Samsung-Heavy ETFs Hit By $1B Verdict

August 27, 2012

Samsung's stock gets trashed after losing its patent case with Apple, and a number of ETFs follow suit.

A number of ETFs with heavy weightings in Apple or Samsung were affected on Monday, with the maker of iPhone’s stock up 2 percent today and Samsung’s down 7.5 percent after the month-long patent infringement suit ended with the South Korean tech giant having to pay Apple more than $1 billion in damages.

The $1.05 billon ruling was shy of the $2.5 billion Apple sought when it charged that Samsung took three months to rip off features of the iPhone that took years to develop. Samsung, which plans to appeal the decision, had argued that Apple is using courts to avoid competing in the marketplace, the Journal said.

In the case settled on Friday, jurors also found all five of Samsung’s claims against Apple invalid after deciding Apple didn’t violate any patents, according to the Wall Street Journal.

As the stock moves clearly demonstrate, the stakes are very high, as Samsung is now the world’s No. 1 maker of smartphones and is Apple’s top rival in the market for tablets such as the iPad. Also, the case could touch on other outstanding litigation between other large tech players, including Google and even Microsoft and Nokia.

As Go The Stocks, So Go The ETFs

With Apple’s and Samsung’s share prices on the line, the ETFs that own them are being affected as well. At the top of that list is the $34.4 billion PowerShares QQQ Trust (NasdaqGM: QQQ) and the $2.6 billion iShares MSCI South Korea Index Fund (NYSEArca: EWY), both of which are heavily invested in the tech giants.

About 23 percent of EWY’s portfolio is in Samsung, and the ETF shed about 1 percent, closing 59 cents lower at $59.58 per share. QQQ, which has 18.8 percent of its holdings in Apple, ended 0.16 higher after rising almost 0.5 percent earlier in the session.

While Samsung will need to fork over more than $1 billion, the South Korean company holds a chance of being least affected by losing the verdict.

Indeed, Apple’s reputation as the major force within the smartphone and tablet market is much more valuable than the damages requested by Samsung, says Street One Financial President Scott Freeze.

“Apple has more to lose, as the company holds the top spot in the eye of the public. The same rings true in the case of ETFs. Samsung is twice as big as any other holding in EWY, while Apple is three times larger than any other holding in IYW,” Freeze said, referring to the iShares Dow Jones U.S. Technology Index Fund (NYSEArca: IYW).

The case, which was held in federal court in San Jose, Calif., a major city in the heart of Silicon Valley, has drawn significant media attention. That’s partly because San Jose is so close to Apple’s headquarters in Cupertino, Calif., but also because the case could have far-reaching implications.

Apart from the two tech giants, a number of well-known companies in the world of tech—such as Microsoft, Google and Nokia—are entangled in their own web of patent battles regarding mobile devices.

Funds with heavy weightings in Samsung include:

  • iShares MSCI All-Country Asia Information Technology Index Fund (NYSEArca: AAIT), with 17.6 percent in the Korean company
  • iShares S&P Asia 50 Index Fund (NYSEArca: AIA), with 15.8 percent in Samsung


AAIT gained 0.61 percent, while AIA has lost 1.43 percent.

Funds with heavy weightings in Apple include:

  • iShares Dow Jones U.S. Technology Index Fund (NYSEArca: IYW), 23.7 percent
  • Technology Select Sector SPDR ETF (NYSEArca: XLK), 19 percent
  • iShares Morningstar Large Growth Index Fund (NYSEArca: JKE), 15.5 percent


The above three ETFs gained 0.15 percent, 0.10 percent and 0.17 percent, respectively, in Monday’s trading session.

The ruling isn’t going to affect any of either company’s current products; however, it will affect how Samsung and other companies from here design smartphones and tablets going forward.

The ruling isn’t going to affect any of either company’s current products; however, it will affect how Samsung and other companies from here design smartphones and tablets going forward.


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