The Critical Path #129: The Right Incentives

We talk about Samsung, Apple Pay (vs. CurrentC) and Xiaomi.

via 5by5 | The Critical Path #129: The Right Incentives.

  • Mark

    The Samsung success shift is an amazing story. I look forward to how it is for them after this next quarter. The thought that Apple may be “propping up both Samsung and LG overall profitability by being a major buyer from both of them is a major tale of irony. I must admit that if I was in Samsung or LG’ s place I would be careful of how I treated my best customer. It might be in Samsung’s best interest to settle with Apple on the IP dispute side and begin to rebuild their relationship with them. If the relationship remains problematic I would be inclined to expect that within 5 years Apple will no longer be Samsung’s major customer. If this happens and Samsung is unable to deal with competitive challenges in other areas of their IM business then they will be “stressed”.

    • Jurassic

      Apple has already moved much of the component orders away from Samsung.

      Many of the displays that Samsung used to make for Apple products are now being supplied by other companies like Sharp and Japan Display.

      And Apple’s processors which were exclusively manufactured by Samsung in the past, have recently been supplied by TSMC with the A8 processors.

      • StevenDrost

        I’m not so sure Apples move to TSMC was motivated by a bad relationship with Samsung. Their primary concern are interested in component costs and margins. Furthermore, Samsung is a conglomerate, the Samsung they are fighting in court is a whole different beast than the one they buy components from. There is only one company that Apple views as a competitor and is actively working against and that is Google. Maps might have been a necessary move, but Spotlight search and Siri are blatant attempts to bypass Google search.

      • I agree that Apple is competing with Google and Tim Cook has made that public. I’m not sure that Spotlight and Siri are attempts to bypass Google Search though.

        The way I see it, Google Search is overshooting the general needs of most users, especially in mobile. For example, when I’m not doing heavy research, I use Google as a shortcut to websites that I already know and frequent. For example, I might search for “asymco” or “iPad wiki” (to find the wikipedia entry) or “Walmart palo alto” (to find the website of the local store) or “漢字 meaning” (to look up a word). This kind of search does not really require a complex search algorithm that takes your personal and private information into account.

        For these searches, we need something much simpler. I think the new Spotlight is a first step to get us there. It’s not there yet of course, but I’m looking forward to something better than Google Search for these occasions.

        It’s how I think Google Search might ultimately be disrupted.

      • BMc

        Another way that Google’s search ad-words business could be disrupted is by mobile, where the amount of time spent by users in mobile apps is now more than spent on general web browsing (desktop & mobile combined).

        There is a good presentation by Benedict Evans where a slide in that shows the growth of “time in apps” vs. “time in web”. Google of course has advertising products in the app space, but it is perhaps why we also read about more push by Apple with iAd in this area. Apple, with the high end user base on iOS, could disrupt Google here if they really put some effort into it (and again, what they might indeed be doing).

        The article/presentation provides some very interesting insights, one of which is how Facebook has really succeeded in mobile when many felt they wouldn’t. Also makes me wonder about the relative success of FB vs. Google in monetizing mobile (that isn’t addressed in the article).

      • I totally agree, but I try to go one level deeper; that is, why do people spend more time in apps when they are on mobile?

        My understanding is that people already know what they want or where they want to go on the Internet, for the vast majority of the time. This is regardless of whether you are on mobile or a PC. On a desktop, Google was arguably the fastest way to get there. On mobile, typing queries into Google is a chore, and you have an icon waiting for you on the screen if you’ve installed an app. Hence apps win.

        So my understanding is that people use apps on mobile because their needs are simple. Even on desktops, their needs are simple. It’s only when we do research online that we really appreciate the full power of Google.

        Putting it another way, Google has already overshot customer needs on both PCs and mobile. However, on PCs, an alternative simpler solution does not yet exist. Spotlight might become the alternative.

        I’m actually sure that Google fully understand this. That’s why they have Google Now and the Knowledge Graph, which aren’t actually pure Google searches at all.

        One more thing is that Safari now shows a subset of Spotlight searches as a list of suggestions when you enter a query in the location/search field. That’s pretty neat in that it totally short-circuits Google.

      • BMc

        Just to clarify that Samsung Electronics is “one company” with multiple divisions. One division (IM – IT and Mobile) sells mobile phones, tablets, computers – while another division is responsible for components (DRAM, logic), and yet another sells displays (and others sell CE like televisions, etc). The divisions each have their own P&L, which is a common management structure in the industry. It is very much the case that Samsung Electronics has both a huge customer in Apple, and a huge competitor in Apple, amongst their different divisions.

        Samsung Electronics is a company in the Samsung Group (the conglomerate that you mention).

      • Sammy

        Agree with your post but would like to add…

        ..”Spotlight search and Siri are blatant attempts to bypass Google search.”

        OS 10.10 users can now search the web without opening a web browser. They may be able to find their answer without launching the web browser.

        +1 for user experience

        10.10 users can go directly to websites ie Wikipedia page in a web browser without Google logging their search query.

        +1 for privacy

      • Sam

        I remember reading about Apple’s big investment in Sharp for their LCDs. Within a few months or year, Samsung bought a small percentage of Sharp’s LCD business.

        That’s dual purpose, make some money from every LCD that Apple buys from Sharp, and also ensure they have enough supply for their lower end phones that don’t use Samsung’s higher cost displays.

    • Sam

      Let’s not forget that Apple prepaid Samsung $100+ million for LCDs more than a decade ago. Back then Samsung was small compared to Sony and others in the LCD industry.