How Android Vendors Can Compete With Samsung

by Ben Bajarin   |   May 22nd, 2013

The initial title of this article was going to be “How HTC can compete with Samsung.” Then I decided to branch it out and make a point that is relevant for HTC but also for all Android handset vendors looking to compete with Samsung.

The public learned this week that HTC is losing key personnel at a rapid rate. Through friends of mine that worked there1, I had a sense this was coming for a while. For the past few years I have been watching the numbers of all the handset vendors and HTC was one that concerned me the most given the trends.

Unlike many other Android handset competitors, HTC only has one business, selling smartphones. Samsung, LG, Motorola etc., all have many other businesses to help them deal with growth or declines in other areas. Chinese competitors are simply focused on the low-end for the time being, but HTC is geared to play in the mid to high-end arena. Which is close to no mans land when employing HTC’s current strategy.

That is why in 2010, I wrote an article stating why I felt Microsoft should buy HTC.2 I had concluded at that time HTC was in trouble. If I was them, or any other mainstream Android OEM looking to make a dent in Samsung’s 95% of the Android profit pool3 this is what I would do.

deeply embed every one of their core services as if they literally own you

I would surrender to Google. Stop trying to differentiate through software or UI value ad-ons and just simply make extremely elegant and innovative hardware, running the latest and greatest stock Android OS. Be vigilant about Android upgrades making sure your devices are always up to date in every area. Work closely with Google to deeply embed every one of their core services as if they literally own you. Focus on making great, elegant, affordable hardware and let Google take care of the rest. This way you can get a portion of the ad-revenues, and other service revenue sharing Google offers, and you have built your device and integrated Google’s services in a way to maximize Google’s revenue potential and yours. Be a Nexus device, without officially being a Nexus device.

This logic is absolutely counter to a market where one needs to stand out through differentiated software experiences. The problem is only Android competitor has successfully done this. I have championed against the Android sea of sameness and now I recommend pursuing it aggressively. People like HTC devices. Carriers like HTC devices.4 As Avi pointed out on Monday, other than the iPhone, HTC devices hold their value longer, this is good for carriers. HTC makes great hardware and can still do well by focusing on great design and unique hardware innovations. They simply need to let go of the software and work closely with Google to ship the latest and great stock Android on their devices.

This is a template that could work for HTC but could also work for others. The bottom line is the current strategy being employed by Samsung’s Android competitors is not working. Stock Android is very good and arguably always the best Android experience5. If needed there is room to add some better apps, like a better exchange email app for example, but don’t change the interface and leave the rest to Google.

  1. They no longer work there []
  2. I still feel this is a good idea and likely []
  3. It is impossible for Android handset makers to survive competing for only 5% of the profit pool []
  4. With a few exceptions of course, like the First []
  5. As much as I applaud and appreciate the attempts to differentiate Android, I prefer stock Android every time []
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Ben Bajarin

Ben Bajarin is a Principal Analyst at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research. He is a husband, father, gadget enthusiast, trend spotter, early adopter and hobby farmer. Full Bio
  • capnbob67

    If only any of this mattered. Ben, surely you don’t get ensnared in that nerd-bait argument that the vast majority of users could tell stock android from touchwiz or sense or a bat to the head and more importantly, proactively seek it out.
    Next you’ll be telling us that Samsung’s success is all about the SD card and removable battery.
    Bottom line – Samsung has invested and continues to spend many BILLIONS to dominate the market through advertising, carrier and consumer incentives. This is a probably insurmountable unless Google are offering some of their billions to HTC? Really? I don’t think so.

    HTC – “we offer stock android”
    Consumer “what’s stock android?”
    Carrier – “no idea”

    Samsung – “we offer… easy mode, split screen, bump share, S-Voice (ad infinitum)”
    Consumer – “yes I saw an ad for that”

    Carrier – “This Samsung is the best phone we offer (and we get $100 back from Samsung)”
    Consumer – “I want an iPhone”
    Carrier – “If you must. And here’s an expensive case and charger so we can recoup some of that subsidy immediately”.
    There are no scenarios where HTC can compete for more than a sliver of the market, which is unlikely to be enough to remain competitive.
    HTC tried very hard with the ONE – they camped out for 3 weekends at a local multiplex right by the ticket check pinch-point and put it in the hands of anyone who was delayed in the queue. It seems to have made little to no difference.

    • benbajarin

      Ultimately I still believe Microsoft will / should buy them. Making hardware is hard, HTC is the consumer branded spin of of their ODM factories and could help MSFT get into phones and tablets. Given that they don’t have large internal hardware expertise for those types of devices.

      But, even if that doesn’t happen my belief is that HTC will shift its strategy back to its ODM roots, like during the days they made carrier branded feature phones. By doing this they will focus on the needs of others rather than their need to brand and differentiate.

