What next, Samsung?

I received a few questions from Shirley Siluk of NewsFactor as a follow-up to my post on the trajectory of successful companies.

1. Do you foresee any hope for a turnaround for Samsung? If so, where do its best opportunities lie?

Screen Shot 2014-10-13 at 1.44.54 PM

The smartphone business was a huge opportunity for Samsung and they took full advantage of it. Unfortunately, it’s a difficult business to stay on top of. The list of victims in that industry is quite long and there have been no long-term winners. Samsung’s operating model seems to be to invest as a ‘fast follower’ filling in the market after it’s established while leveraging capital intensive components synergies. That has also worked for them in consumer electronics (at the expense of Sony and other Japanese vendors). If the modus operandi does not change then their turnaround will depend on the creation of new opportunities/categories. Wearables may be such an opportunity but it may not be as big as the phone business.[1]

2. What has contributed most to Samsung’s decline? Which competitors are posing the greatest threat?

The fast follower strategy belies its own limitations: it implies a transience or impermanence in strategy. In a fast follower strategy it’s only a matter of time before late followers eat into the business, similar to the way that the fast follower ate into the innovator. Chinese vendors are poised to take more share. The way I said it in 2011 was that I saw in Huawei[2] what Samsung was five years earlier. It’s easier for the low-end providers to move up-market and not at all easy (in terms of loss of margin) for the higher end to move down.

3. You mentioned the pattern of commoditization in all of Samsung’s markets — what would be the best way around this?

Commoditization is largely unavoidable. The way to survive as a business is to ensure you create new businesses or solve new problems. One hope that springs eternal is that through a “brand” a maker can ensure long-term margin survival. That did not help Nokia, Sony, or Microsoft. Brand is only valuable if it carries meaning and often that meaning becomes a fading product. So the short answer is that Samsung needs to create new categories or businesses. The challenge for them is that they need to control the platform and service infrastructure. These are currently out of their control and I’m not quite sure how they can regain that control.

I was wondering if you had any followup comments you could offer about Samsung in light of the announcement today that it’s developed a faster 60 GHz wifi technology — do you think this kind of technology, if it’s everything Samsung says it is, could provide the kind of corporate turnaround momentum Samsung needs?

Certainly not. This is a sustaining improvement in a technology. What Samsung needs is a disruptive improvement. A disruptive improvement implies a new business model. Put another way, it means that Samsung needs to invent a new way of making money.

Postscript: One problem with this prescription is that it’s considered impossible to execute and those who try to operate as repeatable innovation companies are punished with deep discounts and condemned as being “hits driven” rather than annuities. Woe befalls the manager who seeks this route.

  1. The graph shows estimates of smartphone shipments for a select number of vendors. []
  2. I did not anticipate the Xiaomi and Lenovo entrants which are also doing very well. []
  • Jacob

    Who is “others” in this chart?

    • r.d

      others are no name company used
      by IDC and Gartners of the world
      to back fill shipment numbers to match the growth
      until it is revised late on so they can get paid by the industry
      for no causing a panic.

      • mleybo

        No, I think “Others” is all the other vendors (Xiomi, MS, Blackberry et al) combined, to show they have now, combined, equaled Samsung.

      • Ac88

        Xiomi, BlackBerry and Microsoft are already listed separately on the chart.

      • r00fus

        That’s what I had thought as well, but that doesn’t add up – if you add up all the others, they are much more than “Others” is showing – I eyeballed it on the chart and it looked 100m+ ish for all non-Apple, non-Samsung vendors.

      • Others, by definition, does not include any of the listed companies.

    • KirkBurgess

      “Others” are the hundreds of emerging market vendors making smartphones with off the shelf parts from the Shenzen component suppliers.

  • r.d

    Samsung has to copy Apple, Google and Qualcomm aside from that
    they can

    1. Extract fees from H265 patents.
    2. 3D SSD at half the current price
    3. HMC (3D Memory)
    4. Flexible Display aka Quantum Dot / OLEDs
    5. develop 5G before anyone else and hide the patents from standardization.
    6. Make the Yen more expensive so Korea is competitive once again.

    • wei

      re: number 5, are you talking about trying to do what Rambus did?

    • Paul Franceus

      I don’t think any of those things will be as profitable as the smartphone business, so you are arguing for them to shrink.

      5 is probably a non-starter unless Samsung also deploys their own proprietary phone network too. The carriers will never go along with that.

      • r.d

        Do you understand standardization works.
        Companies come together and agree on certain
        tech to include in the next generation after LTE.

        How did Samsung get so many H265 patents when it was a no show for H264.

        Nokia and Qualcomm have played this game forever.

      • Paul Franceus

        I’ve been on several standards committees- ANSI X3T9.5 and T1X1.1, so yeah. But if they put their technology into a standard they are required to license it to all

      • handleym

        The point is not that Samsung can make money from h.265 or phone profits, it’s that the money is limited. So Samsung will make, let’s be crazy optimistic, $5 from patents from every cell phone sold on earth. So maybe $15 billion. That’s nice, easy money. But it’s not iPhone level money.

        Basically the money available in patents is limited by the “patent cost” people are willing to pay at the absolute cheapest level of phones. There is no way to impose any sort of customer segmentation to get the rich to pay a LOT more for slightly better.

    • Walt French

      “6. Make the Yen more expensive so Korea is competitive once again.”

      That’s a pretty big market for Samsung, even, to corner and manipulate. Point 5 is impossible; #1 is almost as unrealistic.

      The other points aren’t quite as impossible, but they are well-removed from the current smartphone value stack. In displays, for example, Samsung has had a couple of years with the brightest, most colorful and highest-resolution displays, for example, but the displays on the iPhone6 are approximately just as excellent—with different strengths and few weaknesses. Those displays will continue to be valuable in markets that can afford the best, but will have to go low-margin if they are to protect volumes. And they won’t protect Samsung against bleeding market share to Apple.

      There is approximately *ONE* initiative of Samsung’s that could have disrupted the current smartphone market. But Samsung was unwilling to disrupt its own very profitable business with its Tizen initiative.

  • def4

    Exactly right.
    Samsung desperately needs to see Apple innovate so they can have something to follow. All that wailing and gnashing of teeth about Apple’s supposed lack of innovation during the last couple of years was all about this.

    It was easy for anyone with a bit of empathy and who was paying attention that Apple would take extra steps to try to make any new product or service harder to copy.
    Patents have proven as useful as the paper they are printed on, so I expected Apple to take even longer to release a new category of products because making them harder to copy has most likely become one the product design goals.

    • Sic Transit Gloria Mundi

      given that the smartphone wars started the moment Apple asked Samsung to ‘build us a few million of these’, I expect you’re exactly right.
      and of course there’s a whole ‘net full of trolls who squarely blame Apple for this, entirely ignorant of what are essential business practices – such as suing for breach of contract

      • Just like Sony, who entered the laptop industry after Apple contracted them to make the Powerbook 100 back in the day.

    • Steven Thomas

      Very true. You frequently hear Cook or Ive saying something to the effect that, “We could have done such-and-such a long time ago.” When hard-to-copy becomes one of the design objectives, the timeline becomes that much longer.

    • font9a

      >> It was easy for anyone with a bit of empathy and who was paying attention that Apple would take extra steps to try to make any new product or service harder to copy.

      I think this is because *new* product and services that are inherently and purely for customer benefit, rather that corporate self-interest or advertisers’ interests are diametric to Android goals.

    • pk_de_cville

      “because making them harder to copy has most likely become one the product design goals.”

      Authentec (Touch ID), Secure Enclave, aPay all fit into the Set ‘harder to copy’.

  • Samsung, and Panasonic, Sony, can go either high end in consumer electronics, but computing, or they could try accessory route for computing devices. Samsung has nice high end in TV sets, Sony is good in cameras(with its A7 models starting to eat Nikon and Canon). Apple is prepared to defend its ecosystem of accessories using Healthkit and Homekit, but there may be some cracks.
    If any of these companies can achieve majority in Health&Homekits devices – an ecosystem, it could go into next generation of computing device – glasses, earlier than Apple(but end may be the same: smartwatch vs Apple Watch).

    (off topic, but related)
    There are three things interesting about a watch:
    – context Live Tile
    – it could grow like a Note
    – people more familiar with computing devices they wear (by that, glasses will be less stressful)

    • trashbat

      The issue is that a lot of people have ditched watches, so it is virtually a new device. Similarly, Google Glass is competing with laser eye surgery – or at least, cheap contact lenses. I think the smartwatch will be a hit, but it’s going to be more like a PDA, or earlier models of Blackberry – loved by those who have them, but not really having the universal value of a smartphone. Home, Car and Health strike me as the bigger game, a place where someone could step up and lead – but where every player is wary of handing a lead to either Apple or Google.

      • Space Gorilla

        I wonder about the whole “people don’t wear watches” thing. Just this morning I saw an ad for LeapBand, a smartwatch type device for kids, and two days ago I saw a teenage girl wearing a watch, metal band, square face, not an Apple Watch, just a watch. It was ‘cool’ now. I was quite surprised. But I should also note that most of the wealthier folks I know, business clients and the like, do wear large expensive watches. If memory serves, there was never a period of time when they didn’t wear watches. Fashionable watches have also been well featured in many recent hit TV shows over the past year or so. Is it possible Apple was actually right with the trend, even a step ahead?

    • handleym

      Home is only interesting as an interoperating system. Look at Home today. There are dozens of products, but few sales and no hits, because it’s the freaking Wild West. Every product uses a different connection standard, every vendor fondly imagines THEIR hub is the one that everyone will buy, the software is an utter crapshoot, no-one trusts that some company you’ve never heard of that was making doors or motion sensors two years ago knows enough about computer security to trust with your cameras and locks, etc etc.

