The Major Industry Battle Brewing Between Samsung vs Google

Over the last five years, Samsung has become a behemoth in the tech marketplace. Their smartphones dominate the tech landscape and their profits have been relatively good until recently, considering the fact they still make most of their money on hardware. However, as we have seen in the PC market, a hardware only business model is not sustainable. Indeed, as smartphones become more and more commoditized, Samsung’s profits margins will soon be squeezed — especially by competitors like Xaomi who is eating their lunch in China.

While they are one of the most vertically integrated companies in the tech arena and can leverage this to help margins to some degree, I am convinced that, unless they take control of their entire destiny, they are just going to become like any of the PC companies who have been beholden to Microsoft and Windows and have seen their margins shrink consistently as PCs became commoditized. “Google and Android” replace “Microsoft and Windows” in this scenario and at the moment, Samsung is just a front end to deliver more and more customers to Google to get their ads, services and products via Samsung devices. Given the fact 50% of Android devices are Samsung branded, and Samsung’s cut of any related profits is the same as even tiny companies who also back Android, if I were Samsung I would be really pissed I’m making Google richer while at the same time, jeopardizing my future earnings potential if I continue to back Android.

To Android or Not to Android?

It is clear to me Samsung sees this and is rethinking their relationship with Google and their support for Android. At their recent developers conference, they showed off their own mobile OS that uses Tizen at its core and have even started paying developers to write apps for Tizen. At first glance it seems the focus on Tizen seems to be for the Asian market but don’t let that deceive you. I think there is something bigger in the works with Tizen.

Here is what Samsung is up against if they continue down an Android path as is.

First, they just make Google wealthier and continue to deliver customers to Google instead of to themselves. Yes, Android has served them well so far, but as long as Google owns the OS, Samsung is beholden to Google and is just a slave to them. Second, they drive revenue to Google, revenue that could be all theirs if they owned the customers. Third, they will continue to face margin pressure as hardware based profits shrink. As I mentioned above, our analysis suggests Samsung’s margins, even on their upper end products, could be reduced to around 10%-15% as even high end smartphones become more commoditized.

There is a reason Samsung copies and steals from Apple as the court in San Jose has already proven during the recent trials in California. They look at Apple’s ownership of their ecosystem and lust after it in a big way. Apple is mostly insulated from very low margin pressure since they not only make money from hardware but also from apps, products and services. They can do so since they own their OS and ecosystem and control their destiny across the board. Put more directly, Apple gets all of the profits from hardware, software, ads and services while, in Samsung’s case, Google gets most of the ad revenue, app sales profits and services sales.

The irony to all of this is Samsung is the one who has made Android successful — yet Google will not share the wealth with Samsung any more than they do with other Android licensees.  Samsung has to be steaming at this predicament and looking for a way out. However, they have a dilemma and are boxed into a corner in the short term. While they can and will modify Android as far as they can without losing the store certification, the apps on Android that are both legitimate and illegitimate (the later being important in China) is too vast for them to abandon. Not being able to run android.apk apps would be suicide for anyone in the short term. Their developer environment is still based on Android so it seems they are trying to create a para-platform on top of Android that still uses the store but gets custom apps created for them in their ecosystem.

However, even in this scenario, where they can add some customization, they are still pouring money into Google’s coffers, leading them down a path where a hardware only play could hurt them big time in the future. Keep in mind, all OEMs backing Android are getting the same OS and, while hardware may differ, the OS is identical. It becomes harder and harder to differentiate with Google in control of the OS and related products and services. And Google’s new Android One program basically takes the cost out of the hardware and makes it possible for small companies to enter the market and go right after Samsung’s low end business in emerging markets.

So what could Samsung do to extricate themselves from the powerful hold Google has over them? Some industry folks I talk to think that Samsung could just fork Android the same way Amazon has done with their Fire OS. But even with Amazon’s clout, there are still not as many apps available on the Fire OS as there are in the Google Play Store and staying with Android even in a forked mode could be confusing for Samsung’s customers in the long run.

I think the real thing Samsung is working towards is to get away from Android completely sometime over the next three to five years and take complete control over their future. This is where I think their backing of Tizen becomes interesting and potentially important. Although Tizen has not attracted a lot of app support to date, if Samsung got behind it and was able to prove to the market they will continue to innovate around Tizen and keep delivering hundreds of millions of smartphones and tablets annually under their brand, they could attract serious software developers to the Tizen platform. Remember, they have 50% of the Android market today. If Samsung could show they would continue to be the #1 leader in smartphones even with Tizen, software developers would be crazy not to back Samsung’s Tizen strategy.

