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Samsung facing product delays

(Bloomberg) / 26 August 2012

SEOUL — Samsung Electronics may need to delay introducing new mobile devices so it can make design changes after a US jury ruled that the world’s top maker of smartphones infringed Apple patents.

Apple on Friday won a $1 billion judgment that may also halt US sales of Samsung’s mobile products. The companies return to court next month for a hearing on Apple’s request for a permanent ban on devices including Samsung’s Galaxy Tab 10.1.

Samsung vaulted to the top of a global smartphone market valued at $219 billion by Bloomberg Industries by introducing a variety of Galaxy models using Google’s Android software and gaining share over Apple’s more-limited product range. The Suwon, South Korea-based company may have to rush to change products under development, leading to delays as it seeks to widen its lead.

“Samsung will have to change some products in its pipeline,” Chang In Whan, president of Seoul-based KTB Asset Management, which oversees the equivalent of $5.8 billion, said by phone on Saturday. “There could be delays in developing and releasing new models at a time when products are coming out every six months.”

Samsung’s schedules for debuting new products won’t be affected by the verdict, James Chung, a Seoul-based spokesman for the company, said on Saturday by phone.

Samsung has gotten around other sales bans by modifying some features of its products. The company last year changed the frame of a Galaxy tab model and the location of speakers after Apple won an injunction banning its sales in Germany.

The global lineup for the rest of this year includes the next version of the Galaxy Note, which sold more than 10 million units in less than a year. The company began selling a tablet edition of the Note this month, following the May release of the Galaxy S III, the newest version in its bestselling smartphone series.

Samsung — the largest maker of computer-memory chips, flat-screen panels and TVs — plans to spend 25 trillion won ($22 billion) this year in capital expenditure to boost manufacturing capacity, including 15 trillion won for chips and 6.6 trillion won for flat-screen panels used in smartphones, tablet computers and televisions.

“Samsung has deep pockets and they are going to change some designs up,” said Michael Risch, a patent law professor at Villanova University in Pennsylvania. “Not being able to copy may make them do better things than Apple.”

The verdict may affect other makers of Android-based devices. Apple has sued other smartphone makers, including HTC Corporation, the world’s fourth-largest smartphone maker that generated $15.8 billion in revenue last year mostly from selling phones such as Desire and Sensation.

“HTC would need to look very closely at the patents in question with Apple and see which may be similar to those with the Samsung case,” said Marcus Clinch, an intellectual property lawyer at Eiger Law in Taipei who is not involved in any of the cases. “Having Samsung’s products banned in the US may be a bigger danger to HTC than the damages award because of the precedent it sets for the industry.”

Two of the patents in the case brought by Apple against Samsung are also part of the iPhone maker’s case targeting more than a dozen HTC devices before the International Trade Commission. HTC declined to comment in an e-mailed response to queries.

“This is an issue for the whole Android camp, not just for Samsung,” Seo Won Seok, a Seoul-based analyst at Korea Investment & Securities, said by phone.

Apple, based in Cupertino, California, won less than half the damages it sought from the first US jury verdict in the fight to dominate the global smartphone market, though US District Judge Lucy Koh, who presided over the four-week trial in San Jose, California, could later triple the damages under federal law. Samsung avoided a finding of damages for antitrust violations or breach of contract.

Samsung will ask the judge to overturn the verdict and, if she doesn’t, will appeal the case, Mira Jang, a spokeswoman for Samsung, said in an e-mail.

The “verdict should not be viewed as a win for Apple, but as a loss for the American consumer,” Samsung said in a separate e-mailed statement. “It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies.”

Apple is Samsung’s largest customer, even as they compete selling phones that allow users to surf the Web and play games, and fight in courts on four continents over patent infringement claims. Apple accounts for about nine per cent of Samsung’s revenue, making it the company’s largest customer, according to data compiled by Bloomberg.

Koh set a hearing for September 20 on Apple’s request to bar US sales of Samsung products. She ordered Apple to file a one-page chart by August 27 identifying which devices it seeks to ban.

Samsung shares have gained almost 21 per cent this year, trailing a 64 per cent jump in Apple stock.

“A final decision would’ve been less burdensome,” Heo Pil Seok, chief executive officer at Seoul-based Midas International Asset Management, which oversees $5 billion, said by phone on Saturday. “It’ll take some time for an actual sales ban to take effect, and Samsung will appeal, making it a long-term fight.

“This will be an uncertainty for Samsung, and investors hate uncertainty the most,” he said. 

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