Apple victory will not sour Samsung parts relationship, claim analysts

Analysts claim Apple's recent court victory over Samsung is unlikely to damage their business relationship, whereby the South Korean vendor acts as sole supplier of the chips that power the iPhone and iPad.

At an emergency meeting in Seoul early on Sunday following the damning US legal defeat, the South Korean group's post mortem was led by vice chairman Choi Gee-sung and the head of the mobile business JK Shin, rather than by CEO Kwon Oh-hyun, whose primary role is in charge of the components business.

The clear message from Samsung is that a strict internal firewall between its handset business and its components operations remains intact.

While it plans to appeal the U.S. verdict, and a damages bill for $1.05 billion for copying critical features of Apple's popular mobile devices - a sum that could be trebled - Samsung will not want to put at risk its Apple supply contract which is worth billions of dollars.

Apple needs Samsung to make the iPhone and iPad.

As well as being the only supplier of micro processors for the iPhone and iPad, Samsung also supplies DRAM and NAND-type memory chips and flat screens used in the popular Apple gadgets. Samsung products comprise 26 percent of the component cost of the iPhone, Samsung's lead counsel Charles Verhoeven was quoted as saying in the media.

Samsung's component sales could hit $13 billion next year and bring in $2.2 billion in operating profit, according to a recent estimate by Morgan Stanley. That's nearly 8 percent of estimated group operating profit for next year.

Experts and analysts said the symbiotic business relationship between Samsung and Apple is too important for either to put at risk.

"Apple needs Samsung to make the iPhone and iPad. Period. Samsung is the sole supplier of Apple's processing chips and without Samsung, they can't make these products," said James Song, an analyst at KDB Daewoo Securities in Seoul. "Samsung might be considering lots of options to leverage its components business' importance and pressure Apple, and Apple could be also well aware of this."

With that in mind, Samsung had sought to resolve the patent dispute with Apple - which Apple first brought up shortly after Samsung launched its first Galaxy model in 2010 - through negotiation rather than in the courtroom.

"We initially proposed to negotiate with Apple instead of going to court, as they had been one of our most important customers," Samsung said in an internal memo sent to employees and released to the media on Monday. "However, Apple pressed on with a lawsuit, and we have had little choice but to counter sue."

While Samsung has been found to have copied innovative features of the iPhone and iPad, the Korean group's lawyers have emphasized that its own innovative components and wireless technology patents, which the U.S. jury ruled that Apple did not violate, made Apple's products a reality.

"Apple isn't that stupid (to risk its Samsung parts deal). Apple's agreements with Samsung will ensure that Samsung has no choice but to comply and supply," Florian Mueller, an intellectual property consultant, posted on his blog.

"Also, Samsung's other customers would lose faith if it turned out unreliable. And since Apple threatened Samsung with litigation two years ago, it's had plenty of time to identify alternatives."