I don’t believe Google will let Samsung dump them without a battle. In fact, the recent fights between the two are becoming more public as it is becoming clear Samsung is no longer in love with Google.

I don’t think Google will adjust the revenue share for Samsung since, in doing, so they would probably have to have similar terms for other big Android vendors and that would really impact Google’s earning abilities. But they could be creative in trying to keep Samsung in the Android fold as well as putting a lot of pressure on them in ways we can’t even imagine at the moment. What Google wants, Google mostly gets.

In the long run, Android is a dead end for Samsung. As stated above, their relationship with Google is not that much different than what other PC OEMs have with Microsoft today and look what that has done to them in the commoditized age of PCs. I have no doubt even high end smartphones will become commoditized in a similar manner. If Samsung does not find ways to gain more control and deliver their own apps and services to enhance their overall profitability, they will, excuse the pun, become marginalized.

Published by

Tim Bajarin

Tim Bajarin is the President of Creative Strategies, Inc. He is recognized as one of the leading industry consultants, analysts and futurists covering the field of personal computers and consumer technology. Mr. Bajarin has been with Creative Strategies since 1981 and has served as a consultant to most of the leading hardware and software vendors in the industry including IBM, Apple, Xerox, Compaq, Dell, AT&T, Microsoft, Polaroid, Lotus, Epson, Toshiba and numerous others.

57 thoughts on “The Major Industry Battle Brewing Between Samsung vs Google”

    1. I doubt that Samsung has, or ever had, enough pieces of the required expertise or imagination to replicate Apple’s strategy. Especially given that their product design philosophy is basically and obviously “copy what Apple has done, is doing, or might do.”

  1. Samsung should spend some of its marketing $billions to PAY selected Android developers to create Tizen-based versions of their BEST apps. This would be much more successful than the way they spend the marketing money now. This way they could have thousands of high-quality apps in the Tizen app store very quickly.

    1. Paying for Apps is a desperate move that has not worked out for Windows or Black Berry. A better move would be to make sure Tizen could run Android apps, but then you might as well fork Android.

        1. Absolutely!
          An even better move would be to find another ship because the smartphone OEM ship is sinking.

  2. Hmmmm, so the moral of the story is whatever one accepts for “free” from Google is indeed submitting to Google’s enthrallment. This applies to companies as well as individuals apparently.

    1. Ash nazg durbatulûk, ash nazg gimbatul, ash nazg thrakatulûk, agh burzum-ishi krimpatul. One Ring to rule them all, One ring to find them; One ring to bring them all and in the darkness bind them.

  3. Damned if they do, damned if they don’t. The author does a nice job of outlining the repercussions of Samsung staying with Android. @disqus_NQ5NUGPvGy:disqus furthers the point with this gem:

    “Keep in mind that Nokia has already demonstrated that scale and distribution network are quite emphemeral when you are up against fierce competition.”

    However, Nokia also acts as an cautionary tale of how difficult it is to attempt a third way. Elop famously distilled the problem into a single (burning platform) memo more than three years ago. Presumably, Nokia should have had a much easier time convincing users to try a new OS in 2011 than Samsung will have in 2017-19. Also, Nokia tied itself to a powerful software partner in Microsoft. As terrible as Windows Mobile had been in the iPhone era, the Windows name still had some brand equity with users compared to Tizen.

    My question is whether Samsung has the capability to fork Android to enhance hardware-specific advantages that Samsung may be able to create. Can the company do something unique with payments or health (again copying Apple), storing data on the device rather than using Google’s back end? If so, it would possibly create a sustainable advantage vs. Android competition.

  4. Samsung is in a Greed Trap. They got to 50% on Android’s back and now have green eyes for a change in business structure. As usual they want to be first without doing the hard work to get there. Takinig Microsoft as a alternate experiment, where is mobile windows after billions? Soft trying to go hard. Not. Samsung got big because of Android and their fruits are the Chinese copying the master copier.

  5. Here how i see it,

    In one hand we have a company like LG that was close to bankruptcy not too long ago, which in the last quarter has sold more than 14 million smartphones after a long period of very close working relationship with Google and its Nexus program, which is now better positioned to dethrone Samsung with superior hardware and software integration as the LG G3.

