The innovation ecosystem contains both competitive and cooperative relations between actors, and both complementary and substitute relations between technologies, patents, components, applications, and systems[1]. In this memo, I demonstrate these relations between the two tech giants: Apple and Samsung.
In 2011, Google purchased Motorola and its patent portfolio for $12.5 billion to protect the Android ecosystem. Google did this acquisition to fend off litigation threats from Apple and to protect its partners. Between 2009 and 2015, many patent infringement lawsuits were filed in various jurisdictions. The most disputed smartphone technologies were mobile data access, touchscreen technology, and mobile data transmission[2]. One of the most reported fights in the smartphone patent war was the one between Apple and Samsung that involved patents related to iPhone and Galaxy as shown in the side figure[3]. Samsung’s IP awareness had been awakened since the 1980s by a patent infringement case involving ten US patents on DRAM held by Texas Instruments[4]. Samsung adopted a strategy for patent protection, establishing an IP division, and making efforts to increase in-house innovativeness3. Samsung was at very high risk in its fight with Apple as they countersue a big company, in addition to that most competing firms, also were Samsung’s customers in that they procured components from Samsung. That led to a massive loss of $1billion paid by Samsung to Apple. This was an example of competitive relations.
The accessibility of a specific technology is not impacted only by patents of the focal technology, but also by patents on complementary and substitute technologies and standards. For example, the cross-licensing of complementary patents played an important role to enable accessibility among main innovators in the innovation ecosystem. It all depends on the mode of technology governance employed by an actor. Such cooperative relations were demonstrated in the case of iPhone X. Samsung is controlling 90% of the OLED market share. OLED is the core screen technology used in iPhoneX. With a 90 percent yield rate, Samsung Display can churn out around 224 million 6-inch panels per year to Apple[1]. Samsung Display will supply Apple with between 180 to 200 million flexible OLED panels for the iPhone in 2018. Although Apple hates such a monopoly. Samsung as the world’s biggest chip maker can only satisfy the demands of Apple. Apple pays $120 for each OLED screen compared to $45 for LCD Screens[2].
[1] Samsung is making Apple pay a small fortune for the iPhone 8 display. TechCrunch. 2018
[2] ‘Apple’ OLED Display On The $1,000 iPhone 8, ‘iPhone X’ Gets You This. Forbes. 2018
[1] A review of the ecosystem concept — Towards coherent ecosystem design. sciencedirect.com. 2017
[2] The evolution of intellectual property strategy in innovation ecosystems. sciencedirect.com. 2017
[3] Phone Patent Fight. The Wall Street Journal. 2012
[4] IPR and technological catch-up in Korea. Oxford University Press, Oxford. 2010
