Are Apple's Priorities in Order?

It's shaping up to be the mother of all battles in the fiercely competitive world of smartphones and tablets: the never-ending patent wars between Apple (Nasdaq: AAPL  ) and Samsung that includes more than 30 cases spanning four continents. While both are already champions in their own right -- with Apple being the world's most highly valued company and Samsung being the planet's biggest technology company in terms of revenue -- these patent-related cases are the culmination of a fierce tendency on Apple's part to protect its intellectual rights. The most recent development involves Apple's efforts to stop the sale of Samsung's Galaxy S III in the U.S., claiming that it infringes on two Apple patents.

When you're dealing with a worldwide smartphone market that's worth a cool $219 billion, any handset maker would go to great lengths to retain its dominance. Apple has been fighting patent battles related to the iPhone against Motorola Mobility, and it consistently blames Samsung for violating of its technology and handset designs, notably as the newest unit in the Galaxy line of phones seems to be rivaling Apple's iconic iPhone in worldwide sales. The biggest irony is that Apple still remains Samsung's biggest customer for its chips and display screens.

Tapping China
While it's true that Samsung's phones do look a lot like Apple's products, from the technology and user interface right down to the packaging, Apple has a host of other concerns to contend with, with China being at the forefront. Apple holds a disappointing fifth position behind Samsung in terms of smartphone sales in China, managing only 7.5% market share against Samsung's 24.3%. And this is one country Apple would like to dominate. Its prospects there should brighten in the near term with the introduction of the iPhone 5, which is rumored to be compatible with the proprietary TD-SCDMA network that powers China Mobile, the nation's largest wireless company. Yet there's every chance that Samsung will increase the gap between the two.

Apple knows it needs to one-up its rival in this battle, and within the shortest possible time. The wide range of prices and the variety of screen sizes that Samsung phones boast -- along with other factors such as the wide acceptability of Google's (Nasdaq: GOOG  ) Android operating system, which powers most of Samsung's latest product lines -- don't leave a lot of options open, even for a technological behemoth like Apple. Having a niche product won't let you stand the test of time, and in my opinion that's what Apple needs to realize.

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Fool contributor Subhadeep Ghose doesn't own any shares in any of the companies mentioned above. The Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Apple and Google and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On June 17, 2012, at 12:52 PM, bsimpsen wrote:

    Given that the iPhone is not available on China's largest carrier (70% market share), I'm not sure how one makes the argument that bringing the iPhone to China Mobile creates "every chance that that Samsung will increase the gap".

    Your insinuation that the iPhone is a niche product contradicts the facts.

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