      Homekit helps insofar as it lays down some standards: THESE are the wireless specs you will use, THIS is how you will do security and the cloud, THIS is how you will provide a hub, etc. Is it enough? I think it’s too early to say. We seem to still be in the stage where these previous vendors are under the delusion that they can strike it rich on their own rather than subordinating themselves to Apple’s vision and control.
      Same with Health; Auto is a little more advanced, perhaps because everyone in that space is a little more realistic about the size of the gap between their previous offerings and what Apple provides.

      In this context, I don’t see what Samsung (or Panasonic, or Sony) provide that gives them outsized profits. I might buy a Samsung BT connected scale, or a Sony home security camera, but I am buying those on the strength of their connection to Homekit, and otherwise as commodities. I certainly am NOT buying them with a willingness to pay 50% extra for some extra Sony or Samsung software/cloud connectivity that does NOT utilize the Apple connection. And this is not just on the Apple side. Google and MS will soon enough provide their Homekits, and once again users of those ecosystems will want a GOOGLE-HEALTH connected Scale, not a SAMSUNG-HEALTH connected scale, an MS-HOME connected camera, not a SONY-HOME connected camera.

      • It is true, home automation is in state of balcanization now. Current manufacturers won’t have a choice, really, if they not join Apple, smaller manufacturers without resources for an app, can take advantage of Home/HealthKits and gain market share.

        MS, and Google have little or no experience in consumer electronics, which, already is commoditized. At the same time Samsung has experience here, and weakness in services, cloud, which, in turn Apple offers to take care of using HomeKit. If Samsung could dominate this segment it could even try to use it, as a leverage, for its own computing device.

        While Home is very interesting because of Homekit. Apple Watch thanks to its glanceability offers more in: contacts * time/calendar * activity * location = context. We can imagine being on the street and thanks to local web we can get different information when we glance on watch. Outside is open for Samsung too(Siemens, and IBM as well). Imagine local ‘social network’: instead of leaving locks on a bridge, we can leave our stories(voice) there (+some selfies). Time + location can enable high quality, high pay per click ads related to restaurant, for example.

      • handleym

        Of course, like so much else (ahh, Apple, the company that can’t innovate!) Apple appears to be there, and ahead of everyone else, in some aspects of Outside.

        Just today, for the first time, I saw one of the features I’d read about for iOS8 but not experienced in real life happen — I was about to enter a Ralphs and, what do you know, the Ralphs app icon appeared, ready for immediate use, on my lock screen. This iBeacon stuff is taking off slowly but surely…
        Given what I saw, I’d like to think that one more thing I’ve long complained about, the inability to just find what you want in a supermarket (or other large store) is on track to being fixed (and with the constant reminder that “I don’t have this problem when I shop at Amazon”) — again by Apple.

  • mieswall

    Can you imagine how those graphs will look like in 2 more Q’s? 10m Iphone 6’s in a weekend; or, say, half of those 20m pre-sale China numbers turn into devices sold… What seemed impossible may turn into a reality: the peak of sales of Apple year after year could be actually accelerating instead of softening. The point would be: is Apple able to produce such a huge number of phones?
    If any commoditization is real in smartphones, it is not for Iphones. Plain justice.

  • Whilst it is all too easy to mock Samsung right now, we have to remember that it is a very successful company which simply repeated their own proven strategy (fast follow and then move up-market). Their strategy has worked very well for them in LCDs, semiconductors, refrigerators, TVs and much more. They have repeatedly crushed very strong competition in many markets, and they still retain healthy positions.

    The question is, why did their strategy when applied to smartphones work only temporarily? Why did it start to falter after only a few years at the top?

    Is it because Apple was a more formidable opponent than any that they found in other markets, that continued to innovate and never allowed Samsung to move sufficiently into the high-end?

    Is it because the smartphone market was so huge, profitable and rapidly growing that it attracted the full attention of the extremely powerful Chinese Shenzhen ecosystem?

    Or is it because unlike their other products, they did not own the full customer experience and could not differentiate themselves from low-end phones? Is it because they licensed the OS from Google?

    Steve Jobs once mentioned in I think an All Things D interview that the modularized PC market was the exception in consumer electronics. All other devices were integrated. Although Samsung may have found smartphones to be too hard a nut to crack for the long-term, it is still likely that they will remain a formidable force in other electronics markets. That is, if they can survive their failure in smartphones.

    • Sam

      I believe it is because they don’t own their customer experience.

      1. They don’t own a currently deployed software stack or ecosystem, ala Google, MS and Apple.

      2. They spent 10s of billions $ on marketing which they should have spent making themselves unique in software and/or ecosystem.

      3. They are currently just an OEM with price advantages through their ownership of manufacturing of the commodity parts of Phones.

      4. Compare the Windows world to the Android world. Samsung is like HP or Lenovo in the PC world where MS makes all the profits. As Google does in the Android world.

      The list could go on……

      Android OEMs got commodized in years while Wintel took 2 decades….

      • I mostly agree, but as you mention, Android OEMs got commoditized in a few years. That is amazingly fast. I don’t think it could have happened as fast without the rise of electronics in China.

        I’m sure that Samsung spent a lot of money on software development and they actually tried stuff like their own music service or app store. In that sense, they at least tried to be like what Xiaomi is right now. They tried but failed.

        For that matter, Microsoft, the largest software company in the world hasn’t had much success either. It’s obviously very hard unless you are in a country where Google is blocked.

        I don’t blame Samsung for any obvious mistakes. I think they tried the right things at the right time, but still couldn’t win. And the rapid rise of the Chinese meant that they didn’t have much time to pull it off anyway.

        The question for me is who can do it better and why.

      • RestfullBull

        > The question for me is who can do it better and why.

        Personally i don’t think there’s someone who started from scratch in 2007/2008 that could have competed with android and Google’s breathtaking pace, and already working os which had already few years in development. Maybe Apple could have done it, but since they built IOS on the basis of the mac OS ,it’s hard to see them with such bad opening conditions.

      • Yes, absolutely.

      • mjw149

        Low end phones were always commodities, that’s how markets work.

      • charly

        That the low end is a commodity is simply not true. The $15 mobile phone market is a duopoly between Samsung and Nokia.

      • charly

        CD players or DVD players were also commoditized very fast

      • I remember CD players coming to market in 1980 or maybe even before that. Commoditization happened at least a decade after that.

      • charly


      • I don’t see google making all profits in the Android world, on the contrary Samsung did all profits.
        Even Microsoft earned more from Android than Google did.

      • robertjpayne

        Google makes money indirectly. It’s impossible to know the value of the data mining that they do for targeted advertising.

      • Its difficult but not impossibile, horace wrote this one
        It seems that google is losing money on android if you count the money loss on motorola.

      • mjw149

        I don’t think Motorola should be counted that way. It was a one time loss and the sale was seemingly triggered by concessions from Samsung, which has future value that can’t be counted yet.

      • The sale was needed to acquire patents to defend Android, it should count as an Android expense.

      • I think the problem is, even Google may not have a good idea of the value of their data mining.

        Their investments, especially in the low-end may not be financially justified, but instead driven by their sense of mission.

        This isn’t a problem while they are a monopoly and still growing fast. It will be a problem when growth stalls or when a formidable competitor emerges.

      • Indeed!

      • font9a

        It may be that Microsoft actually makes more profit on Android than Google does – through patent licensing.

    • Ian Ollmann

      It is one thing to move into a moribund market, ape the leaders and then beat them with marketing and production know how. It is another thing to enter a market currently being actively overturned by a software takeover and attempt to beat the leader with hardware using a software platform you don’t own. They just attempted to compete on the wrong axis.

      Horace had this outcome pegged a few years ago. Samsung has no software moat. Perhaps if they had bought Palm, the outcome would have been different. However, it is quite likely that they, like HP, wouldn’t have known what to do with it.

      • Yes. But as you mention, Samsung didn’t have much of a choice. They didn’t have the resources to compete on the *right* axis either.

    • RestfullBull

      Very good possibilities. My guess:

      1. Even at the high end, android hardware doesn’t have a strong differentiation. In general the lack hardware differentiation is something that most of the electronics industry is struggling with(all the money is in software), and smartphones too. So it becomes a cost game – so it becomes a classic disruptive competition where newcomers have some extra advantages.

      2. Apple surely made things much tougher for Samsung, although if say apple didn’t exist and android still exited in it’s current form(Google+oem’s), Samsung’s fate was probably similar.
      3. Because android is customized, the user experience is unbundled and modular. In general , modular ecosystems always beat integrated manufacturers when it comes to time to market, or in it’s other name, innovation. This makes it very hard for oem’s to compete on user experience.

      • I agree. A few things to add on 1)

        About differentiation at the high end. What you say is definitely true. The thing is, according to Clay’s “law of conservation of attractive profits”, profits should now flow to adjacent layers in the value chain. However, it is questionable whether Google is an adjacent layer because their revenue model is very indirect, and their services are not necessarily the ones that are valued in low-income countries. In the software layer, Facebook looks better positioned. On the hardware component layer, companies like MediaTek are well positioned to profit, as well as maybe Samsung’s chip business. This will be interesting to observe.

      • RestfullBull

        I don’t think chips will make a lot of profit, because it’s a part of the commoditized electronics industry.

        On the other hand, the availability of affordable, good smartphones enables a huge amount of new business, facebook among them but also uber and many others , and they could be seen as taking the profits. And i wouldn’t count Google out of this – for example their maps data is a core enabling technology in their self driving car project – which might bring them lots of money.