    On the other hand we have a giant like Samsung, with all their success has never been able to provide a good hardware experience other than their Army of cheap plastic and Gimmick Features that no one want to use to compete with Apple despite all their cheating and copying, and now you want me to believe that within 3-5 years they will be able to replaced Android with Tizen and built the equivalent of all the APIs, Cloud, and Google Services somethings even Apple and Microsoft with their Nokia well built device is struggle with despite all their experience in software integration and service.

    you kidding why?

    What Samsung need to do is focus on building the best Hardware possible and buy 1-2 services startup such as LINE Chat to integrate with their hardware exclusively and let Google manage the user experience on their smartphone with their Google Now Launcher to better maximize profit per devices in exchange for a larger share of revenue otherwise the same thing that Happened to Nokia and their Microsoft stupid strategy will happen to them too, for over thinking their Strength.

    1. lol…. Reading this comment is about as entertaining as reading the obituary section in a local newspaper. When a particular company runs out of new ideas they always begin to follow the new Alpha Male in the industry. That male is SAMSUNG!!!!

      Not just because if Samsung Group taken as a whole Family (Chaebol) is better compared to the Rothschild Banking Family, Royal Dutch Shell Family or the Saudi Royals, etc, but because no company has a single Division that’s come so far, in so little time to completely overwhelm an entire industry. Their rise to fame and power even overshadows Apple’s rapid rise with just their Electronics Division alone.

      When are you people ever going to learn that Corporate Profits are only for the Elite Share Holders to Brag about? When will any of you understand Market Cap means nothing to consumers? When all it is, is a way for Share Holders to gauge whether they’re going to buy or sell more shares. Samsung Electronics alone had already passed Apple now 3yrs ago in market share. They already beat them in Revenue due to their diversity of products and low to high end models. Their marketing via their own Cheil Worldwide has literally blown all of their competition off the map. They are on the brink of launching new product categories Apple can never match in diversity. From TV’s to Home Appliances, to Robot Home Security and Automation, they are ahead of the game. Their newly renamed Samsung Healthcare and Electronics Division alone is well out of reach for Apple. When they recently branched out and opened their headquarters here smack dab in Apple’s back yard selling equipment direct to Hospitals, Emergency Care and Universities. Universities where Samsung now has the greatest R&D Network in the World:

      And that doesn’t even include Samsung Techwin or their other Global Technology Centers for R&D Innovation. Samsung Techwin is a surveillance, aeronautics, optoelectronics, automations and weapons technology company:

      And then we’re still barely scratching the surface of Samsung Group…. let alone Samsung Chaebol’s Power and Wealth. There is no comparison available between the technology innovations that come out Samsung Electronics division alone…. let alone the whole of SAMSUNG! ….and the scale comparison to LG is even larger. While’s it’s still #2 Chaebol in a country that is in the Top 12 Financial Powers in the World, while only being in the Top 100 in population. Largely on the back of SAMSUNG! …..America doesn’t come close to depending on Apple the way a large part of the World depends on SAMSUNG!

      Now Vietnam has joined that list, with Samsung providing 30% of their GDP, while no other Global company comes even close to that. In Brazil, India and China w/o Samsung involved in building new factories, chip fabrication plants, resource development and hiring their people, their GDP would fall dramatically. The Chinese above all know this only too well. That’s why Samsung is now building a new 60 stories high Tower Headquarters in Beijing right now. And they are building it themselves, just like they’re doing here in San Jose in a state of the art building designed by a Top 5 Architectural firm in Chicago! ……can Apple build their own Space Doughnut Headquarters in Cupertino??? Absolutely NOT!!!

  6. The way forward for this is to directly compete with the Android. How? Lets say Samsung releases the S6 in 2015 or late 2014. They should sell two variants of the flagship phone. One that runs on Android for lets say 400$ the other Tizen for lets say 250$. Same specs. Same all, but different OS. Now they may sweeten the pot still by luring the telcos to a subscription model deal with the Tizen based OS.

    Otherwise, they may use the snow-ball method like what their doing in Asia now. If it does prove successful they can do a volume ramp the production then slowly but surely recapture and convert sales to the Tizen platform.

