About the rumoured Samsung finger print sensor:
SamMobile claims that as you swipe over the sensor, a “real-time image of your fingerprint” appears on the display. Contrast that to the iPhone 5S, which doesn’t store actual fingerprint images on the device, and you’d think privacy advocates and grandstanding lawmakers would get more riled up with Samsung than they did with Apple. (They probably won’t.)
How many stories in the tech press have you read over the past year which posited a theory of Apple being in trouble? Tens – probably hundreds of articles have appeared which put forward the idea that Apple’s needed to move the iPhone downmarket and create a cheaper version to gain market share. Failure to do this means doom.
So let’s take a look at a company which has followed exactly this plan, competing at every level of the smartphone market from cheap devices for the masses through to expensive, high-end phones: Samsung.
Samsung’s earnings are out, and they’re not pretty:
“Earnings will remain stagnant this year as the explosive growth of the past two to three years seems to have ended,” said Lee Sun Tae, a Seoul-based analyst at NH Investment & Securities Co. “Although the lower-end smartphone market will continue to grow, the scale of profit from that segment doesn’t compare to the high-end market so the growth seems limited.”
Samsung’s problem is simple: at the low end it is being squeezed out of existence by low-name and no-name Chinese manufacturers, all happy to stick “good enough” Android on their phones with no costly extra software. Although the company has tried to differentiate its products by value-ended extras and services, for price-conscious consumers these are meaningless or, in some cases, a turn-off.
At the high end, it is being squeezed by Apple, which has proved it can compete in any market.
If you want to make a comparison to the PC market, Samsung is like IBM was: a “quality brand” producing products which aren’t sufficiently different from cheaper commodity players like Dell. In the smartphone market, for Dell read Lenovo or (long term) Xiaomi.
Is Samsung price fixing? The Washington Post certainly thinks so:
“That sentiment has intensified in recent years, a period during which Samsung has obstructed price-fixing investigations — drawing only minor fines — and seen its chairman indicted for financial crimes, only to receive a presidential pardon ‘in the national interest,’ as a government spokesman put it.”
Maybe Google should amend “Don’t be evil” to “Don’t be evil, but don’t be too choosy about what your partners get up to”.
The Economist gives a fantastic insight into what makes Samsung successful. Hint: it’s not being innovative in terms of technology:
Samsung’s successes come from spotting areas that are small but growing fast. Ideally the area should also be capital-intensive, making it harder for rivals to keep up. Samsung tiptoes into the technology to get familiar with it, then waits for its moment. It was when liquid-crystal displays grew to 40 inches in 2001 that Samsung took the dive and turned them into televisions. In flash memory, Samsung piled in when new technology made it possible to put a whole gigabyte on a chip.
When it pounces, the company floods the sector with cash. Moving into very high volume production as fast as possible not only gives it a price advantage over established firms, but also makes it a key customer for equipment makers. Those relationships help it stay on the leading edge from then on.
The strategy is shrewd. By buying technology rather than building it, Samsung assumes execution risk not innovation risk. It wins as a “fast follower”, slipstreaming in the wake of pioneers at a much larger scale of production. The heavy investment has in the past played to its ability to tap cheap financing from a banking sector that is friendly to big companies, thanks to implicit government guarantees much complained about by rivals elsewhere.
Now consider this in the context of how it’s worked in the smartphone market. “Fast follower”, indeed.
I’ve been using a Samsung Galaxy Tab 8.9 for a while, in addition to the iPad 2 that I regularly use. It’s a nice little piece of hardware – lighter than the iPad (as you’d expect from the smaller size), and with enough battery life and power to do plenty of stuff.
In common with almost all Android tablets, it runs Honeycomb rather than the latest Ice Cream Sandwich (ICS) version of Android. And, although Samsung have stated that it will be getting an update, it’s likely to be later rather than sooner – perhaps a few months. Of course, Android being Android, a bunch of hackers have already started on an “unofficial” port, and the beta of that has been enough to persuade me that ICS, while still behind iOS 5 in many ways, is a big step forward.
But the fact remains that Android tablets remain a long way behind the iPad in many other ways. There’s a lack of “showcase” applications, for one thing: the likes of GarageBand, which can sell an iPad in five minutes, simply don’t exist for Android. Then there’s the failure of tablet vendors to actually use ICS – amazingly, there are tablets which are still shipping using Android 2.3, which is as absurd an idea as Apple shipping a tablet with iOS 3.0.
So what should Google do? I have three suggestions.
Technology companies these days are scared to death to make a product that varies too far from Apple does because they fear being left behind. Some companies even go so far as to say that Apple’s inventions were inevitable — if that’s the case why weren’t they done before?
Indeed. Everything looks obvious in hindsight. And it’s fear that makes companies copy, rather than laziness or stupidity. It’s not that companies like Samsung are bad (I love Samsung TVs, for example), it’s simply that when you’re playing catch-up, sometimes the best first step simply to stay in the game is to copy what other people are doing, and rely on customers who want options. In the long run, it will hurt you: but when a company launches a product that creates or redefines an entire category, it’s better to stay in the game with a me-too product in the short term.