It was a rough year for Samsung, but 2015 isn’t shaping up to be much better.
After watching profits tumble this year due to increased competition
from other Android phone makers, Samsung sits at an odd inflection
point. It can pump out pricey, generic Android phones and watch cheaper
phone manufacturers continue to eat its lunch, or it can start
innovating in software and services and find new ways to differentiate
its devices from the competition.
Samsung had one plan to do the latter, but it seems to be faltering. Reuters had a big story last week on Tizen,
a mobile operating system made by Samsung that was supposed to ship on
at least one phone this year. But Tizen has hit a bunch of snags, and
Samsung wasn’t able to release the OS on a phone before the end of 2014.
(There are rumblings a Tizen phone will launch in India soon, but
nothing has been confirmed yet.)
Samsung’s Tizen project is a way for the company to wean itself off
Android, which is controlled by Google. Manufacturers may be able to use
Android for free, but it comes with stipulations, including using
Google’s suite of services like Gmail, Google Maps, and the Google Play
app store.
That means there isn’t much difference between a Samsung phone or one
made by a company like the Chinese startup Xiaomi, which makes phones
just as powerful as a Samsung’s but sells them for about half the price.
That’s partly why they’re now the largest smartphone maker in China.
It’s companies like Xiaomi that are causing customers to buy cheaper
phones instead of pricy Samsung phones, which has been devastating to
Samsung’s profits this year. (Xiaomi is currently the fourth-largest
smartphone vendor in the world and rapidly gaining ground on Huawei,
Samsung and Apple.)
Samsung’s big challenge next year will be to prove that its Galaxy
phones, which are wildly profitable, can offer more than the cheaper
Android devices out there. Tizen was one potential answer to that
problem.
But Tizen is very similar to Android. I tested an early version of
Tizen at the Mobile World Congress event in Barcelona earlier this year.
Here it is running on a sample Samsung phone:
It looks and function almost exactly like an Android phone. But
unlike Android phones, it doesn’t have the robust ecosystem of apps and
services Google can provide. That makes it tough to convince people to
buy one over an Android phone. It’s the same thing that killed
BlackBerry and has caused Windows Phone sales to remain flat. People
won’t buy phones that don’t have access to good apps or services.
Meanwhile, Samsung has tried to create services for its Android
phones, but none of them have really taken off. There’s Milk Music,
which is sort of like Pandora, but not as good. There’s also Milk Video,
a streaming video service with a very limited selection. And ChatOn,
Samsung’s answer to iMessage, WhatsApp, and other popular messaging
apps, is shutting down soon.
Still, the Tizen project is far from dead, and we’ll probably see it
ship on a few low-end devices in emerging markets next year. Tizen also
powers most of Samsung’s smartwatches. And even though Samsung has yet
to make a smartwatch that can sell in significant quantities, I’ve heard
we can expect to see more models in 2015 as the company continues to
experiment.
Finally, Tizen can control “smart home” appliances like light
switches and washing machines. That “internet of things” trend is one of
Samsung’s big bets on the future.
But here’s the reality for Samsung in the near term:
Profits tanked 60% last quarter for Samsung. This quarter might be a
little better because of holiday sales, but I bet the launch of the
big-screen iPhone 6 and iPhone 6 Plus won’t help things. (Analysts are
expecting a record quarter for iPhone sales.)
And while Samsung enjoyed about three years of massive growth, the
smaller Android manufacturers have caught up and figured out how to
undercut Samsung on price.
The iPhone is still doing well because it’s a unique experience in
everything from hardware design to apps and services. Samsung phones
still look like any other plasticky Android device out there and don’t
have any key differentiating software features. An Android phone is and
Android phone. It really doesn’t matter who makes it these days.
Tizen was one potential saviour for Samsung, but now even that is flailing.
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