      • Kizedek

        There could be money in chips, but the value moves up the chain from manufacturing to design. I think there have been a few articles, on Asymco I believe, in the last year or so about the moves Intel should or shouldn’t have made.

        For example, they saw production of their main desktop processor lines as their cash cow, and as something that would always have value. In a similar way that MS has always viewed Windows. So Intel sold their ARM interests/license/facility, I believe.

        However, as Apple has shown by investing in PA Semi, etc. the value can be in turning out new SoC and Computer on a Chip designs, and outsourcing the actual production, maybe owning some of the machines.

        So, Intel may have kept what is becoming commoditized, the things that can be duplicated by Tawain Semi and Samsung and others, and may have lost its edge to push forward in emerging industries like mobile, embedded and wearables.

      • mjw149

        It worked for Intel for two decades. I think it’s underrated as an approach for Samsung. Qualcomm has been very successful with the SoC piece, as well. Samsung is much better at iterating than innovating, so the pure building blocks piece makes a lot of sense for them. They can sell chips for chromebooks, for tablets, for phones and then wind down the phone business now that it’s less profitable. Just sell Notes on the high end and parts for everyone else. They can be the next Intel perhaps, they’re already #2 and #3 isn’t even close in chips. It would be painful and risky but so is phones right now. VZW just got their first Sony phone. Times are changing.

      • Yes. Qualcomm seems to be enjoying good growth and profits.

        Selling high-end chips can be very profitable.

        But I think they have to do better than the Exynos.

      • RestfullBull

        30% profits on something between $5-$30 per chip(i.e. phone) sold is good money definitely. But in the context of the phone industry , that’s not much of the vanished profit.

      • As far as I know, the Android OEM business hasn’t been very profitable except for Samsung to begin with.

      • handleym

        Samsung is in the same position as Microsoft now is in that, being large and integrated, it pays a constant strategy tax.
        If Samsung wants to sell CPUs to competitors, does it reserve the best CPUs for itself? In which case why would I, a competitor, want to play a game I cannot win? Better to buy from nV or QC.

        The logical thing, when you’re in this situation, is to create extremely strong boundaries between business units and do NOTHING to allow one business unit to help another. But history shows us this is pretty much impossible to sustain. The lure of “synergy” and the resultant win today always triumphs over the threat of lost sales tomorrow.

        You hit the same sort of problem, from a different angle, if you imagine that Samsung want to try going down the Apple full vertical path, with a Samsung designed SoC that has features (like Apple’s Secure Enclave, crypto, and probably a VM pages compress/decompress engine) that only work as part of deep OS support. Such chips are less appealing to sell to 3rd parties; but they are a whole lot less appealing in less than Apple volumes; but Samsung is in the business of shipping fifty phones, each with different SoCs, not a single phone with a single SoC which will provide enough internal volume.

        Basically “if you want to get to there, I wouldn’t start from here”…

      • Yes. That is the essence of the innovator’s dilemma.

        It’s interesting to contemplate on what Nokia eventually did. They jettisoned the phone business. Samsung is still not in such a bad position, but it might be wiser to do so earlier than later.

      • StevenDrost

        I agree, but only for a company which designs both the hardware and software. We all know the advantages Apple gets, but I would not say those apply to Qualcomm in the same way.

      • I’m sure there are may ways to look at Intel, but the way to look at it from “the law of attractive profits” is that as the PC industry became modular, the attractive profits shifted to the component makers. And Intel was the component maker with the strongest market position.

        In smartphones, the initial products were not “good enough” so a lot of integration (as opposed to modularization) was necessary. These are the strengths that both Apple and Samsung had. At least initially, Samsung had stronger integration in hardware. In this situation, ARM processors were ideal because they could be integrated with other chips with other functionalities.

        Now as Android smartphone production is being modularized, the power might shift to chip makers again. I’m not sure if Intel would be the beneficiary, but companies like MediaTek which provides the systems-on-a-chip for Android One seem to be having a profitable time.

      • charly

        Intel strength is not its chip design but being the best (and biggest) fab. Intel has some problems with the radio part so attacking smartdragon isn’t yet useful but as soon as that is good they will user their much better fab tech than Taiwan Semi, Samsung and others (i assume you see IBM as plural) to crush them.

      • Kizedek

        That’s rather the point. You can be the biggest and best… for awhile. They are biggest and best desktop class chip fab.

        When Mobile comes along and requires many more chips (at least one person on the planet), do you move in that direction, or decide that desktop chips are still more profitable for you?

        When others set up good-enough fabs to exploit the new markets, do you compete, or turn your experience to complimentary areas further up the chain: like designing and licensing custom SoCs?

        When processes evolve and producing chips/chipsets becomes something like “printing on demand”, do you continue to push large “print-runs” on your existing machines, or do you design and license a new generation of machines?

      • charly

        They have the best fab by far. It doesn’t matter if it is for Desktop CPU, Server, GPU, Tablet, smartphone or watch.

        Problem for Intel is that Qualcomm has a big advantage in the smartphone market because their radios are (much) better and patent licensing cost are lower for them.So the question is can Intel increase their radio quality fast enough (looking at GPU and the answer is no)

      • font9a

        So affordable, good smartphones are a loss leader that enable social businesses? These are huge businesses, yes: but they only exist by the complexities of trading human interactions for advertising dollars. Not sure Samsung has the ability to create a (social?) platform that can compete with google or Facebook to sell ads…

      • Affordable good PCs were a loss leader that enabled IBM, DELL and HP to maintain lucrative corporate IT businesses.

        Or in the consumer space, affordable good PCs were a loss leader to push crapware in our faces….

        A bit extreme maybe, but I think funny things may happen.

      • font9a

        This implies that that Samsung is just altruistically creating handsets for Facebook, Twitter, and WhatsApp — or that it intends to capitalize on its marketshare in the future to also sell eyeballs. Shaky, shaky ground we’re walking on now.

      • If you think PC OEMs were altruistically loading crapware on their devices, yes.

        In reality, the crapware owners were paying the OEMs money. Similar things are likely to happen either directly or indirectly in smartphones.

      • charly

        That is like saying TV sets only exist for tv ads (in a way that is true) but for most of TV existence TV set sales were (much) bigger than TV add sales

      • StevenDrost

        Yes, TVs generate more revenue, but ads generated much more profit.

      • charly

        I don’t even know if it is true that TV media produced more profit but media has much, much more power than their revenue should warrant.

      • Given the rapid change in the smartphone market, I don’t think that self-driving cars should be something to seriously consider. Unless Google can bring them to the worldwide market in about 5 years.

        I think it may be better to focus on a 5-year span at longest. 5 years ago, Samsung hadn’t even released the Galaxy S. It’s a long time ago.

        Maybe chips won’t make profit. But remember Intel make a lot of money while PCs in general were very commoditized.

        There is a lot to think about.

      • Space Gorilla

        I tend to think most people will want a self-driving car from a *car company*, you know, somebody with decades of experience building integrated vehicles.

      • Walt French

        I’ll note that your comment is quite akin to what people said about Apple entering the phone business.

        Perhaps a big difference is that Google appears to have no intention of actually producing cars.

      • charly

        Apple was forced into the phone business because their main product, ipod, was moments away from being killed by the mobile phone (dumb or smart)

      • Walt French

        Hmmm… Apple “forced” into the business that transformed it into the biggest company in the states, one that is fabulously more successful than the iconic iPod that paved the way, one that has made it fabulously profitable.

        The utter ignominy of being disrupted out of a ten-year old product!

        Any bright ideas how *I* could be similarly afflicted?

      • charly

        A flucht nach vorn can be extremely successful. See for example Samsung mobile phone division that had to become big in smartphone to survive or the horse coach builders that became very successful car makers.

        It was in 2008 (or even before the first ipod was sold) for anyone obvious that the mobile phone would eat the mp3 market as soon as flash would become cheap enough. It was at that time already standard for expensive phones to have a camera and be able to browse the net (crappy) so if Apple wanted to succeed it needed those features. Add OSX light (ios) and a touch screen. (probably an idea stolen from LG which came out first with the now standard smartphone format) and you have the iphone.

      • StevenDrost

        It seems that way now. At the time cell phones could play music stored on an SD card, but it was an awful experience. That was until Apple entered the business and dramatically changed the experience. Your “moments” would have taken a lot longer if Apple had not come out with a phone.

      • charly

        The best camera is the one you have with you as the say of mobile phone camera’s. The best mp3 player is also the one you have with you, aka your mobile phone in your hand has a better user experience than the ipod at home. The iphone did actually slow done the movement from mp3 players to mp3 playing mobile phones because they created a period of high flash prices.

      • StevenDrost

        They also don’t have a very good track record of entering new categories (profitably at least).

      • Space Gorilla

        I thought of that, yes. The difference of course is that Apple didn’t create a phone, they created a computer that fit in your pocket, and it happened to also make phone calls.

        Another factor is that Google is not a maker (or builder). Apple is a maker/builder. I think Apple probably could make a car if they chose to. It’s the experience in making things that matters. Google is an advertising company.

      • charly

        What if self-driving cars are electric. How much do “car companies” about those kinds of vehicles

      • Walt French

        Chevy, Toyota, Nissan, Tesla, others currently produce electric cars. Probably many more. Our 10-year-old Prius is of course largely electric; I’d say that’s a lot more practical experience than Google’s tech that needs every single stoplight put into a database.