  7. I agree, but I don’t think Tizen or Windows or an new OS will be able to compete against Android and IOS. As Ben Evans put it “the mobile wars are over, Google and Apple won”. I would stick with their strength in manufacturing high-end components. for example: If/when biometrics revolutionize the payment system they could sell other manufactures the fingerprint reader or other high-end hardware. Being an vertically integrated company, their products would always have the best/newest components, sustaining their position at the high end. If their components are compelling enough they could be like Wintel was for the last 20 years and essentially tax all mobile phone sales.

    1. A war, like a fire, is only over until there is a new flare up. There are things that Samsung and Microsoft could do together that would set the android world on fire. They share numerous assets that make victory a real possibility. Now if these two company only had visionary leadership…

      1. I think that is the best thing I’ve read today.

        The problem is that Samsung’s leadership’s ego dictates that they be the next MS, Google or Apple. They only make partnerships that they are willing to burn. Nobody trusts them, them just partner with Samsung when they have to.

        1. Wow have you ever got that wrong! Sorry…. but Apple and Microsoft are two companies best known for burning both partners and themselves in the end. It now seems we really can’t tell the difference between them. Both are greedy proprietary companies run more by share holders than by the brain trusts they hire to design their products. You mean you can’t see that Samsung is one of few companies that can exist as both a most valuable parts partner as well as their best competitor simultaneously? That’s some sublime ignorance you have there!

          Get real! Apple has always been so happy to betray their best partners, like IBM, Xerox, Microsoft, etc. Even to the point of adopting MS’s own “Embrace Extend Extinguish” business tactics and improving on them. If you can call their cannibalistic behavior that. Only Apple has become better at it, than Microsoft!

          Meanwhile Samsung is becoming better at contributing to (both money and code) and utilizing the Open Source Community, than even Google. While Apple continues to raid their Open Source Chicken Coop without ever giving any code back and donating very little money. Haven’t you heard about how much the Open Source Community hates Apple for that? Talk to any Open Source Dev on the Webkit Team for one and you’ll get an ear full of anger and hatred toward Apple. Their own Jailbreak Community is beginning to fear they steal from them and never give them credit or money, while trying to kill them off!

          Samsung is now in the Top Ten most respected Open Source Community Members on the planet and without their hard work and support in the future on the Linux kernel alone, even Google would lose out. Think back to Steve Jobs’s arrogant claim in the 90’s that makes your claims for Apple still null and void. After having spent up all of Apple’s R&D budget, attempting to make Mac OS and NeXT play nicely together, he said, Apple doesn’t have to spend a single dime on R&D ever. They only need to just take better advantage of the Open Source Community!!! ….and you mean, you think Apple has a great relationship with IBM or the open source community just because IBM is developing Apps for iPad? When they’ve already been making them for Android in their MobileFirst Enterprise initiative? IBM just last year committed to spending $1 Billion Dollars on Open Source development!

          Whereas Apple is actually paying IBM to be a partner…. yeah that’s true. Samsung and IBM have been great partners for over 10yrs (IBM is Selling KNOX to Enterprise and using it themselves already in all reality) and even the US Government trusts Samsung more than they trust Microsoft or Apple especially. Recently the FBI put out an order for 26,500 KNOX Licenses for their own Galaxy smartphone purchases and BYOD devices. BYOD is something Apple can’t do without multiple containerized logins for both private personal and enterprise features in iOS. All Apple iOS devices have to be either personal or enterprise use only. Until they figure out how to include multiple user accounts (like Android in Linux) they won’t be getting anywhere in the coming BYOD Market!

          1. Why is being “open source” better? Better code = better user experiences. If you have better code and you are not obligated to share it with the Open Source community why would you? Google, Apple, Microsoft are all companies who have spent a lot of time, energy and effort creating operating systems and apps which they used to differentiate their products so they can sell them for a profit.
            You seem to be angry that companies charge money for code. But, it’s not as if Samsung is doing this for the good of the open source community. They need an alternative to Android and they don’t have the means to build it them selves so they Open source it. Samsung is not a whimsical, starry eyed Open source beliver, they are just as motivated by profit as any of the others.

