8/27/2012

Apple vs. Samsung: "Koreans are furious at China for copying our products. But when Korea does the same, Koreans defend the action. That is a highly distorted form of patriotism. When a company takes the wrong path, it is the public’s job to correct it.”

Long ago, trade economists noted the best guarantee a developing economy to start playing by international rules is when it starts creating its own intellectual property worth defending. Korea is in many ways, has long ago passed that point. And yet, in some ways, it has not yet reached that development milestone.

As I have repeatedly pointed out, Korea has yet to develop a market-defining product. It has produced hundreds of thousands of very good to excellent products, many of which have been significant improvements on the original designs created by others. The Galaxy line of products is a good example of this.

Putting aside patent issues for the moment, it is not enough to produce high quality products that are often better in various ways than the originals. Producing improved copycat models requires priorities that limit basic R & D. While some R & D is put into improving the original product design, huge amount of resources must be devoted to setting up production lines capable of generating large volumes of high quality products in very, very short time frames. This is Samsung Electronics primary global competitive advantage. But the tradeoffs include being branded as a copycat and being forced to also compete on price, which means much smaller profit margins than the true innovating companies.

This is not to say there is anything wrong per se, at least for the short- to long-term, with this business mode. But there are also some structural weaknesses, particularly given that Korea has to watch its backside with up and coming competitors, such as China today, and possibly Thailand and Indonesia tomorrow.

The Koreans need to find the means to move up the food chain in terms of basic R & D and market-creating innovation. Otherwise, they may risk emulating their Japanese mentors yet one more time.

Turning to the below selection of articles, I have chosen a couple of articles that give a good summary of what happened in San Jose as well as a contrary court case that took place in Seoul coincidentally(??) a day before the US court decision.

But first I lead with a marketing analysis that interestingly enough appeared in today's Samsung-owned newspaper, the Korea JoongAng Daily.

As Copy Cats Abound, Hint of Hypocrisy Invites Backlash: "Korea is Furious that China is Copying Our Product" Samsung's Korea JoongAng Daily 

Korean's attitude to copying may be changing.  The article notes, in part, that:
A Korean professional IT reviewer who runs a blog called “Konata’s Mobile Life” mobilized dozens of images to make a detailed comparison of the two rivals’ smartphones and tablet PCs dating back to early 2009.
The blogger also compared their campaigns and package design to bolster his argument that Samsung was in effect a copycat. “Koreans are furious at China for copying our products,” he wrote in a blog post. “But when Korea does the same, Koreans defend the action. That is a highly distorted form of patriotism. When a company takes the wrong path, it is the public’s job to correct it.”
Some experts said they hope the ruling serves as a turning point for Samsung. “I think Samsung should reform its corporate culture [of copying its rival] .?.?. I even think it will feel grateful to Apple later,” tweeted Lim Jung-wook, head of global business at Daum Communications.
By Tom Coyner, Senior Commercial Adviser at IPG.