      • charly

        Chevy & Toyota don’t sell electric cars. A Prius is a ICE car with electric help and a Volt is a hybrid between an ICE and an EV. ICE cars are completely different from EV and any practical experience with them is as useful as building horse coaches was for cars (in 1910 it was very useful, 1930 it wasn’t)

      • Space Gorilla

        As Walt already pointed out, lots of car companies have decades of experience working directly on or towards electric cars. In fact electric cars were invented in the late 1800s.

        But you bring up an interesting point. I’ve been a fan of Tesla for a long time, and it seems clear Tesla is working towards a cheap electric car strategy. They’ve already announced their next model with a price target of $35,000 (if I remember correctly). Add in a solar powered home charging station, plus some creative financing and Tesla could maybe get the cost of owning/operating a vehicle down to $300 or $400 per month. I would also assume some increase in range/battery over the next five years. Imagine paying $400 per month for your vehicle and *nothing else*, no fuel costs, hardly any service costs, this could be very disruptive. Then add in self-driving and it gets incredibly interesting.

      • charly

        There is a gigantic difference between a one off and mass produced electric cars. There are only four companies that have experience in mass produced electric cars, Tesla, Mitsubishi, BMW & Nissan and only BMW and Tesla have models who are really designed from the start to be electric. Also with cars iterative design is very important but the cars haven’t been on the road long enough for that to work.

        Tesla is a luxury brand. They would be idiotic to make sub $50k cars under the same brand. The smart way to do this is for Tesla to be taken over by one of the giant car makers to create an outlet for the technology in the cheaper electric cars.

        ps. I’m not talking about which stock owners will own most of the company but where the middle management will come from

      • Space Gorilla

        “There are only four companies that have experience in mass produced electric cars, Tesla, Mitsubishi, BMW & Nissan”

        This is false. Check your facts.

        “Tesla is a luxury brand. They would be idiotic to make sub $50k cars under the same brand.”

        Tesla has already announced the Model 3 with a price target of $35,000. This *already happened*. They expect it will go on sale in 2017.

      • charly

        If it is false than name names. (Chinese names excluded)

        $35k is still more than than a Cheap (but not cheapest) BMW or Mercedes. Tesla plan is also to be sold by then.

      • Space Gorilla

        Ford, GM, Chrysler, Toyota, Honda. Maybe you’re not old enough to remember the electric cars from the 1990s, which were soon squashed, but they did exist.

        “$35k is still more than than a Cheap”

        Well, you said Tesla would be “idiotic to make sub $50k cars under the same brand”. Now 35K is fine? You have to pick one story and stick to it.

        There’s nothing wrong with admitting you simply didn’t know Tesla had already announced the cheaper Model 3.

      • charly

        There is a big difference between mass produced and making a few. Ford, GM, Chrysler, Toyota and Honda never mass produced an electric car.

        35K entry is getting close to 50K in real off the lot model that is sold.

        ps. It is obvious that the model 3 is named so because it completes with the BMW 3 series

      • Space Gorilla

        You said “There is a gigantic difference between a one off and mass produced electric cars.”

        All those companies I mentioned did a lot more than “a one off”. And they all had electric vehicle development programs for decades as well. Of course you can wiggle out here by making up your own definition of “mass produced”.

        “35K entry is getting close to 50K in real off the lot model that is sold.”

        No, it isn’t. You’re reaching now in an effort to ‘not be wrong’. I’m sure you will be able to buy different levels of the Model 3 and perhaps the highest end one will be 50K, but that doesn’t change the fact that Tesla is targeting 35K as a price point.

        The important thing here is the financing and what Tesla could do at 35K plus a solar home charging package. Tesla could offer a monthly total operating cost that is very disruptive.

      • charly

        A good definition for mass produced auto. A thousand a year on a semi dedicated platform (so no electric Fiat 500 build by Magna but a Leaf or the first Tesla)

        Why a thousand. A thousand a year is when it make sense for car makers to not build a tube frame with fiberglass shell but in aluminum.

        My experience with cars. The lowest advertised car is not for sale and only on special order available. Your experience may be different but are they?

      • art hackett

        Only if they steal a working form from another party. Apart from maps and search (both important products), what have they actually made that is an earner? They bought youtoob which was a good marketing opportunity, but I’m sure they didn’t foresee the way it could develop into an alternative entertainment source, as they are killing it with forced advertising (obviously their fortè). The self driving cars are just another sideshow like glasses and the rest as there is no easy money in it unless they self drive to google clients.
        While their cable/fibre venture could be useful in disrupting the appalling US ISP system, they will drop it as soon as it fails to adequately monetise as they have demonstrated multiple times.

      • charly

        The money for Google in self driving cars is in more surf time.

        Fiber is something to spin off as a reliable but boring and unimportant money maker. If i owned double digits in Google i would invest in it as a way for my grandchildren to be rich

      • Tatil_S

        Chips are somewhat commoditized, but you can count the number of companies that can bundle together most parts of a smartphone with one hand. There is far more competition in the handset market.

      • charly

        I come to 7 + TI chip makers so it is slightly more than one hand. But there are dozens of smartphone makers not including the brands that buy from ODM’s

      • Tatil_S

        As far as I know, TI has left the mobile CPU, cellular and connectivity markets completely.

      • charly

        They have stopped designing but have they stopped selling their old wares?

      • StevenDrost

        Google is hardly the first company to work on huge complex problems like self driving cars. But, there is no business in it, not for a long time and even when self driving cars do hit the road there I’m not so sure Google will be able to capture the profits. It’s a long road from viable technology to marketable product. It’s a research project and it makes people feel better about the company, but it’s not something shareholders should focus on.

      • charly

        Google doesn’t need to capture direct profits from self driving cars. They just get their money back with that extra hour of surf time

      • charly

        OEM at the moment don’t sell to people but to networks. Networks don’t mind crapware but it should flow to their bottom line so i don’t see an OEM driven crapware explosion on mobiles.

      • OEM at the moment don’t sell to people but to networks.

        I’ve heard that the situation depends on country. There are countries where the Networks are not the major resellers of phones.

        Networks don’t mind crapware but it should flow to their bottom line

        I don’t see this as negatively affecting the proliferation of crapware. If anything, it might accelerate it.

        A lot of the crapware, at least on Android phones sold in Japan, is actually carrier related software and services. They try to sell you their own services, which are actually popular some of the time.

        Also, during the i-mode era (the high-spec Internet capable feature phones that were dominant in Japan before the iPhone), carriers heavily subsidized OEMs though artificially high prices paid for hardware. Even when the phones were given away for free to the end users. Basically, the commoditized OEMs were kept on life-support by the carriers. Instead, the OEMs had to do everything the carriers told them to.

        I think this suggests that the presence of carriers can actually accelerate crapware.

      • charly

        Crapware is something you don’t want. Carriers have a more intimate relationship with the user so the change that they will include something you don’t want is smaller. “Crapware” may also lead to OEMs wanting their end users to use their product longer

      • Carrier crapware is not a hypothesis. It is a reality that has existed for years in some form or other, at least in Japan.

        One common scheme has been to force you to sign-up for a service ($1-3/month) to be eligible for a certain discount.

        Carrier crapware already exists.

      • StevenDrost

        If you change the word profit to value I’m with you. The basis of competition is the software ecosystem. It’s hard to see how any Android OEM will be able to sustain a margin when they add little to the overall value of the product. In the long run this will hurt their ability to innovate. Arguably, we have already seen this play out in the PC space. Google itself is the hardware player to watch out for, just like Microsoft is in the PC space.

      • Yes.

        Slow innovation is a possibility, and I think we have to remember that it was Samsung that really pushed the envelope for Android. I’m particularly interested in seeing how Android 5.0 performs on 64-bit. If its bad, that would be a red flag.

      • charly

        But the change to 64bit is mostly a Google thing.

      • The combination of hardware and software is what makes Apple devices so good. Hardware-wise, the performance of the 64-bit Tegra K1 relative to Apple’s A8 is not yet known. GPU is also a factor. Software-wise, the effect of Androids ART runtime on real-world applications is not yet known. Neither are the 64-bit optimization on Android.

        We have to see the benchmarks on Nexus 9 as compared to this years or even last years iPad Air to get a clear picture.

      • charly

        But it is NVidia so i would expect great things from them graphically but cpu wish not so much. There was a reason they failed before

      • “(all the money is in software)”
        Curious that Apple is going in almost the opposite direction (at least for the time being)

      • RestfullBull

        Apple sells something different , in a totally different way(integrated software/hardware). In that market things just works differently than android.

      • HR PuffNSuff

        I keep trying to drill it down into people’s heads: Cell phones are not expensive to make. There is a huge amount of profit margin in the cellphone hardware market. Even the much derided low-end cellphone market is brimming with profit margin. I’d estimate the general markup of just about any smart phone in the US market to be between 150-400%.

        At the moment the value of a smartphone to a consumer is much much larger than the cost of it’s production. In effect all consumers of smart phones are ‘paying too much’.

        The problem with being an android OEM is there’s no residuals on the software, but all the money here is not in the software. Not by a long shot.

        Granted it’s better to be Apple and have the residual software sales and sales of high margin phones.

        It’s even better to be Google and say “Store’s open bring me business.”

        Or you can switch who’s doing better in the above situation depending on how much risk you like to apply…alot vs. zero.

        I guess what I was trying to say was: the cellphone game ain’t the PC game.

    • StevenDrost

      The mobile device market evolved fast because, it’s just a different form factor and OS of a computer. The industry was already in place, they just needed to retool.

      • That could be true. However smartphones rapidly moved far beyond what PCs ever were. For example, I’m not sure that rapid penetration in emerging markets with extremely low prices would have ever happened for PCs.