          2. Samsung doesn’t have the means to do it themselves? lol.. Now that’s a laugh. They did a pretty great job on Bada OS apparently beating out WP7/8, Blackberry, Palm, Symbian in it’s 1st yr out till 2012 (3yrs in a row), when they committed Bada to open source Tizen. Now that Samsung has proved Tizen is actually more efficient than Android, what do you have to say about that? The only thing they changed is they substituted Bada’s RTOS Kernel for for a Linux kernel in Tizen and kept it’s application framework and API’s the same. (RTOS is used on Gear Fit though)

            btw….. Apple OS X and iOS are also built on Open Source too. Believe it or not, NeXT was based on the Mach kernel while incorporating FreeBSD source code. It was basically only a few years newer than original Mac OS based on Xerox Parc’s Gui and mouse. Then when Gil Amelio was told by Ellen Hancock Apple’s own Copland OS was crap (which it wasn’t, it was based on a new 64bit relational database file system with Copland Finder Instant Search, not unlike BeOS’s BFS and Tracker), she recommended buying BeOS.

            Steve Jobs heard about that and though he had pretty much given up on NeXT and was paying more attention to Pixar…. he called Gil Amelio and told him not to buy BeOS and got him to buy his dying NeXT instead at over twice the price. Which he promptly turned around and secretly made the largest purchase of Apple stock since it was created. NeXT thing we know he was spending up all Apple’s R&D budget on getting an OS that was incompatible (unlike Copland or BeOS) Mac OS to become OS X. Steve said then, Apple doesn’t have to spend a dime on R&D, if they just concentrate on utilizing the Open Source community in a variety of projects to turn NeXT/Mac OS into OS X!

            And that’s the Open Source with Proprietary Software Story of Apple’s OS until iOS. Which was a down port of the PowerPC RISC OS X to ARM Risc based iOS with it’s Open Source roots and all! Now what was that you were saying about Apple spending money and resources on their OS’s? Reality is that last year was the first year Apple even broke into the Top 50 in spending on R&D and Steve true to his word worked the opened source community like a Gold Mine for OS X, OpenStep, KDE Konqueror Browser for Safari…. etc et al. So you mean to tell me Samsung Group $500 Billion dollar this year in revenue company can’t make their own OS Tizen work? haha… are all you Apple fans that deluded? lol….

            But anyway here’s the difference between Open Source and Proprietary and why over 90% of the Top 500 Super Computers, majority web servers (like Apache), over 80% of Smartphones on Android Linux, automobiles, almost every router from Cisco to Trendnet, etc and almost the entire film industry uses Open Source Linux on server farms to IBM’s Watson (and I’m just skimming the surface not even mentioning Governments, Military, IBM Mainframes, etc). 😀

            The reason companies band together to create software that can be used by everyone, is so as a group they can spend more money and resources and create something like OpenGL API’s, Linux, Apache, FreeBSD, etc and so forth, to create a cross platform base of software able to be used on any hardware platform, anywhere for free in a co-operative environment where each contributes to the Project. Apple however has never been one to contribute back to anything they only TAKE FROM!

            For Microsoft…. with problems and not enough money to duplicate Open Source developed programs also utilized the Open Source Community on Server Programs they don’t have the money or expertise to develop themselves. Why do you think Steve SweatMonkey Balmer danced and pranced for “Developers, Developers, Developers, etc”? lol… yeah because he knew how important Open Source was with it’s immeasurably huge developer community! MS could not really afford to spend 10 to 15yrs to develop what they’ve taking advantage of in OPEN SOUCE! ….and even Apple knew they couldn’t afford to develop the browser engine and internet stack protocols required for Safari and is also why they joined Khronos Group for OpenGL Too!!! ^_*

          3. You seem to be confused on a lot of fronts, so i’m only going to focus on the big ones. I never said Open Source was bad, only that bring open does not equal
            Better, better software equals better. Second, Tizen might be more “efficient”, but that does not make it “better”. There are a lot of functions the OS needs to be successful (copy and paste, multitasking, maping, app store, etc). Even if it was able to match every feature of IOS and Android, it would have no Apps and an install base of zero to intice developers. The mobile OS wars are over, Tizen is a pipe dream. Third, Apple does contribute to open source (webkit). But, more importantly they are one of the most important companies for evolving computing.

          4. I explained how Apple wasn’t considered a software company good enough to make their own OS, so they bought NeXT instead. The only true software companies as you say…. among these today are Microsoft and Google. Apple still relies on buying software companies with software mostly… already developed for them and simply continuing to have Open Source do a lot of coding it all for them too. Then they simply repackage and re-brand it all.

            iMaps is one of those and Samsung has already made an exclusive deal with Nokia to use their “Here” Maps on Tizen. Since Google wouldn’t make a deal for Google Maps on Tizen. Notice Apple’s iMaps (using Open Source Maps or public domain) aren’t nearly as good as even “Here Maps”. Especially on Turn by Turn and we all know Google owns Street View, that none of the others can ever afford to duplicate! ……the topper is only Google has the Exclusive Satellite Contracts and government contracts locked in on a perpetual license deal!

