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Samsung turns to smart home, wearables chips as mobile declines

10 years of smartphone dominance is over

Analysis Looking for a radical change in culture and product mix is Samsung, which has ridden high on the smartphone boom but is now refocusing its growth efforts on the IoT, chips and displays.

The decade of the smartphone will end this year, and growth in sales will fall below 10 per cent for the first time ever, according to predictions from IDC researchers. Profits have been eaten away by the shift of sales towards emerging economies, and vendors have been under pressure to pack high end functionality into mid-priced packages, just in order to stay in the game.

Yet so far, the smartphone suppliers have failed, despite assiduous efforts, to find a new superstar device to compensate for handset slowdown. The tablet’s short day in the sun, the modest interest in smartwatches – these attest to the huge difficulty of finding a form factor which will appeal to the mass market while being aspirational, and profitable; let alone one which will become an indispensable part of daily life, like the smartphone.

And that is the other dilemma for the vendors. Everybody will still buy and carry a smartphone, they will just want to pay $150, not $600, for it, while still having all the latest features. The economics will be extremely tough for most suppliers, hence the quest for new markets in the smart home or vehicle, and the broader IoT.

Samsung needs a new culture

This is creating a very challenging transition period for the largest handset maker of all, Samsung, which started the year warning of significant challenges ahead in 2016. Rising competition, slow global economic growth and a hardware-driven culture will all hurt the Korean giant, according to its vice chairman and co-CEO, Kwon Oh Hyun.

In a speech distributed to media and employees, he warned that new business models, driven by software, are weakening traditional hardware as a competitive differentiator. “The territories of industries are collapsing,” he said. “We have to compete in a new way that we’ve never experienced in the past.” He reiterated the calls of his predecessors to make Samsung a software company, adding: “The competition landscape is changing to software and platforms, so we need to build a new system and competence.”

Smart home and wearables

At CES, Samsung showed off some of the innovations which it hopes will enable it to adjust to that new landscape, both as a maker of devices, but also as the world’s second largest chip vendor. One of its centrepieces in Las Vegas was a wearables processor (WPU), particularly geared to fitness gadgets, and claiming to be the world’s first chip with the ability to take multiple measurements, including body fat, temperature and heart rate. The Korean firm also unveiled the obligatory reference platforms, to speed up development of commercial products, such as fitness bands, based on the WPU. The chip will appear in its first commercial device during the first half of this year, said Samsung.

Samsung’s other major focus was on the smart home, although unlike Qualcomm and many smartphone rivals, it is placing its TVs, rather than the handset, in the central controlling role.

Samsung already has a connected home platform, based on its 2014 acquisition of SmartThings, which features a Wi-Fi-linked home hub and a smartphone application. However, Google and others also have WiFi home hubs, and better control of underlying frameworks for applications (Android and Weave) and connectivity (Thread). So Samsung is differentiating itself, and tying together several of its product offerings, by embedding the SmartThings hub into the TV. This will allow it to market its high end SUHD TVs as "IoT-ready" while moving the center of home power from the WiFi router to the television.

Samsung says SmartThings can now control Samsung devices plus more than 200 compatible products from third parties, from door locks to security cameras. These can now be monitored and managed from a single dashboard on the TV screen rather than via separate applications on the handset (though alerts can still be delivered to the smartphone). The TV-centric approach has another political benefit for Samsung, by allowing it to distance itself from Google. It uses its own Tizen Linux-based operating system for its smart TV platform (and some wearables), making it independent of Android and giving it the opportunity to build up its own ecosystem and apps base, in areas where Google’s OS is not yet the de facto standard.

Copyright © 2016, Wireless Watch

Wireless Watch is published by Rethink Research, a London-based IT publishing and consulting firm. This weekly newsletter delivers in-depth analysis and market research of mobile and wireless for business. Subscription details are here.

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