After a sluggish 2014, Samsung has wasted no time unveiling a new strategic vision for its mobile communications business. But will the new direction be enough to reverse the fortunes of the Korean company?
Samsung kicked off the new year at the Consumer Electronics Show, where it showed off plans for a range of connected devices. Another big announcement came a week later, when it introduced the Samsung Z1, powered by the new Linux-based Tizen operating system, to be sold exclusively in India. Just as Samsung’s success will hinge on its performance in the emerging IoT landscape, so too does the company’s future depend on Tizen and its ability to make inroads in the Indian smartphone market.
Samsung, which has a market cap of around $184 billion, has found itself outperformed by Apple at the higher end of the smartphone market, and blown out of the water by company such as Xiaomi in the budget offerings.
The Samsung Z1 will retail for around $92, far less than the Xiaomi Note and iPhone 6. The goal is to compete with the Chinese manufacturers Xiaomi and Huawei, India’s Micromax ($110), and Google’s Android One ($100) for Indian consumers who are in some cases buying their first smartphone.
For Samsung, the appeal of this demographic is twofold. First, it’s growing quickly, 27% year-over-year in Q3 according to the International Data Corporation. Still, at only 72.5 million units total, the room for growth in a country with over 1.2 billion people is obvious. Second, because of the rapid increase in smartphone adoption, Samsung can reach consumers who have not yet developed a familiarity with and preference for iOS or Android operating systems. Though its app library is limited (1,000 apps compared to the 1.3 million plus within Apple’s App Store and the Google Play Store), Tizen’s promise is in its portability; it already powers the Samsung Gear S watch and is behind the newly launched line of Samsung TVs.
Up to now Samsung smartphones have used the Android and Windows operating systems, but ending this reliance will undoubtedly provide a boost for the bottom line of the smartphone segment of the company.
The new product launch should also dispel rumors that Samsung was prepared to purchase BlackBerry. Having invested in developing an operating system of its own, spending $7.5 billion to acquire a flailing one seems unlikely. After a 74% decline within the mobile communications unit last year, Samsung needs to act quickly, but only time will tell whether developing Tizen and an ecosystem for connected devices will provide the boost the company desperately needs.