        Remember the one-laptop-per-child project which in some ways triggered the Netbook phenomenon? That’s kind of where the PC stopped. Tablets and smartphones have easily moved beyond that.

        So yes, smartphones benefitted from the PCs before them. However I think it’s still amazing that the market moved so fast.

    • charly

      TV/Video/Cable-box system was modularized and not even that high end sound systems are also modularized

  • RestfullBull

    What about Samsung doing something like Google-X ?

    They have companies in every industry – so they have the domain knowledge. They also have huge variety of technical capabilities. Considering that Google-X is only 250 very talented people, it seems possible they could arrange that.

    It will takes some time, but surely there are many great opportunities out there.

    • Walt French

      We have a friend with Parkinson’s, so I won’t minimize the social benefit of ALL Google[X] projects.

      But reading down the list, I am struck with how little ANY of the projects express Google’s competencies, values, etc. The glucose-sensing contact lens, for example, has been shopped around for many years, and I don’t see any evidence that Google has some special expertise in sensing (which remains problematic), communications (the issues for which are unlike all the other IoT ones) or marketing (which Google does superbly to a small group of tech aficionados but basically is set up to totally automate).

      I take Google[X] as part of the tech marketing that I mentioned. It helps enthusiasts feel good about a brand that exists to sell advertising.

      • I find it interesting every diabetic I know wares glasses and not contacts.

      • Tatil_S

        There are a lot of people whose insulin resistance makes them high risk for diabetics. They are told to watch their glucose levels multiple times a day, but they do not have to stop wearing contact lenses. Still, for most people, I’d think a patch or a watch might work better than contact lenses, but I do not have the budget of Google.

      • RestfullBull

        Who knows ? maybe they feel they have unique approach that nobody has yet to try – and their more risk tolerant than others ? Maybe they feel some of the research in the field has been neglected, and they’re willing to give it a go ? Maybe they have some unique search tools that allows them to connect the dots in new and surprising ways , together with their brilliant staff ?

        Couple that with enough capital and openness to collaborate with other companies, Maybe there’s a chance of a good result. Heck they seem to advance in their self driving cars and their balloons and drones reasonably well.

        And remember – Google-X is just an experiment in creating a new kind of corporate r&d lab. As all experiments , it can fail , or hopefully wildly succeed.

      • simon

        In the areas where Google actually really does have business advantages, including searching, data centers, and advertising, they aren’t collaborative.

        If anything the fact they are very public about Google X makes me think it more as a publicity stunt rather than a serious endeavor.

      • RestfullBull

        > the fact they are very public about Google X makes me think it more as a publicity stunt rather than a serious endeavor.

        That’s a good point , but:

        Publicity has 2 sides: the first is as a stunt ,in order to fool people.
        The second ,as a tool to attract/preserve talent(both through interesting/important work and as a tool to increase stock prices). And talent is key in this day and age.

        So there might be good reasons for the publicity(especially if you combine it with some for of patent protection, and i’m sure Google tries to do plenty of those).

        But beyond guessing motives , if we look at the wiki for project loon for example, it looks like a serious effort, with serious people working on it, interesting approaches, money being spent in field trials, work with regulators , etc. All this with relatively rapid time tables(as far as r&d goes). And those things don’t come cheap.

      • I take Google[X] as part of the tech marketing that I mentioned. It helps enthusiasts feel good about a brand that exists to sell advertising.


        Google-X is hardly the first ambitious research institute funded by a company that is making obscene profits. Xerox PARC immediately comes to mind, but there are many, many others. The problem is, they very rarely generate big profits from their research. Even when they are a bit more focused than Google-X.

        I actually view Google-X as a symptom of too much money and lack of focus.

      • StevenDrost

        Walt, typically agree with you, but I would argue the values point. Google is a company born out of a research project. To me, Google X is the distilled essence of Google. Financially, the company is even structured to give the founders the freedom to conduct experiments without being accountable to the shareholders. That’s not to say it’s good business and I won’t touch their stock.

    • art hackett

      Touch wiz is probably a good indicator.

  • Walt French

    Samsung is in a difficult bind, but one which many of its competitors would be happy to find themselves in.

    Samsung’s hardware expertise and ability to throw capital at initiatives brought it to a very strong position. If it cedes some of its high-volume, lower-priced business to others, and watches its higher-priced share stagnate or fall, it can still generate the only profits besides Apple’s.

    The formula seems likely to be about as effective in phones as it is in other consumer electronics where Samsung has perfectly respectable businesses. It seems the biggest shortcoming is in not utterly dominating the smartphone business — a future that, as Horace, Ben Thompson and others have long claimed, was never in the cards.

    • disposableidentity

      The mid- and high- end of Samsung’s range always had good margins, but it never really made them any significant money. As with the PC market, the mid- and high- end already has a dominant player with all of the market share — Apple.

      • Ravi

        That is because diabetics are prone to infections and are also more difficult to get rid of the infection. You do not want to take the risk of a corneal infection. Glasses has no risk so why bother?

      • howie__feltersnatch

        Ravi is a wizard

    • Tatil_S

      Assuming Samsung can keep the mid to high end business, will the management have the courage to cede the low end? If their volumes are not down, but revenue is falling so dramatically, that sounds like they are still chasing the low margin business unless this quarter is being affected by a fire sale to clear inventory.

      • charly

        low end business does not mean lower margins. Especially if the low end is just some light re-engineered high end model. Which is often the case with electronics.

      • Tatil_S

        I don’t know which field of electronics you are thinking of, but in this case, low end is low margin due to the robust competition and low differentiation. In perfectly competitive environments, prices converge to cost of production, so that fits the theory as well.

      • charly

        Chips is an obvious example, see for example NVidia but Apple and iPhones or Mercedes or Renault/Dacia are other examples of companies that use their old tech in their lower end

      • Tatil_S

        I meant to ask which field is “low end, but high margin” business.

      • charly

        Pay day loans

        problem with the low end is that it is bad for business to admit that the margins are high (more potential competitors, buyers hate high margins more than in the high end) so they are often hidden.

      • charly

        Samsung and Nokia are the only ones that make those very cheap, not even feature phone, mobile phones. With a duopoly i have no doubt that margins are health

    • I think the question is will the smartphone market behave like general consumer electronics products, or will it follow the trajectory of PCs.

      If it is the former, Samsung should continue to be profitable (margins may be low but still profitable). If it is the latter, then the outlook is much bleaker. PC vendors had a very, very hard time.

      Maybe a Porter Five-Forces analysis will give use a clearer idea (I haven’t done one yet).

      • charly

        There were two problems with the PC market.
        1. It was a loss leader for services/servers for IBM, HP, Compaq etc.
        2. No barrier to entry. Me and my screwdriver can make just as good a PC as Dell and even with laptops you find that they are mostly made by ODM’s

        There is also the question if PC makers belong to the manufacturing sector or the wholesale sector. There are big reasons to assume that they belong more to the latter.

      • Yes, exactly.

        And that’s the direction where I think the new low-end smartphone vendors are heading to.

        Smartphones may become loss-leaders for services. Xiaomi looks like an apt example.

        I’ve heard that an Indian smartphone brand called Kailash is actually a water heater & wet grinder company. Also in Japan, shopping center chains are starting to sell smartphones. Quite remarkable.

        I think that these are reasons to believe that the smartphone market will be even worse than the PC market.

      • charly

        PC’s could be made in bedrooms (did Dell start that way) so a wet grinder company is actually an improvement but 1 is definitely true why the smartphone market may be worse.

      • HR PuffNStuff

        Unlike the PC market there’s no real loss leader position in the android smart phone business. Google rules the services roost on droid and anything that isn’t the Play Store always feels cheap and dirty.

        Which is why I believe Samsung’s Tizen was even ever in development in the first place: to maintain profitability.

        As far as the phone market being even worse than the PC market… There’s no possibility. Cellphone components are so cheap it’s hard not to make money.

        Processors range in price from pennies to $35, screens $20-$50 and misc parts (camera’s GPS, whatever) $5-$100. Way-back-when I estimated the cost of an iPhone 5 to be $180 actual cost was $200 or something. Cellphone building is dirt cheap no matter what phone it is.

        The main problem with the PC market profits is actually wintel itself and their pricing. I said in another post the PC market is just waiting for competition to drop out before a resonable profit returns.

      • Cellphone components are so cheap it’s hard not to make money.

        That is simply not true. Motorola bleeds money. Sony bleeds money. Estimates suggest that the aggregate profits of the smartphone market minus Apple and Samsung are negative.

      • HR PuffNStuff

        Those aren’t the best examples to use at all…

        Motorola makes phones (and other products) no one uses or wants.

        Though I think that as far as user interface goes WP8 has the best…not that I use or really want a WP8. They suffer from many of the same issues that make me dislike iOS (locked down, lacking in functions) But obviously if your phones ain’t selling you ain’t makin’ money.

        That makes me wonder why MS and Motorola are divided on the above graph. It’s the same company. Maybe they are still doing business as Motorola? Meh. Or it could be Horace minimizing again for the sake of a graph. I don’t really mind either way though.

        Sony has been bleeding money for years. In fact everything Sony does seems to lose money. PCs, PS2, PS3, PS4, televisions. I’ve said it before and I’ll say it again I don’t think Sony has posted a profitable quarter this century.

        So yeah if you aren’t being successful in the market you aren’t making money big surprise.

        However, I’d imagine LG nets a steady trickle of money through the smart phone business since, like Samsung, it gets it’s LCDs at cost. Though Samsung has the added benefit of getting it’s SOCs at cost in many cases as well.