            Samsung has had Samsung Hub (App Store and more) for 4yrs now. To go with being the Multitasking KING, like it or not. Apple still can’t get out of the fix they put themselves in, when they bought NeXT instead of far better BeOS. Try as they may, after they brought (like always bought/stole/whatever) Dominix Giampaolo (BeOS fame, BFS file system) in to develop a new file system and Search Engine (Spotlight) that actually worked like Copland Finder and BeOS Tracker did. Then when Dominic went public (Apple white washed this debacle from web history) about BeOS Tracker and BFS being far superior to what he was forced to include for Apple, Steve Jobs went ballistic! ….or is it Thermonuclear on him? Apple eventually did hire him full time to shut him up. Now we haven’t heard another word from him ever since (kinda like another Genius Scott Forstall).

            What he’d done (even though it violated all his file system principles), was basically clone BFS as a virtual sub file system for Apple. Naturally he was upset, because they couldn’t or wouldn’t use HFSX as the new base relational database file system to replace HFS+. Now Apple is still using it that way today and Spotlight isn’t system wide iOS still doesn’t have a basic file manager, and is still using “Preemptive Task Management instead of Pervasive Multitasking. Which is more like what Microsoft was going to use WinFS for (clone of BFS too). So they too could keep living in the past with legacy features too.

            Which Bill Gates recently revealed, was his biggest regret. Not making WinFS the primary file system over NTFS, simply because they couldn’t grasp the database concept. This was back when Steve was again threatening another lawsuit against MS, over WinFS violating their Copland 64bit file system and Copland Finder Search patents. Along with being too much like HFSX and what Apple was about to do on OS X operating system. Duh…. they were both clones of BFS, so naturally they’re very similar!!! ….if not outright rip offs of then Palm’s BeOS property!

            So now…. Apple still has NO Pervasive System Wide Multitasking. Well till they adopt a new database file system for Instant Search. Like they were going to do with Sun ZFS and Scott Forstall was begging them to do. Guess why Apple didn’t grab ZFS? Because then Steve couldn’t hold an iSueU hammer over Microsoft’s head on WinFS, with HFSX and Dominic now in house then! ……and of course another iSueU hammer held over Sun CEO Jonathan Schwartz’s head. With Sun holding a bigger hammer over Apple with Schwartz prior work with Lighthouse and Sun’s own Concurence. For the MS side ZFS, it simply blew both BFS Clones out of the water and had Sun Java and LookingGlass in it’s pipeline threatening both of them as well as MS’s .net. Furthermore Apple was in trouble over Quicktime falling far behind FLASH them sneaking Safari in on Windows users in iTunes/Quicktime updates. Which was a bigger threat than Apple’s iBooks fiasco now:

            Now though, since Jonathan had even gone public… with the fact Apple was going to be switching out HFS+ for Sun’s ZFS licensing, that put Apple in between a rock and a hard place. Which would take the wind right out of Steve’s lawsuit threats against Microsoft over WinFS. So of course this sent Steve into a Thermonuclear Rage in 2006/2007 around Vista launch.

            Next thing we knew…. Steve Jobs was denying Apple had ever even been interested in ZFS and then MS dropped WinFS as a virtual sub database system (even though Cairo Project presided Copland Finder in the early 90’s). That’s when Steve’s nose grew about 10 inches right before our very eyes.

            So now you’re trying to tell me Apple is more of a software company than Samsung? Who not only wrote their own two ground up separate OS’s, but recently contributed F2FS (Flash-Friendly File System) to Open Source. Just saying Samsung has a new crop of software Geniuses on the order of Dominic Giampaolo and Scott Forstall and they didn’t steal them from their competitors. Samsung right now has far more developers working for them either Microsoft or Apple, worldwide in perhaps the largest University based R&D Network on the Planet called SAIT for Samsung Advanced Institute of Technology!