      This is why I propose just bowing to Google. Google does share revenue and perhaps would share more if the deal was right. Perhaps HTC can participate more on the upside will still making small amounts no the hardware, but doing them in large volume globally.

      This won’t make them like Samsung but it is a sustainable path forward. Samsung’s position is not sustainable and in the US its extremely weak. My gut tells me Android’s position in the high-end may not last forever but it will take a few years to see if I am right.

      HTC or others need to focus more on working with Google or the carriers on their specific agenda.

      • steve_wildstrom

        It’s mostly forgotten now, but HTC, then known as High-Tech Computer, was largely responsible for the original Compaq iPAQ, the only successful Microsoft Pocket PC (pre-phone Windows Mobile) device.

      • capnbob67

        I would suggest that by definition, being bought out by MS is the very antithesis of “survival” or “competing”. Let’s not pretend that Motorola has “survived”.
        The ODM route is theoretically plausible but MS has Nokia (and will buy them first if anyone) and Google has Motorola (what’s left). The chinese makers are likely to offer ODM services at lower rates than HTC. With so many potential competitors, ODM in 2013+ will not be like ODM in 2002+.

        I don’t see Google wasting much more of its advertising $s (beyond what it has already spent on Android and Moto) to do what would be necessary to create a real hedge against Samsung – better to just keep the beast happy than try to fight it. Spending a billion or 2 on Android development per year probably makes sense in terms of ad revenue and defense against Apple/MS. Spending $5-10Bn to fight Samsung does not.

        Consumers certainly don’t care about Nexus phones and carriers do not like them unless they conform to their models. I find it highly unlikely that the Nexus approach will create a market large enough to sustain HTC. We’ll see.

  • http://twitter.com/M_Gauche James King

    This type of thinking is what lead to the stagnation in the PC market. It ultimately de-incentivizes the OS maker from innovating. After Android has finished gobbling market share, where does it go? This is why I’ve never understood the pessimism re: Blackberry and, to a lesser extent, Windows Phone. Hardware diversity becomes meaningless when the software is the same.

    My advice to HTC is to pursue its own software stack or partner with a company making a unique OS. Ubuntu Touch is looking pretty good. Blackberry 10 is more advanced than any other mobile OS on the market. HTC hardware featuring a unique user experience has to be a better strategy than producing another Android clone. The One is an awesome phone that could be an incredible halo device for a nascent ecosystem. IMO, HTC needs to get out from under the Android umbrella and start taking more risks. Becoming more conservative in the face of competition almost never works. In the end, it’s necessary to take big risks and blaze new trails. It doesn’t always lead to success but they don’t call it a “fighting chance” for nothing.

    • benbajarin

      Thus lies the crux. I agree with you, it’s just that no one is going to do it because they have not been able to do it yet and they can’t justify the model. Asian companies don’t take risks like that and once they have and failed, they almost never do again.

      One thing about the competitive landscape that is overlooked is how Asian culture works. Its shocking Samsung is doing what its doing, but there are also a lot of Americans in decision making spots.

      This is again an area I give the edge to Apple.

      And I love the HTC One, I just use a launcher that makes it look like stock Android.

  • gabriele vidali

    Everybody always forgets about miui

  • def4

    There is so much wrong with this article I don’t even know where to start.
    Your advice to just use vanilla Android is about as good as the Microsoft acquisition: three years too late.

    I was watching live the I/O keynote when the Google version of the Galaxy S4 was first shown. My reaction was “eww, WTF is that ugly POS”.
    The default Google Android interface is amazingly ugly. I’m astounded by the fact that most geeks can’t see that.
    You are attracted by it because of two things: it’s the lightest available and thus the fastest and the fact that your hopes of getting somewhat timely updates are not naïve.
    Android has stagnated. Nobody who isn’t reading this kind of blogs knows or cares which 4.x version of Android their phone runs.

    Samsung will remain the top mobile phone manufacturer for the foreseeable future. They have huge scale, Apple-style integration (different levels, but still very valuable) and they are extremely driven and aggressive in sales and marketing. For more than a year they have also been either the or close to the fastest at providing updates.

    Why would Microsoft buy HTC? This is business, not charity.
    Microsoft already rents another OEM with much stronger name brand recognition, scale and distribution muscle for 1 billion a year.
    If HTC doesn’t have anything of value to contribute isn’t it better for everyone if they find something else to do?

    • benbajarin

      My point is, the other vendors, from my discussions with them, are just not willing to do what Samsung does any more. So yes the options are bow to Google and try to get revenue over time from ad sharing or go do something else.

      All other than Samsung just don’t have the RND or marketing balls to make a go out of it. Plain and simple.