        HTC’s market share is dropping and they are still posting profits. They’ve sort of been forgotten really…

        Lenovo is probably posting profits on their junky crappy crap. Though Lenovo’s products don’t interest me at all. I think they’ll be the next Sony to be quite honest.

        Xiamoi phones are made for like $50-$75 and sold at a minimal markup IIRC…I read an article on them a long time ago when they were emerging… Whats important is they are making money…

        So really to me it seems like the ones not making the money are the ones really trying hard not to. But I’ll look into the net profits on cellphones being negative.

      • HR PuffNStuff

        Jeez for some reason I just completely confused Motorola with Nokia… WTF is wrong with me. I look like an ass now 🙁

        Point still stands Motorola still makes products no one uses or wants…

  • willo

    I am sure Samsung are investing billions upon billions of dollars into their own software driven ecosystem with Tizen. And if TouchWiz is anything to go by, the future is not looking very bright. When it comes to hardware, Apple is beating Samsung. When it comes to software, Apple is years and years ahead of anything about to come out of Samsung.

    • orthorim

      Yeah I think the last week was scary for Samsung. Apple is doing all those things that Samsung would love to do, but is years and years away from being able to do.
      The funny thing is nobody stopped Samsung from thinking about health and home before – home in particular is already full of Samsung devices. But they just don’t have the ideas.
      Apple, on the other hand, keeps going like a steam train, tightening the screws, ever increasing integration with everything. If you use HealthKit, and Apple’s health app, you’re never going to leave the Apple ecosystem again. Everything they do is like that – adding more and more ties that keep people in – voluntarily, with great features that are in themselves not revolutionary, but that are good enough that you’d miss them if you switched.

      The Apple difference is that Apple knows how to play the platform game. Samsung has no clue (and also doesn’t own the software so even if they wanted to, they couldn’t).

      Recently lost my iPhone to a water incident and spent a month on Android – the number of services and apps I missed was amazing. I couldn’t wait to get back on iOS. Nothing like a forced Android vacation to see how tight integration already is.

      • charly

        Healthkit is only interesting for old people and a small fraction (10% or so) of the not old.

        Homekit has to deal with long replacement cycles and the fact that any successful version of homekit (Apple’s, Google, Microsoft or Samsung) will be ported Sailfish (or any OS that is more successful)

        An Android user would probably say the same.

  • Comment Zilla

    Samsung has no focus. Its there culture. I doubt they are suddenly going to change.

    • orthorim

      I see how they can innovate in hardware and manufacturing. Make the thinnest, best screens (they seem to be doing that already), best integration, things like that.
      They don’t own the software layer but they’re not going to be able to fix that problem. Companies with much more experience in software design have been left in the dust by the pace of development in Android and iOS – Blackberry, Microsoft, Nokia to name a few. Firefox OS also – lagging.

      And you can’t sell a device that’s “a little worse” than others. That’ll sell zero, or near zero. That’s why Windows phone don’t pick up volume, defying all the marketing and distribution efforts.

      So Samsung isn’t going to make better software. They can still manufacture and distribute like nobodies business. iPhone cannot be for everyone, Samsung will (try and) pick up the rest.

      • charly

        Firefox OS purpose is more a write once deploy everywhere layer (even if everywhere is just Android) than be a successful OS.

  • Samsung’s stock is trading at 1.1 x tangible book, historically a low
    valuation. As Warren Buffett has repeated repeatedly, sometimes Mr
    Market bears gifts.

    • GlennC777

      Sometimes Mr. Market’s gifts are turds. Companies on the way down can destroy value with immense speed.

      I’m not saying this will happen to Samsung. But depending on how it’s accounted for its capital investments related to phone manufacturing, large write-downs and accounting charges due to under-utilized production capacity would not be out of the question. There goes your book value.

  • this holds true for Apple as well:

    “Commoditization is largely unavoidable. The way to survive as a business
    is to ensure you create new businesses or solve new problems. One hope
    that springs eternal is that through a “brand” a maker can ensure
    long-term margin survival.”

    • GlennC777

      Your point doesn’t seem to have much of a point to it. The whole idea is that Apple is differentiated at the high end through continuing solutions to new problems, among other things.

    • StevenDrost

      Nope. He was referring to the fast follower strategy. Apple makes a device differentiated through software. Your product won’t become a commodity when you are the only one who makes it.

      • charly

        But the years of IOS leading Android are long gone. It now seems more the other way round with new things in IOS being more inspired by Android than new things in Android being inspired by IOS

      • StevenDrost

        I would remind you that Google just released an OS which supports 64bit CPUs and is focused on “unifying design”. They also just released a tablet with 2048×1536 resolution, which comes in white, black and gold. I would say that copying goes both ways.

      • charly

        64bit is not copying but natural progression but you are right, copying goes both ways and that is good

      • StevenDrost

        True, the only thing Apple has done is pushed up the time frame for 64bit. It’s strange Google put a 64bit chip in the tablet and not the Nexus 6 phone. Still Nexus 6 is my Android phone of choice for the moment. What’s your take?

      • charly

        Tablets can use more power so using 4GB of memory happens

        here first. They also have less hardware (no mobile phone/network) so a smaller target to port. That is my excuse for why the tablet first

      • StevenDrost

        Neither of those really stand up it only has 2GBs of ram and will be available with LTE. From what I’m reading the Nvidia ‘s 64 bit Project Denver looks like the only CPU that can benchmark even cloase to Apple’s A series chips, but it’s power consumption and thermals are too high for a phone. It’s still on 28nm, but I would expect flagship Android phones to be running 64 bit SOCs within a year.

      • charly

        I did not say this tablet will have 4GB but that tablet is general will have more memory than phones because they have less battery/thermal issues and that phones/tablet will have more memory in the future just because of normal way of the world.

        Has NVidia a good radio or is that really the reason why they are not in phones.

      • Walt French

        nVidia has staked out graphics as its area of expertise, and neither of the two top contenders for video/gaming quality are interested.

        I don’t know how much of nVidia’s dropped balls are more appropriately blamed on its partners. The Tegra line designed with Flash-specific optimizations, but Adobe apparently never had a decent code base that worked on mobiles. (An instance of Flash on my Mac took up more memory than half the total memory of early iPhones, plus it chewed up a lot of my Mac’s GPU — both impossible on an iPhone, plus the code was apparently too buggy to get running reliably.)

        And nVidia’s problem with WinRT seems mostly that Microsoft never built a market for it; still, that was a big effort that came to nought.

        The new Tegra line benchmarks VERY well (if not always the best) but increasingly even chips need an “ecosystem” of drivers, graphics libraries, etc, that fit for a given product. Without a high-end market, and without optimization for low-cost markets, it seems to me that nVidia is a bit screwed. Yes, in part by their own, unfortunate choices.

      • HR PuffNStuff

        Nvidia, as far as the SOC market is concerned is dead anyway. They’ve been busted benching their products in non real life situations. Qualcomm is bee’s knee’s these days. Tegra 4 was a mess… So was Tegra 3 actually…

        They need to leave the SOC market or retool everything including their marketing approach. Meaning project Denver is probably another Nvidia scam job.

        Believe it or not, as far as SOCs are concerned Intel is the one to watch. Their SOCs smash a lot of the competition.

        PS Adobe is on my s-list too. The Crash Player needs to die a horrible death, and Adobe’s coders must be executed in a horrible fashion.

        PPS Windows RT is dead now if people weren’t aware.

        Just putting my two cents in and comments are directed at the thread only.

  • “…invent a new way of making money.”


  • from Barron’s this week (on Samsung):

    ““The semiconductor division and the cash are worth more than the current market cap,” says Mark Newman, an analyst with Bernstein Research. “That means investors are getting for free the world’s largest maker of handsets, the leading display business, and the biggest and most profitable TV producer.”

    • coherence

      Thank you for writing all these reactionary posts separately rather than as one coherent reply.

  • Nick

    Actually – all the spotlight have been on Samsung these past few weeks. But have we looked at how the other Android OEMs are doing?
    If the general trend and iPhone 6’s release managed to cause a considerable dent (downplaying it a bit, i know) on Samsung’s overall well being – then what of HTC, Sony, LG and the likes fare not to mention with XiaoMi and Huawei’s far reaching encroachment. Its possible that Samsung might still come out ahead amongst in a field of ash. (by ahead i mean behind apple in profits but still ahead of the rest of the ‘market’)
    And if i were to treat it like a zero sum game – does this mean that Samsung will now have to share a lot of its profits with XM and HW?

  • victor

    Hi horace,
    Great comments as always. I do agree that innovation could be a path to salvation for samsung and i agree that it would be hard since they do not own the software layer. But i would add another path: Strategy.
    Apple and Samsung, because of their high integration (apple more then samsung) were ahead of the productivity frontier, doing better phones that no one could emulate, but modularizarion came and now everyone is on the same frontier, everyone is able to emulate those phones. When everybody is on the same frontier the game changes, its about strategy, its about exploring trade-offs on the frontier, otherwise profitability will erode. They must segment the market (find a specific job and circunstance that smartphones could fullfill), commit to this segment making trade-offs on a unique value proposition (fullfilling the job to be done would need then to redesign the hardware, redesign the chip, etc.) so whenever people find themselves on that circunstance of their lives they would have samsung as the unique proposition. It would restablish their profitability. Apple did it, they have found a position they made all the trade-offs needed and that makes then able to suatain

    • StevenDrost

      But, Samsung tried this. They tried every size, they tried the stylus, they tried putting their own skin, services and software features. Your strategy boils down to find some profitable niche… great … what do you have in mind?

      • charly

        There is also the size problem. Samsung is so big that it doesn’t need one niche but a dozen.

