Samsung's Smartphone Dilemma

Samsung unveiled the Galaxy S6 and S6 Edge yesterday at Mobile World Congress. Following a 45-minute keynote that lacked much purpose besides highlighting how mistakes made with the Galaxy S5 have now been corrected, I'm left wondering who is Samsung's primary customer: mobile carriers or phone manufacturers? Is Samsung losing all sense of reality by ignoring consumers and instead shipping smartphones in order to drum up marketing for its stronger smartphone components business? I'm no longer confident I know why Samsung is selling smartphones.

Following last year's Mobile World Congress, it was obvious that Samsung was undergoing its second Crisis of Design. As expected, the Galaxy S5's reliance on plastic and gimmicky software contributed to Samsung losing all momentum as a smartphone manufacturer. Increased competition from both the high-end and low-end caught Samsung sleeping. Yesterday, Samsung pressed the reset button on its smartphone strategy as its latest flagship phone was positioned as a fix to last year's mistakes. Whatever option Samsung went with last year, the opposite choice was taken this year. Citing "design of the future," Samsung dropped all of the plastic, opting for metal and glass. Meanwhile, 40% of the phone's features were cut as Samsung used shaky marketing spin to position the reduction as evidence of a new strategy focused on "design with a purpose." Samsung took a few pages from the Apple playbook and removed features such as a removable battery, expansion memory, and water proofing, all of which were reasons that hardcore Samsung fans had stuck with the brand in recent years. 

The problem facing Samsung is that nearly every one of the changes made with this current crop of phones was the right move. Better hardware and fewer features have been the trend in the premium phone segment for years and the current winners have been busy building their platforms on the trust such a strategy has formed with consumers. However, Samsung's loyal customer base had remained engaged because Samsung was trying to be different, offering consumers choice and options, while design was considered an after-thought. These consumers place more value in removable batteries and the ability to swap out memory, not the look of the device. By trying to be like another premium smartphone manufacturer, Samsung may have shot itself in the other foot.  

Samsung didn't change its entire smartphone strategy. The company reiterated their goal of doing things first so that others will follow, which supposedly leads to more innovation. However, a few minutes later, Samsung announced a mobile payments platform called Samsung Pay using nearly the same presentation and talking points that Apple used five months ago when announcing Apple Pay. Interestingly, the presenter skimmed through this part of the presentation, with very few details as to Samsung Pay's implementation and the fine print. Samsung is apparently licensing the fingerprint reader technology from a third-party, which raises some questions as to the background and long-term sustainability of the feature. I thought this Samsung Pay example summed up the conflict found throughout Samsung's entire presentation.

Samsung was more focused on mentioning key words such as design, hardware, camera, and mobile payments, instead of discussing why certain things were being done or removed from the phone. This lack of clarity has been Samsung's problem for years as the company has mostly relied on offering consumers choices that other smartphone makers decided not to pursue. The problem is Apple is now selling larger screen iPhones, and Xiaomi and other local Chinese smartphone vendors are selling decent hardware at lower prices. Samsung's differentiation has disappeared. Samsung may not be at the point of utter desperation, but they certainly came off as remaining quite nervous. Samsung says they want to be first in mobile, but they show great discomfort in leading.

If Samsung is relying on its premium smartphones to market screens, processors, and other components to other smartphone vendors, instead of giving the consumer a good experience, I highly doubt the company will be able to regain the Galaxy sales momentum lost in 2014. Smartphone competition continues to intensify and companies without a mission statement built around the consumer will find dimming prospects. Samsung's refocused attention on its smartphone components business is becoming a major liability and dilemma for the company's ambitions as a smartphone manufacturer.  


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