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What's next for Samsung?

What's next for Samsung?


The bigger you are...

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For the past few years, Samsung has been on top of the smartphone world, outselling Apple’s iPhone and besting everyone else by creating powerful phones with big screens and small prices. But now the Korean company is getting a taste of its own medicine as a variety of small Chinese manufacturers are starting to deliver even cheaper phones with no less impressive capabilities. The smartphone market can’t stop growing, but Samsung smartphone sales are actually falling — and while undercutting the competition on price is still a viable strategy, others are now doing it better.

The world’s biggest smartphone maker didn’t get there by accident. Having spent years toiling in the shadow of feature-phone leaders like Nokia and Sony Ericsson, Samsung’s mobile division rose to prominence at the turn of the decade by embracing the Android platform aggressively. The Korean company was early to the smartphone fight and more agile than most. While Nokia and BlackBerry were ponderously trying to evolve their outdated software, Samsung was focused on just cramming the highest specs inside the cheapest phone. It wasn’t pretty, extraordinarily well made, or in any way original, but a Samsung Galaxy phone was assured to give you the most for your money.

A vast, integrated supply chain can be a double-edged sword

The problem of slumping sales for Samsung should not be underestimated. This may be a company that makes everything from oceanic drilling rigs to kitchen sinks, but more than half of its operating profit comes from its mobile business. And while a vertically integrated supply chain gives Samsung the advantage of developing new and exclusive technologies, it also means that any loss of business is felt multiple times over. Samsung Display depends on assured demand from Samsung Mobile, and when one falters, the other feels the pain too. There’s no better example of how quickly things can unravel for a dominant company than Nokia’s experience since the turn of the century. Having once grown to accommodate demand for hundreds of millions of phones per year, the Finnish company had to be painfully dismantled when its Symbian and Maemo platforms were devastated by Android’s ascendancy.

It’s obvious that Samsung’s growth couldn’t continue indefinitely, but what’s happening at the moment is that people are replacing Samsung devices with cheaper alternatives. According to the latest IDC figures, Huawei has doubled its smartphone shipments over the past year, Lenovo has risen dramatically, and a further dozen Chinese companies like Mi are in with a chance of making it into the top five vendors in the world. Samsung should be nervous.

There are numerous reasons for Samsung’s recent stagnation. One is that the old spec race has basically run its course. In the days when the Galaxy S II was fighting it out against the HTC Sensation, Samsung could tout the fastest processor, nicest display, and best camera around, but now all of those specifications have generally plateaued. Samsung’s octa-core processor offers little to compel a buyer that might consider a less overpowered phone. And the greatness of Super AMOLED displays has been matched and even surpassed by IPS LCD screens. Samsung’s old technological edge has been dulled, its pricing advantage has been dispelled, and now the company’s left with trying to convince people it’s worth their time through software and design.

The spec war’s over and Samsung has no peacetime plan

To its credit, Samsung’s leadership has shown no lack of foresight. The company has made constant and repeated efforts to make its Tizen (once known as Bada) software a viable platform to compete with Android. Knowing the importance of having something unique to keep users engaged, it’s built up its own app store, partnered with the likes of Amazon for Galaxy-exclusive Kindle offers, and built a comprehensive suite of tweaks and additions to the basic Android OS running on its phones.

The problem has been execution. The Samsung UI that was once known as TouchWiz has earned derision for being bloated, bloopy, and unintuitive, while the subscription-based Samsung Music Hub was recently shuttered due to lack of user interest. Ironically, Samsung’s now struggling with the same sort of software issues that gave it the opportunity to become a leading phone manufacturer in the first place.

The outlook isn’t much rosier when it comes to design. Samsung’s last three Galaxy S flagship phones have all come in for criticism for their cheap, plasticky feel and fake metal aesthetics. The latest S5, in particular, has been the butt of a recurring Band-Aid joke, owing to the dimpled pattern on its back. Samsung tries incredibly hard to be a design leader — both in software and hardware — but the real world rewards results rather than aspirations, and the company’s products have struggled to cross a threshold of excellence that would inspire loyalty and delight among its user base.

More than anything, Samsung’s issue is one of brand loyalty. The company has poured billions into marketing itself as Apple’s equal, but it has never achieved the depth of affection that its Cupertino rival commands. Samsung has sought to be the pragmatic rather than aspirational choice: pay less, get more. That works only so long as Samsung is indeed winning on price or specs, but when one starts to be undercut by competitors and the other ceases to be quite so important, the vast number of current Samsung users and the company’s incredible manufacturing capabilities start to become irrelevant. They mean nothing to a person looking to buy his or her next phone.

These problems aren’t new, they’ve just been patched over by growing sales

The failure to properly address the two critical issues of software and industrial design is starting to catch up with Samsung monetarily, but there’s still plenty of time to correct course. The evolution of the company’s Gear smartwatches from the experimental and thoroughly flawed Galaxy Gear a year ago to the much-improved Gear Live today shows a company learning quickly from its mistakes. The Gear Fit is a brilliant use of Samsung’s curved AMOLED display, though its software still needs a lot of work. The agile and aggressive Samsung of old is still around, channeling its efforts toward wearables, but it might be time to bring that same attitude back to smartphones as well. If Samsung were to learn — not copy — from its competitors like the all-aluminum HTC One or brilliantly ergonomic Moto X, it could finally start living up to the haughty claims in its pervasive ads and promotions.

Mobile chief J.K. Shin has promised that at least one new phone this year will be made of "new materials," offering hope that Samsung is finally ready to stop emulating leather and metal and start actually using premium materials in its phones. Samsung has always been able to build phones that sell well on paper and on store shelves, but to engender the sort of customer loyalty that won’t evaporate with the merest hint of price competition, it needs to give us the complete package: an uncompromised phone that can outsell the iPhone because it truly is better.