      • victor

        Right! everybody is trying but focused on product or demographics what wont let them find real differentiation. just to clarify, what i am saying is much different from a “niche” its circunstance based segmentation so strategy is about exploring trade-offs focusing on a specific job and circunstance in people’s lives. If everybody finds themselves in that circunstance so the “niche” would be everyone. Additionaly to focusing in a different job to be done they could even choose the same job but integrate around it in order to eliminate the pain points and provide a unique experience.
        I do have in mind some solutions and i am sure that they would find theirs if they look beyond hardware and software!

      • charly

        Samsung didn’t try Padfone style systems or what Motorola tried were you could hook it up to a screen. In my opinion there is where the money is if you can make it a success. Apple is trying this with the new version of OSX but i think their system is to expensive

      • StevenDrost

        But, Motorola did not do very well with that design. It might have been early as office was not out yet for mobile. Having used both Google Docs and the IWork suite, i can’t see why most people pay for Office (and I’m a power user). But most people still want to work on a laptop, the one device to rule them all theory is early. Also, it’s the same space occupied by a tablet with a keyboard case. Even that’s is a tiny market compared to the number of people who just need a phone and can deal with the onscreen keyboard. This is a small market, Samsung needs a market which can replace half the smartphones on earth, a docking station won’t get them there.

      • charly

        A smartphone that can be plugged in a 15″ laptop shapped docking station is not in the same space as a tablet with keyboard case. Neither is a 25″ screen + real keyboard & mouse.

        Problem for Samsung (and Apple) is that it is unlikely that the number of consumers will grow anywhere near the average price drop. The docking station is the only way to up the average price for more than a year. It is also why SAMSUNG (& Apple) NEEDS 60GHz. It allows an WinTel-less office by supplying a better office environment than Wintel.

      • StevenDrost

        But, Apple has not seen their ASP drop significantly since the original IPhone was introduced, in fact it will actually rise this year.
        The docking station won’t work, because you are basically adding PC functionality to the smartphone. There is a reason the PC market is so much smaller than mobile, most people don’t need it. Samsung needs a market like Smart phones which everyone on the planet needs.

      • charly

        If you sell 4S 8GB for less than €250 excluding tax than i don’t see how ASP can’t drop but i could be wrong.

        PC market is smaller than the smartphone market not because the user base is smaller but because user share a PC and not a smartphone and a PC has a much longer life

        Problem for Samsung is that the consumer market for smartphones will see a massive drop in ASP, a normal market share distribution (read Samsung as the biggest will have 30%), not a massive growth in sales and may even experience an increase in the usable life of mobile phones. In short the boom in smartphones is over.

        PS. PC (and in this case i would even ipads with a keyboard) do have a smaller user base than mobiles but that group isn’t that much smaller. But it is a group that can spend a lot more if it shows up in an increase in productivity. Besides Samsung is leaving the windows PC market so any market share they steal from that market is free extra gross.

      • Walt French

        I think the reason your product ideas seem unlikely is that they are based on unawareness of the math.

        @StevenDrost’s estimate that the ASP will rise is obviously based on the assumption that €250 phones will be a small part of the mix, while new phones with higher prices will be the lion’s share. It is a very likely assumption. An older @MonkBenT blog item on the “Trip to Rome with No Free Coffee” (IIRC) spells out how the low-price item can actually RAISE the ASP.

        As to hybrids: they make sense if the CPU and memory are the expensive components, while the OS, software and other items are cheap. But getting apps tuned for both a 5″ touchscreen and 15″ screen with keyboard & mouse — 9X the area! — is HARD, as the lousy quality of Android pad app appearance, and awful Windows Surface interfaces, attest. And a modern ARM CPU, a GB or two of RAM, plus suitable memory, is actually a relatively small part of a premium phone’s price.

        So your ideas are a bit off — hybrids have sold very poorly for tablets and especially phone/laptops — because they don’t countenance what people seem to enjoy (good UX tuned to what job people are doing) and what it costs the manufacturers to provide.

      • charly

        I forgot that Apple introduced the 6+. Without that $100 ASP would drop but with it ASP will rise.

        Hybrid is the wrong word. You may insert the smartphone in a laptop but in the case of a 25 “screen and wireless mouse & keyboard the smartphone would be more a “citrix server” connected wireless over 60GHz.
        The big advantage of this is that you don’t have to sync which is so much more complicated than written a touch and a keymouse interface for one program because you only have to write one program and with sync you need to write two (and keep it at the same feature set).

        Apple is trying to do the sync method with their latest versions of OSX & IOS. I think that this will obviously fail for the smaller programs while with a touch & keymouse OS you can always fall back on the touch when you are in keymouse or visa versa.

        For a good desktop experience you need 4GB of memory. Smartphones/tablets miss that but that is only a problem of time.

      • StevenDrost

        I don’t think that sync is that big of an issue or that Apple’s solution will obviously fail. Also, although most people use multiple devices, they don’t use them for the same function. I don’t watch Netflix on my smartphone or write documents on my tablet, the mainstream smartphone buyer is not concerned with syncing.

        So the small group of people who are worried about syncing have many good solutions. If you don’t trust Apple, there are Dropbox, Google docs, Microsoft,amazon cloud services and others.

        Then adding a keyboard, mouse and a bigger screen does not make a smartphone into a desktop. Many if not most desktop apps are not designed for a mobile and as Walt said “But getting apps tuned for both a 5″ touchscreen and 15″ screen with keyboard & mouse — 9X the area! — is HARD” Personally, I can’t even access any of my work applications on a mobile OS and I’m far from alone.

        So, the smart phone docking station would only appeal to people who need a desktop, don’t already have a decent one, can do all there computing on a mobile OS and don’t mind the bad UX. That is a very very small group of potential customers, buying an inferior product without the incentive of lowered costs. I fail to see how it would meaningfully impact Samsung’s ASP for smartphones.

      • charly

        Apple solution wont fail. That is Apple’s problem. Apple’s solution is for every use TWO programs. Problem is that in some cases there is only a IOS or a OSX program without its counterpart. Because Apple is a success with this (and it is the expected future the last decade) will force Android to follow. But it wont follow with TWO programs but ONE program, TWO interfaces.

        I think you underestimate the market. I would love to use my desktop’s keyboard to write a whatsapp message but some apps need much more text entry than whatsapp. And having room for multiple screens is sometime very usefull.

      • StevenDrost

        As I’ve said repeatedly and the Motorola Atrix learned in the market, it’s a niche audience who would accept that solution. Neither IOS nor Android are ready to fully replace the PC. Many legacy apps simply have not been brought over to mobile (yet) and there is still much more computational power available in a PC. Another problem is exactly the solution you suggested. You need a separate UI’s for Touch vs Non Touch and when going from a 5in screen to a 27in screen. These principles have been tried and tested in consumer markets.

        Even in Microsoft’s Windows-centered view of the world, they have you using a tablet/PC and a phone. The two device solution is the only viable solution right now, so I’m not sure why you are singling out Apple.

        One more thing. Your example is a solved problem. I regularly write messages using IMessage on my IPad, IPhone and Mac. I also use Facebook Messenger on my Windows desktop at work, windows laptop while traveling, IPad (rarely) and IPhone.

        I like Ben Thompson’s view that your watch becomes the computer and everything else is just a dumb screen. But we are a long way away from that becoming reality and it’s not a solution to Samsungs current financial situation.

      • charly

        It is not only mr. Thomson’s view. It is my view too but for it to happen the watch needs to be as fast as a an s5, have the connectivity of an s5 (more because it needs to connect to an external screen) and also have a battery for a day (at least because recharging is more difficult than with a phone). Problem is that at the moment connectivity & cpu speed is possible but you end up with a battery time of 3 hours OR it works a day but it is way to slow. But Moore’s law will solve this problem in 5 years just as it solved the Atrix problem for being to slow and not having any software (just solved by time)

      • StevenDrost

        I have three problems with your 4S logic.

        1.) 1,2 and 3 generation old products have been sold by apple for a few years now and have barely moved the ASP. Last year the story was how much of a failure the 5C was because everyone wanted the highest model. I’ve been to a mall during the release day and I can confirm that trend is very much alive.
        2.) The 4S is not “good enough”. The lack of LTE is deal breaker for both the consumers and the carriers who are the ones who truly purchase the phone. Next year the 5C (if still available) would be far more compelling, but personally I think we are a long way away from good enough at least in the IPhone space(see my previous point on the high sales of the highest model).
        3.) And this is the big one. Apple makes the 4S and could stop making it if they are worried about it cannibalizing higher priced products. This is a very different position than what Samsung is facing, because they don’t make the lower priced “good enough” products which are stealing their marketshare. Put simply, Apple has full control over the supply and pricing of IPhone and could lower or raise ASP with ease.

      • charly

        1) Apple sold it for €200 less, not a model -2 for €350 less. Opens a new market but creates the big problem of dropping phone prices.
        2) Lack of LTE is a dealbreaker for carriers but not for consumers. For consumers it just means the Internet is a little slower so only normal definition youtube and not high. definition. They can life with it (because of the much lower price)
        3) It is very difficult to convince people that you wont have a special sale when you have done it once.

  • canvas

    What’s your (anyone’s!) prediction for iPhone shipments this quarter and the next? The chart seems to be saying 38M and 58M but if reported pre-orders are anything to go by the number will be much higher. Love to canvas some opinions.

    • HR PuffNStuff

      My prediction is relatively flat relatively minimal growth as compared to the iPhone 5 in total over the 6 line’s life span. As for the quarter it should be massive probably exceeding all previous models. This would be due to the announcement that there will be no “s” line released (thus no one waiting for the upgrade). But that depends on whether or not consumers know that.

