Samsung loss may hurt Android, limit diversity

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Samsung loss may hurt Android, limit diversity


A person walks past a mobile phone shop in Seoul on Friday displaying posters for Apple’s iPhone 4S, left, and Samsung Electronics’ Galaxy S3, right. Experts warn that the recent series of verdicts over patent infringement between the tech powerhouses in Seoul and California could limit consumer choice. [AP/YONHAP]

What does Apple’s victory in its epic patent dispute with its fiercest rival signal for the U.S. smartphone industry?

After jurors decided that Samsung has to pay damages slightly in excess of this figure, it can be seen as the $1 billion question.

Analysts from Wall Street to Hong Kong were busy debating over the weekend whether the jury’s decision that Samsung Electronics did in fact rip off Apple’s technology and design would help it gain an edge in the U.S. market over its Android rivals.

Many analysts said the decision could spell danger for competitors who, like Samsung, use Google’s Android operating system to power their cellphones.

“I am sure this is going to put a damper on Android’s growth,” New York-based Isi Group analyst Brian Marshall said, “It hurts the franchise.”

Most of Apple’s competitors have used the Android system to produce similar technology, which could limit the features offered on all non-Apple phones, industry watchers said.

“The other makers are now scrambling” to find alternatives, said Rob Enderle, a leading technology analyst based in San Jose.

Seo Won-seok, a Seoul-based analyst at Korea Investment said the popular zooming and bounce-back functions that the jury decided Samsung stole from Apple will be hard to replicate.

The companies could opt to pay Apple licensing fees for access to the technology, or they could develop new technology to create similar features that don’t violate the patent - at a cost likely to be passed onto consumers.

A loss to the Android-based market would represent a big hit for Google. The company relies on Android devices to drive mobile traffic to its search engine, which in turn generates increased advertising revenue. Android is becoming increasingly more important to Google’s bottom line because Apple is phasing out its reliance on Google services such as YouTube and mapping as built-in features on the iPhone and iPad.

Samsung engineers have already been designing around the disputed patent since last year.

“We should never count out Samsung’s flexibility and nimbleness,’’ said Mark Newman, a Hong Kong-based analyst with Sanford C. Bernstein. “This is merely an embarrassment and annoyance to the company that they will have to find ways around.’’

The dispute centers on Apple’s dissatisfaction with Google’s entry into the phone market and its comments that any company could use Android free of charge.

Google entered the market while its then-CEO Eric Schmidt was on Apple’s board, infuriating Apple co-founder Steve Jobs, who considered Android to be a blatant rip-off of the iPhone’s innovations. Apple filed its patent infringement lawsuit in April 2011, engaging the country’s highest-paid patent lawyers to demand $2.5 billion from Samsung.

Meanwhile, the Seoul Central District Court issued a ruling on Friday banning sales of older smartphone models from Samsung, such as its Galaxy S, Galaxy S2 and Galaxy Nexus. This is expected to deal another blow to those businesses that deal in used handsets. The old models are up to 30 percent cheaper than their replacements. Moreover, a reduced product lineup means lower sales, according to industry figures.

Some have also raised the specter of looming price hikes as other smartphone makers may have to pay licensing fees to Apple in relation to its technologies.

“There may be a big Apple tax,” IDC analyst Al Hilwa was quoted as saying by the Wall Street Journal. “Phones will be more expensive.”

The paper reported that, during the trial, Apple was willing to license some of its patents to Samsung at a rate of about $30 per smartphone or $40 per tablet PC.

Should Apple file and lose patent suits against other mobile gadget makers that adopt similar designs, the financial burden could be relayed to consumers, analysts said.

By Joo Kyung-don, AP []

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