Samsung's dilemma: How to attack its customer (Apple)

July 23, 2010: 12:19 PM ET

Samsung makes a fortune building the parts for the iPhone.  How do they compete with the iPhone at the same time?

According to iSuppli, Samsung makes three of the most expensive and important parts of the iPhone 4, The processor, the SDRAM and Flash storage.  On a 16GB iPhone that comes out to over $50.  On a 32GB iPhone, that price heads towards $75, making Samsung responsible for around a third of the $187 total building cost of the iPhone.

Quick Math: If Apple (AAPL) sells 40 million iPhone 4s, that's over $2 billion in revenue for Samsung.

iSuppli estimates

But, like a lot of Asian electronics conglomerates, Samsung sells its own line of phones. Some, like the Android-powered  Samsung Galaxy S line (reviewed here), compete directly with the iPhone.   How do you compete against a product that you also financially want to to be successful?

Well, it turns out that it gets tricky.  Samsung and Apple have traditionally laid off of each other for the most part.  That is, until Samsung decided to adopt Android.

The first shots might have been fired by Apple at its World Wide Development conference in June. Apple CEO Steve Jobs said that the "Retina display" used in Apple's latest iPhone, and likely made by Samsung's archrival LG Display, is much better than AMOLED displays like those used on the Galaxy S line.

Jobs cited the dense pixels which went far beyond what you can determine with the naked eye. The iPhone 4 has a resolution of 960×640, four times higher than its predecessor iPhone 3GS, while the Galaxy S's resolution is 800×480.  However, the Samsung screen is significantly larger at four inches to the iPhone's 3.5 .

A Samsung representative, via the Korean Herald, said that quadrupling the resolution would only increase the clarity at most only three to five percent. They also said that this type of display is too power-hungry, draining it 30 percent quicker than Samsung's Super AMOLED technology. The use of OLED pixels also allows the Super AMOLED display to show colors more accurately, while also giving a higher contrast. Blacks are more black, colors are more vibrant, and has no limit on viewing angles.

While Apple likely makes up for the power savings by including a huge battery, the toll then moves to weight, making the iPhone significantly heavier than Galaxy S phones, even more so than the Sprint Epic which has a physical keyboard.

There has even been speculation that, because of supply shortages, Samsung is keeping the Super AMOLED screens for itself, forcing other manufacturers like HTC, Motorola and Apple to continue using what they perceive to be inferior displays.  Samsung could have a monopoly on these amazing screens for up to a year or more.

That was far from the end of the fighting however.  Fast forward to last week's Apple Antenna-gate press conference.   One of the phones Apple used to demonstrate that  the "death grip issue (diversion)" was prevalent across the industry was the (not Android) Samsung Omnia II.

Samung fired back at Apple, just like the other mobile corporations Apple cited, with the following statements:

"we have not received significant customer feedback on any signal reduction issue for the Omnia II. Based on years of experience of designing high quality phones, Samsung mobile phones employ an internal antenna design technology that optimizes reception quality for any type of hand-grip use."

"The antenna is located at the bottom of the Omnia 2 phone, while iPhone's antenna is on the lower left side of the device. Our design keeps the distance between a hand and an antenna. We have fully conducted field tests before the rollout of smartphones. Reception problems have not happened so far, and there is no room for such problems to happen in the future."

Today, Samsung goes on the offensive with an interesting (and smart!) Twitter campaign.  They are pulling some disgruntled iPhone 4 users from Twitter and offering them free Samsung Galaxy S phones.

The move doesn't cost Samsung too much because you can pretty much pick up free Samsung devices with plans from major carriers already (see prices at bottom).

This not only makes for some happy new Samsung customers, it also gives other perhaps disgruntled iPhone 4 users reason to air their iPhone 4 grievances on Twitter (free phones!).  That isn't going to help Apple's image on the Internet.

Speaking of Apple's image, Samsung is rolling out a new ad this week which doesn't specifically target their iPhone supply partner.  However, when just about anyone sees it, they think it is an affront to the iPhone 4.  This might be the perfect way to attack a partner.  Passive aggressively!

Samsung ad. via Mashable.com

Would this ad have worked before Antenna-gate?  Would people have thought it was even anti-Apple? Has full bars become the opposite of the iPhone?

It will be interesting to see how this supplier relationship evolves (devolves?) now that Samsung and Apple's phones are competing more vigorously.  Remember on the software side, Apple uses its Android competitor, Google for search, maps and YouTube videos, so competitors can co-exist.

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About This Author
Seth Weintraub
Seth Weintraub

Google went from searching the Web to worming its way into nearly every facet of business and government. Seth Weintraub unveils where the company is going, who it's competing with, who it's about to compete with and how market forces push the company to veer or adhere to its Don't Be Evil motto. For 15 years, Weintraub was a global IT director for a number of companies before becoming a blogger.

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