      • def4

        I understand, but that plan is incomplete.
        If Samsung is already fast enough with delivering updates that are not so important anymore where’s the value for consumers? Where’s the part of the plan that greases the hands of the operators more than Samsung does?

        • benbajarin

          I suppose its not the updates that are the clear prop in my mind in the minds of consumers. I just threw that in there because Android developers do actually care about that. So in essence more up to date devices is better for developers looking to make money.

          Goog did just address this to a degree with their announcement at iO around play services. But I know devs would prefer strong modern platforms of Android. So I guess that point was more for the ecosystem than the consumer.

          I’m not sure what greases the wheel for consumers, other than perhaps HTC can provide a deeper services integration with a carrier or Google that does present a better experience overall. I’m just brainstorming so not sure what that is but it could be something.

          I know carriers would like a little more love and cooperation with the handset guys. So perhaps this goes in that direction? They are mercantilists though, so perhaps we shouldn’t feed them.

      • capnbob67

        No vendor has ever done what Samsung is doing (at the scale they are doing it). It is not a question of willingness but capability. No-one but Apple has the capability to spend billions to make many more billions (not that that is Apple’s approach).

        Google do not have the balls (or the need) to fight Samsung and no OEM has the resources to do it.

        • benbajarin

          I agree so doesn’t that again make my point which someone succinctly said below that if you can’t compete cooperate?

    • benbajarin

      Regardless, though, of my defense of what I wrote, I am pleased to have this discussion. That is why I lobbed this thought out there.

      Sometimes I do analysis in public just to help me think things through with our thoughtful commenters.

      • def4

        Thank you for providing the venue. :)

  • http://twitter.com/dhruvrks dhruv

    yes its a year late advice. google already bought motorola, so it would be crazy for them to ad share with htc. but the point you make is apt, if you cant compete cooperate.. i would guess they should cooperate with sony or lg more. the web around all this is too dense, so it doesnt make sense to sit in judgement..but all this is interesting..more so because google outmanuevered microsoft in all this..and a few years ago google didnt want to wake the giant. guess they played their cards right.

  • lanister

    Google is hoping said companies can provide legit competition and stem Samsung’s currently rampant domination, until the next iphone 5s.

  • Mark Jones

    Using your strategy, HTC would differentiate purely on hardware (design, components, build quality, etc), as any low-cost Android-handset maker could use stock Android and Google services. Could that hardware-only differential ever be worth $400 (in the unsubsidized case)?

    • benbajarin

      This is an interesting discussion point because it really all comes down to a philosophical way to view the market. Either everyone just wants cheap, or “good enough” and that will simply be the norm in a highly nuanced global consumer market. OR, we can believe that hardware innovations still have a long way to go, and any vendor can invest heavily in RND and push new limits of science and innovation and still create premium experiences.

      For those who read much of what I write, I continually bring up the automobile market as an apt, although not perfect, analogy in which we can get insights for. There are many cars that are good enough, and all get the job done, but many appeal to a specific segment. There is the quality of quantity play in autos, and then there is the large lure of pure consumer choice.

      So I feel we still have a lot to innovate around within mobility. Only a few, can succeed doing hardware, software, and services themselves. Others are better suited to focus on their strengths. That was sort of the point of this article using HTC as an example.

      Any hardware company needs to decide what kind of hardware company they want to be and pick the right strategy to sustain a business with.

      • Mark Jones

        Thanks for the responding and the opportunity to bat these ideas around.

        I agree that “hardware innovations still have a long way to go.” But two things:
        1. Hardware innovations can come from in-house R&D, or through integrating third-party elements (chips/sensors/etc).
        2. Hardware innovations increasingly rely on software and services to create the significant monetizable value desired.

        If the software and services via Android are available to the $150-phone-makers, then HTC has to either create HTC-only hardware, or have the ability to get exclusives from third-parties. I don’t think HTC has the resources or volume to do either (unless as you suggest, they merge with someone else, but who?). Google already owns Motorola, so I find it unlikely that they would choose to be charitable toward HTC (especially since HTC is unlikely to commit to Android only). And Microsoft has Nokia. Blackberry?

        Yesterday, Apple CEO Cook referred twice to the “magic at the intersection” of hardware, software, and services. I think he could be envisioning the fingerprint reader/camera/wifi/bluetooth intersecting with ID/location/payment software and e-commerce services (see Apple shopping mall patents), and that together iOS users will get the “magic” of secure shopping anywhere with just your phone. The magic that wasn’t seen in the incomplete NFC and Android mix.

        You’re right that HTC needs to decide what kind of hardware company they want to be. I just think it very unlikely that HTC can find success as a hardware-only high-end business when the exact same software/services are available to its low-end competitors.