in comments below, and please, I'd be honored if you chose to follow me on Twitter so I can let you know when these items are published here first on Computerworld.      

Copyright © 2011 IDG Communications, Inc.

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