In January, I wrote a story for Forbes called Is Samsung Invincible, predicting that the South Korean manufacturer might just have carved itself a defensible Number One spot in electronics, achieving an ambition that has eluded Sony, Panasonic and many others.
3 Reasons Samsung Is On Top
- Samsung has been one of the top three players in major markets like TV and cell phones for more than a decade. Forget those stories that claimed Samsung came into its own at CES 2013. Samsung achieved its dominance way back in 2003. $53 billion in revenue in 2012 is tough to argue with.
- It is one of the top manufacturers of the crucial components — flash memory, DRAM, LED screens and OLEDs — that everyone else has to buy. Even when Samsung loses market share, it still wins.
- Samsung doesn’t make mistakes. Sony stuck its neck out with Rolly. Panasonic tried to get into movies when it bought Universal. Microsoft tried to popularize the tablet in 2002 and something called SPOT that certainly resembles the fabled iWatch in 2003. Samsung makes interesting products, but it doesn’t make foolish bets. And it sells 500 Android phones a minute.
Game over. And for the cherry on top, Samsung continues to crank out some pretty funny ads, showing it has a surprising flair for consumer outreach.
This why a Wall Street Journal story claims that Google is now afraid of Samsung because of Samsung’s dominance in Android phones. The idea is that Samsung will leverage its share to gain concessions from Google.
"There is a threat from Samsung to Google that is real," Rajeev Chand, a managing director at boutique investment bank Rutberg & Co, told the Journal. "Over time, Samsung will be able to leverage market-share dominance to negotiate better terms from Google.”
Second Thoughts On Samsung's Dominance?
So what could change all this?
Corporations take advantage of consumers all the time. You can feed them horsemeat burgers and lock them into credit card contracts that Sauron himself would admire. But if your success becomes too public, if it somehow looks like you’re bragging about it, they will walk.
Your mission: To Serve Man — without any hint of irony.
Dell was an invincible juggernaut in PCs until customer service and satisfaction ratings began to dip. Instagram recently risked a peasant revolt when it unveiled plans to use photos in ads. Consumers don’t have much power, but they’ve come to realize that many globe-spanning operations can be brought to their knees by collective hissy fits.
Hanna Montana. MySpace. Australopithecus. Look upon my 2003 Motorola Razr, ye mighty, and despair.
And So It Begins…
So how will the Samsung decline begin? It won’t happen for a few years. In fact, expect to see the company enjoy a temporary surge of popularity. But then you’ll see the backlash begin to sink in: Buy a Samsung? Ewwww. Don’t know why, just ewwww. An investment bank will make a prediction about Samsung quarterly shipment declines. Others will pile on.
And let's be clear: The power in the Google-Samsung relationship all sits with Google. Google has the best information retrieval system in the world. It owns a global data center that is absorbing more functions — like shopping and advertising — by the day. To undercut Google, you’d have to engage in the equivalent of medieval warfare and invest billions in infrastructure just to come close. Samsung’s value in the relationship is that it’s a slightly more upscale partner than HTC or LG. That's it.
The company will also eventually find itself on the horns of the killer product dilemma. Samsung has always been a great fast follower. It aspires to have the most feature-rich or best designed products in the majority of the high-end price bands. But it doesn’t create truly new products. Comb the company's product catalog and you won’t find a Walkman, or an iPhone, the first $1,000 PC or the first laptop. You’ll find the digital equivalent of John Kerry.
To truly become the sort of company that rivals the best of Sony or Apple, Samsung does have to create a signature product. The flexible OLED phone comes close. It rolls up! OLEDs, however, remain difficult and expensive to make in volume, particularly large format OLEDs. Companies have been trying to bring them to market for more than 10 years.
If Samsung can pull that one off, here’s to another ten years on top. If it even slightly misses the mark, let the dog pile begin.
The big question is, how many companies can come up with a hit on demand? That is Samsung's problem.
Image courtesy of Shutterstock. Samsung logo from Samsung