Samsung's earnings, prospects much brighter than Apple's

As its Q4 earnings show, Samsung does a lot of things well, including building the strategic components that go into its smartphones and tablets.

Samsung announced a record quarter last week. And the day before, so did Apple, despite the critics who doubt it can maintain its growth. Due to the consumer marketing prowess of these two companies and their mutual global litigation, Samsung and Apple could be perceived as direct competitors. But except for mobile categories, Apple and Samsung have limited overlap.

SOURCE: Samsung earnings report [<a href="">PDF</a>]

Apple shipped a total of $41 billion in iPads and iPhones in Q4, compared to Samsung’s $25 billion in smartphones and tablets ($29 billion total when incorporating the $4 billion in feature phones), with Apple growing its mobile category by 23% during the quarter ending December 2012, compared to the same quarter in 2011. Samsung grew 59% in that same category. But this is where the similarities end.

RELATED: The Apple double standard

Shares of AAPL take a nosedive following record breaking earnings

Samsung is a vertically integrated manufacturer with significant semiconductor fabrication capability. Samsung builds components, such as mobile processors, mobile baseband LTE 4G modems, and LCD displays, that are incorporated into Samsung smartphones, tablets, PCs and TVs, as well as many other products manufactured by its customers, such as Apple. Samsung builds Apple’s A4, A5 and A6 microprocessors, and has supplied many of its LCDs. Given the litigation, Apple appears to be working to move its semiconductor production away from Samsung, and it’s rumored to have interest in working with the Taiwan Semiconductor Manufacturing Company (TSMC). Unlike Samsung, TSMC does not make end products used by consumers. So it won’t surprise Apple with an introduction of a competing smartphone or tablet.

Apple designs some of its components, such as its microprocessors it's licensed from ARM, that are manufactured by other companies. Apple has fewer rich component technology patents than Samsung. For instance, Samsung forecasted that it will ship 80 million units of its second-generation 4G LTE chip that connects mobile devices to the internet at higher speeds. This is a differentiating technology that smartphone and tablet manufacturers need in order to sell high-end tablets and smartphones in developed markets. Qualcomm has dominated the 4G LTE market, and Intel has just begun to produce these devices, but Apple’s patent portfolio is weak in this area. This means Samsung has much more control over cost, and will be able to establish deep, low-power integration of more powerful smartphones and tablets connected at higher speeds.

Samsung is positioned to repeat its mobile success. Its advantage over Apple is that it has to eat its own dog food. Samsung builds most of the strategic components, mobile processors, LTE chips and LCDs that go into its mobile product line, and also sells them to other mobile device manufacturers. Samsung’s mobile designers have the benefit of Samsung’s market testing each Samsung component with other teams building similar products. Likewise, Samsung’s component manufacturing and engineering teams benefit from having Samsung’s mobile engineers working at the next bench. It’s an open model of innovation that will lead to more powerful, faster, lighter, less-expensive and more profitable products as Samsung serves the rapidly growing market.

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.
Must read: 10 new UI features coming to Windows 10