            What makes Samsung believe the geniuses they hire around the globe can write new Innovation Evolved software better than Google, MS or Apple? SAIT Projects like this:

          5. One other thing….. Samsung is now in the Top 5 Open Source Contributors… in case you don’t understand where all that Open Source Code comes from! lol…. They’ve contributed a new Solid State Specific File System that is just now being picked up on Mobile device use, including Tizen and in the future Android and other Linux Distros including Ubuntu. There work on the Linux 64bit kernel is has been huge and that’s only one a few Open Source Projects Samsung is involved in. Right now they have more developers hired than Apple does, not including those in the Open Source Community developer contributions in the Bay area (San Jose, Silicon Valley) as well as Samsung International Telecommunications Headquarters in Dallas, Texas! …..where many of those developers work!

            The short list of Samsung’s presence in America and it doesn’t even include Samsung C&T Construction and Engineering, Samsung’s many mining and other Silicon chip design in Arizona, PA, California, Washington, Florida, etc and so forth! :DDD


            And….. actually read it and you might be surprised as for the 4th year in a row, Samsung has won CiCi Award for investing the most in America. They are the largest investor Texas’s economy… you know the Samsung Sized Largest State in the lower 48!!! ;-P

        2. Wow I’m still amazed that you don’t realize Samsung Group is a whole lot bigger than all of them and they are so diversified, that these others will fail while Samsung just keeps moving along into new industries and technologies apart from anything any of the others are even capable of!!!

          1. Samsung is a massive company and they do impressive things on the hardware side. But they are not a software company. If they had the means to build their own closed OS they would. But they don’t so they were forced to try an open one. I have no doubt that they will build new gizmos, build they faster, build more if them and ship them farther. But, unless they start hiring ALOT of computer engineers and programmers they will not be a serious player in operating systems. And even then its hard

          2. You need to take off your “I Bleed 6 Colors of Apple” Blinders off and realize Apple even as far back as starting the whole iSueU out of Business over Software copyright and patents in the original Jobsonian Era of the late 70’s and early 80’s. When Steve went after Franklin Computers and because Juries didn’t know the difference between, what was Fair Use (law hadn’t even been ruled on yet) and a violation of copyright, succeeded in running them out of business!

            On top of that Steve didn’t realize that by killing the first clones, he was actually shooting himself and Apple in their own two left feet!

            Because back then Apple really was on the verge of becoming a Software development powerhouse. But Steve lacked the vision to see beyond his own ego and greed for power and money. Consequently by killing Franklin they killed off the spread of their own Higher Profit Margin Software Sales!!! …..and if they would have embraced cloning like Microsoft’s Bill Gates did, it might have been him as the richest man in the World instead of Bill Gates!

            What followed for Apple became par for their course. Running in 2nd Place then to Microsoft and now to Google Android and Samsung!!! 😀 ……and btw…. Tizen is a whole lot more than meets the eye. It’s Application Framework alone is far beyond either Android’s Play Store or Apple’s iOS App Store and don’t forget it’s all based entirely on our future being in W3C’s HTML5 .WGT Web Widgets!!! …while also having the capability to run Android Apps too!!!!

          3. I use every major OS, let me guess you have a Samsung phone. Your opinions are infused with Anti-Apple and pro-Samsung bias.
            You talk about how Apple acquired NEXT because their OS plans did not work out. So what? If you can’t build it buy it, a smart move if you ask me. Yea, they leveraged Open source. So what? All consumers care about is that their devices have a new cool capability. Samsung has a long way to go before they can prove that they can meaningfully differentiate their products with Software. All your stories about how much of a legendary jerk Jobs was are irrelevant.

  8. They have kind of painted themselves into a corner with positioning themselves against Apple and thinking the only thing they had to do was copy hardware. They want what Apple has, which is a compelling ecosystem they control. But they have put themselves in an almost impossible position to do that. From a certain perspective they are facing the flip side of what MS is facing.

    It will be an interesting next few years to say the least.


    1. Not sure why, but this comment reminded me of Sheryl Crow—”It’s not having what you want. It’s wanting what you’ve got”


  9. I thought Samsung was heading for a split as well, but the Google I/O announcement about Knox integration was a surprise. I can’t reconcile Samsung giving this to Android only to split off. Frankly, I feel it was the only news at I/O that stood out.

    Rather than break off on their own, I wonder if Samsung could team up with a few other Android mobile makers and split together. Kind of like what Todd McFarlane, Jim Lee and others did in the 90s with Marvel when they left in unison and started Image Comics. Strength in numbers.