      There is a possibility of decent growth due to the new phablet however. I’ve heard many a story of folks moving to the droid camp because they need the larger screen due to vision problems or just because they really like it.

      I’ll cement it for posterity right here since I like going back and seeing if I was right: the 6 sales will be relatively flat. Emphasis on “relatively”.

  • Horace – I’m surprised you can still talk with your tongue so firmly in cheek:
    “Postscript: One problem with this prescription is that it’s considered impossible to execute and those who try to operate as repeatable innovation companies are punished with deep discounts and condemned as being “hits driven” rather than annuities. Woe befalls the manager who seeks this route.”

  • sammy

    In 2012 (and of course before), NO-ONE was talking about Samsung. They were the #1 phone maker, but all US press/blogs were delusional and kept repeating the phrase “Apple is the #1 smartphone maker in the world.” Even – no, especially – on CNBC, which you’d think would be capable of reporting numbers correctly. To this day, Samsung barely get a mention on CNBC.

    In 2013 (and of course before), NO-ONE was talking about Lenovo. Horace at least has the honesty to admit he was one of the ignorers. And yet, they are simply IBM. With all the great engineering skills that IBM has had for decades. #1 PC maker in the world. But with very small margins and an open door onto the Chinese markets. In 2 years they went from zero sales to being one of the biggest handset manufacturers in the world. I believe Horace also completely wrote off the PC industry and Microsoft and Intel. I’m writing this on a PC (iMac) and I imagine the majority of people reading this will also be doing so via a PC.

    I’m a great supporter of Apple, and own a great deal of their stock, but I’m afraid populist commentary like this site, coming out of the US, is just financial fanboyism. You all have your heads stuck in the California sand and refuse to read the sales reports showing which companies are taking market share.

    Yes, the challenges reported above for Samsung are true. Lenovo, Huawei and Xiaomi are eating their lunch in the lo-end. But maybe one day Xiaomi will need to make some money? And remember Samsung’s high end phones are no cheaper than Apple’s – another misreported fact. So they have to compete on features there.

    Samsung have many businesses and they are world leaders in most of them. If you add the parent company, they are one of the greatest engineering powerhouses on the planet. To write them off as another Nokia, is a severe underestimate IMHO. My guess is that they would be able to survive and adapt even without a handset business at all. They are more similar to IBM, Phillips, Sony and GE in that regard.

    • Space Gorilla

      Something interesting to note, the iPad alone is actually the #1 PC maker in the world, beating Lenovo’s annual units by a significant margin.

      • charly

        Does that include Lenovo’s tablet sales?

      • Kizedek

        i guess it depends if they run Windows or not. Remember that Windows tablets are already counted as PCs by most surveys and analysts. But iPads are usually left out, despite their often being more expensive, and being used more and to do more jobs.

        Android tablets, on the other hand, maybe shouldn’t be counted, just as iPod Touches and Kindles aren’t counted.

        But the irony, for most of these surveys, is that to show growth in the “PC” market, iPads need to be counted. You back them out and the PC market is flat or still shrinking.

      • Kizedek

        i guess it depends if they run Windows or not. Windows tablets are already counted as PCs by most surveys and analysts. But iPads are usually left out, despite their often being more expensive, and being used more and to do more jobs.

        Android tablets, on the other hand, maybe shouldn’t be counted, just as iPod Touches and Kindles aren’t counted.

        But the irony, for most of these surveys, is that to show growth in the “PC” market, iPads need to be counted. You back them out and the PC market is flat or still shrinking.

      • charly

        Most tablets are bought for web browsing, some media playback & gaming (and taking pictures but that should IMO be a criminal offense) Ipads have a bigger share of tablets that are used outside of this but i seriously doubt that most ipads are used for anything semi-serious. Besides Lenovo is also stronger in the “serious” market and the Yoga is IMHO the arch-type of tablets.

        OSX is big in the US. outside it and its not anywhere close to the big ones. But the number of serious PC makers is getting small with Samsung and Sony leaving the Global field.

      • Space Gorilla

        “Sounds like Space Gorilla is saying that iPads alone without 4-5 million Macs would make it first.”

        Yes, that’s correct. Lenovo reported 55 million PCs sold in their last annual reporting period, and called that outstanding. The iPad is around 70 million annually now, and of course the media says the iPad is in trouble simply because sales have levelled year over year. I suspect this plateau is temporary, but that’s a different discussion. As of right now, even if you add Lenovo’s tablet sales into their total (I’ve seen 6 million as an estimate but Lenovo reported 9.2 million I think), the iPad as a standalone business is the world’s #1 PC maker.

      • Space Gorilla

        I don’t think so. It’s a little fuzzy with Lenovo having hybrids I think? Anyway, you could go ahead and add in all Lenovo’s tablet sales. The iPad still beats Lenovo by a significant margin.

    • capnbob67

      Don’t overestimate Samsung either. They have world leading fabs and produce a ton of memory but it’s a commodity with low and unpredictable margins. The APUs they design themselves are inferior to Qualcomm and Apple parts and are mostly used in their own devices. As their phone sales fall, they will have empty fabs. No one makes serious money from TVs, appliances and other consumer electronics. They’ve stopped selling PCs in Europe. Face it, the majority of their profits come from smartphones. If smartphone profits evaporate Samsung will cease to be a valid competitor to Apple unable to wield the marketing budgets and carrier incentives that have driven their recent success. Apple’s purchases from Samsung components are all low margin deals for Samsung and make up for little of the lost smartphone profits.
      Samsung isn’t going to die but it will stop being a top tier competitor unless it can arrest this decline. It will go back to being a low margin volume producer like it was before it had Apple to copy.

      • HR PuffNStuff

        1. the foundries won’t be empty the price will lower and we’ll see more lower end SOCs for the Chinese market. However considering ARM SOCs are used in almost every product in existence these days it won’t be a problem.

        2. Samsung used to produce iPhone iPad processors (it’s TSMC now)

        3. Samsung makes money from everything everywhere.

        4. PCs have been a loss for everyone (excluding Apple) for years so good choice. This will change as the market realigns itself as competition drops out.

        5.Samsung will continue to be Apple’s strongest competitor for a while unless another phone maker reaches trend status. Years ago HTC was the rage.

        I’d expect smart phone sales to generally flat line, and market share to adjust itself, and I’d expect it soon. Meaning market saturation, and consumer re-alignment to brands.

        I think Lenovo, not Apple, is Samsung’s biggest competition since they are getting very good at out Samsung’ing Samsung.

        ‘Cause lets be honest with ourselves here guys, as far as it goes for you Apple people; Apple tends to have no competition even if Apple’s product were inferior it would still be purchased and loved by Apple people. Meaning that Apple will keep it’s customers, and Samsung can’t change that.

        Thus Blue Ocean baby…or is Apple the Blue Ocean? Who knows.

  • Ray

    I agree with some of the comments below regarding how ignorant are most readers about Samsung. Most consumers and casual IT enthusiasts know Samsung Electronics as a mobile phone company, which is far from truth. Samsung (even leaving out other Samsung Group companies) has tablets, TVs, appliances… and components, which are not known by consumers. Samsung dominates the global memory market (both RAM and Flash), OLED displays, Li-Ion batteries, etc. So basically when an Apple, HTC or Motorola mobile phone is sold, Samsung is also making money. You can’t say that from any other company in the conversation, and this is why Samsung cannot be compared to Blackberry or even Nokia. Samsung was already a successful consumer & component electronics company before the smartphone industry exploded, and it can continue being so even if it wouldn’t sell a single smartphone, which will be far from reality anyway. Even if the Chinese OEMs eat the low-end, Samsung can still produce mid-range and very high-end phones like the Note 4, since it actually controls the patents, production and supply of best OLED screens in the world, which is one the most important components in smartphones today. Smartphones essentially all look the same today, and the BOM is determined by four major components: a huge high-def screen, a fast energy-efficient ARM processor, memory (Flash and DRAM), and a huge Li-Ion battery underneath. Samsung is dominant globally in all these four components, so it will benefit from the growth of the smartphone industry in any case. Again, nothing to do with Blackberry, Microsoft or Nokia.

    • charly

      You could also say it about LG and maybe Sony as they also make a lot of components.

      ps. With smartphones i would not look at BOM but Bill Of Materials And LICENSES. Samsung is also big in that “component”.

      • Ray

        LG is not dominant in memory, processors and batteries. The only technology where they can compete is displays.
        SONY is also not competitive in most of those areas.
        What is remarkable about Samsung is that they have the best hardware ccomponents that matter in a smartphone, and hence why all other OEMs struggle to compete at the high en. This gives Samsung a 6-12 month advantage.

      • charly

        LG Chem is big in batteries

  • Taiwanosaurus

    A key challenge that Samsung needs to address is organisational design if it is to have a hope of once again turning supply chain heft to its advantage.

    Having worked with them on a couple of partnerships, the degree of paranoia between departments and lack of communication (surely a key plank of sustained strategic re-direction) was nothing less than shocking. There was also a sense in which the Samsung position eventually achieved with Android took Samsung itself by surprise. Tizen was a kind of semi-gesture politics/semi-strategic move towards a different platform to provide an option out of a situation that Samsung itself seemed not to have completely targeted. There was never a sense that Tizen was going to get the same treatment as Android had by Samsung – it was more of a hope than a play.

    I have also spent time in the Shenzhen OEM ecosystem and the coming wave of products driven by over-capacity and the local genius for ‘me-too’ rapid market entry means that the next ‘fast commoditizer’ wave is going to be brutal.