Some soul-searching ahead for Samsung

Associated Press

SEOUL, South Korea

A U.S. jury’s $1 billion verdict against Samsung for what rival Apple claimed was the illegal copying of its iPhone and iPad designs signals a turning point for the South Korean electronics giant known for its prowess in adapting the innovations of others and nimbly executing production.

The verdict not only jolted the world of global gadgetry but also likely sparked some soul-searching in Suwon, South Korea, where the family-run Samsung conglomerate is based.

The world’s top seller of smartphones finds itself in the post-iPhone reality, where the decades-long practice of industry mimicry now can mean a bruising legal challenge.

And so Samsung finds itself in a position of having to recreate itself as an innovator, not an imitator. But the switch, experts say, will be much more challenging and time-consuming than the shortcuts Samsung used to take.

“The case shows that Samsung is still inadequate in soft(ware) area, such as designs and patents,” M.S. Hwang, a Hong Kong-based analyst at Samsung Securities, said in a commentary.

Samsung Electronics Co. has a top-heavy command structure that centers on the founding family. At the apex is 70-year-old Lee Kun-hee, who inherited the mantle from his father, Samsung founder Lee Byung-chull, in 1987.

The strict hierarchy has enabled speedy and bold investment and swift execution. That, plus the ability to build on the innovations of others, such as Sony Corp. — has helped Samsung become the world’s largest maker of televisions, memory chips, liquid crystal display panels and now, smartphones.

Its path is reminiscent of many Japanese companies, such as Canon Inc. and Nikon Corp., which started out by copying European designs and then became innovators and pacesetters in the 1960s and ’70s.

“It is impossible to be an innovator from the beginning,” said Chang Sea-jin, a professor at National University of Singapore. “If you don’t have a technology, imitating more advanced companies is the easiest way to catch up.”

Samsung long has been regarded as a “fast follower” — imitating or licensing technologies and then competing by lowering costs, improving quality and adding functions.

It overcame its belated entry into the memory-chip business in 1983 with efficient mass production and investments. Today, Samsung supplies about 30 percent of the chips that go into electronic gadgets.

In the early 2000s, Samsung claimed leadership in the global television industry.

But when Apple released its cutting-edge iPhone in 2007, Samsung employees likely were too pressed to catch up to scrutinize possible patent encroachments. South Korea’s idea of intellectual property is also less strict than that in the U.S., Chang said, and speedy execution is highly valued at Samsung.

Still, Samsung outsold Apple this year in smartphones by offering more variety, including low-end phones for price-conscious consumers.

Last Friday, a jury in San Jose, Calif., ruled that Samsung went too far in copying the iPhone and the iPad. It awarded Apple $1.05 billion, while a judge considers whether to ban sales of eight Samsung products in the U.S. Samsung has vowed to appeal.