Can Samsung innovate?
If we’re not there yet, we are quickly approaching the Samsung Era in handheld electronics.
The Korean giant sells more mobile phones, and more smartphones, than any other company. It competes in all markets, from the high-end down, and is pouring its record profits into expansion and advertising. Samsung is now among the most valuable brands on the planet.
Samsung rose to prominence by out-grinding rivals in commodity markets, and it approaches phones and tablets the same way, by quickly pumping out handsets with incremental tweaks and improvements.
The question now is whether Samsung can innovate, if it can deliver the kind of totally new devices that rivals like Apple have.
There is no question about Samsung’s ability to compete in many markets at the same time. The company announced a new Galaxy Note tablet with an 8-inch display two weeks ago, and reports say its next Note smartphone will have a 6.4-inch screen.
This means that Samsung’s smartphones and tablets will probably soon come in one-inch intervals at every size from 4 to 11.6 inches. These are sold at various specs for different markets and price points, meaning the company has many dozens of devices in play around the world.
“They are literally competing in all segments at all times, even competing with Apple before a product comes out,” said Andrew Rassweiler, an analyst at IHS iSuppli. “Samsung has a horse in every race.”
And Samsung’s breadth has not come at the cost of its thoroughbreds. Its flagship Galaxy S line is the first to truly challenge the iPhone for dominance in high-end smartphones. It also revealed recently that it will soon unveil the Galaxy S IV, just 10 months after the S III was launched. The Galaxy S IV launch event will take place this Thursday.
The company is wildly profitable and successful. Recent data show that Samsung is easily the world’s dominant phone maker by units shipped and the global leader in smartphones. If you see a random person with an Android device, chances are it is a Samsung.
‘Speed is the key’
The company, however, has built this success directly on its history as a component maker, where it rose to prominence the same way. As Samsung Electronics was building momentum in the global mobile phone industry in 2004, then-CEO Jong-yong Yun expressed his feeling toward the devices in an interview:
“Speed is the key to all perishable commodities from sashimi to mobile phones. Even expensive fish becomes cheap in a day or two.”
For Samsung, phones are not the “revolutionary product” that Apple promised when it launched the first iPhone. The company does not aim, as Steve Jobs once said of Apple, to “make our hearts sing.”
Globally and in this article, “Samsung” refers to Samsung Electronics, the flagship firm of the Samsung Group, a massive chaebol, or Korean conglomerate, that runs everything from fashion brands to health care.
The group’s electronics unit was originally founded in 1969 to make appliances like refrigerators and TVs, and was eventually merged with its semiconductor business. DRAM is where Samsung had its first real international success—it started years behind rivals in the U.S. and Japan, but steadily outworked them, gaining ground with each chip generation until it took the technology lead in the early 1990s.
Long-time Samsung watchers say this intense focus on small, steady technical improvements is still the company’s core approach.
“Samsung never comes up with any new products. It improves it and comes up with the next generation of product—much better and much cheaper, and much faster,” said Sea-Jin Chang, a professor of business policy at the National University of Singapore, who wrote a book about the company’s emergence over now-struggling Sony.
“Samsung’s success comes from this DRAM experience, because it was the first business they actually made any money in,” he said.
The company’s consumer electronics are now its largest source of profit. But it is still the world’s dominant producer of components like NAND flash memory and DRAM, LCD screens and mobile processors.
Samsung still approaches both businesses the same way, Chang said. The “digital sashimi” philosophy holds across all of its product lines.