    I just want to see Samsung ditch. Fight! Fight! Fight!

  10. I most heartily agree with pretty much everything the article states except the following statement:

    “I have no doubt even high end smartphones will become commoditized in a similar manner.”

    Change the phrase ‘high end smartphones’ to ‘high end Android phones’, then you got it right. Just as high end Windows PCs got commoditized even though high end personal computers still exist, sell well, and make a tidy profit.

    I don’t claim to have originated the following idea but when a consumer good, either by design or happenstance, becomes a vehicle for expressing one’s identity, a high end segment will always emerge even if the low end might commoditize. Or maybe, especially if the low end commoditizes. Without this characteristic rooted in basic human behavior, there would be no gourmet foods industry, or high fashion, luxury car, fine jewelry, or a host of other industries. There would be no Apple, Rolex, BMW, Chanel, Harrods, and hundreds of other companies catering to the high end segment of their industries.

    1. Apple is already a thoroughly commoditized product maker on the scale of Chairman Mao Zedong’s Mao Suit. The communists felt the need to identify themselves and their loyalty to this communist leader in unison. So they adopted his traditional clothing style in black to set themselves apart from the general public. The Black One Size, One Style Mao Suit became the costume of the Revolution!

      Apple one makes one design with all the same components, same locked down OS, no customization, no way of setting one person apart from another with the same product and all having the company logo worn like a badge of honor for a sterile industrialized totally outsourced Design House Only Company! …….that’s as commoditized as it gets!!!

      There is one phrase that fits Apple and it’s Elitists Fans to a T….. and that’s Applewellian Brain Washed iProles! ……it’s now worse than it ever was when Applewellians all proud of their Elitist Products twindled to the point of near extinction several times over Apple’s history. They were seen as radicals….. revolutionists….. who were all willing to bleed 6 colors of Applewellian Loyality like 70’s Lacoste Polo shirts a sign of being a devout Preppy in the upper crust of American Society.

      When the dozens of clones came out and out did them in varieties of colors and new styles, they no longer stood out in a crowd and that’s exactly what’s happened today. There is no way a product with an Applewellian iProle Logo on it that has them standing out from the crowd when they, themselves are now abandoning the hallmarks of the Applewellian I Bleed 6 Colors only of iProle Loyalty! …..everyone else evolved to greater, bigger, better, more powerful, choices and now Apple is following right behind them just to fit in again! :DDD

      Nothing new… nothing different…. and certainly nothing revolutionary, as they too have commoditized themselves right back into the sea of ordinary products and users by copying the ones who originally copied them! ;-P

      There is no price difference and now even celebrities have led the way into going for HTC M8’s, Notes, Sony Z’s, Moto G’s, Xiaomi Mi’s, LG G5’s, S 5, Active’s, Zoom’s and now the Alpha Male of True End to End Manufacturers has taken the lead….. and in the June Quarter taken it not by a few 1000’s or Millions even….. tens of Millions THREE TIMES the MARKET SHARE OF APPLE’s ELITISTS SMARTPHONE PRODUCTS!!!

      They now have Three Segments of the High End Market Locked in and their devices now command greater dollars than anything single model from Apple. Who only has basically mid range 5s and cheap low end iPhone 5c device models to choose from. That company that I didn’t even have to mention once…. is basically beating the pants off Apple with diversity of products with designs, parts, assembly, marketing, distribution all totally over shadowing Apple across the board, end to end with models to fit every style, want, need and choice. Where Apple only meets one to fit every small minded elitist, addicted to their Logo and that’s it!

      1. People want the best. People want Apple.

        There’s no “cult” no “devil” none if that crap. Accept reality and stop with all this silly conspiracy talk.

  11. Great piece!

    The biggest mistake Apple made early on was to license Basic from Microsoft for the Apple ][. This made Apple dependent on an outside company for critical software for the Apple ][. Microsoft used this to leverage Apple into a deal that allowed Microsoft to use Macintosh technology on the PC.

    Steve jobs learned this lesson.

    Unfortunately for Samsung, software like comedy is hard.

    1. The original licensing of a BASIC interpreter from Microsoft in 1977 to form Applesoft BASIC wasn’t so much a mistake, as Microsoft was in no way a competitor, then.

      More significant were the numerous failures of the Apple ///, which Apple expected to replace the Apple II. Fundamentally it was a very advanced system, with the capability to access a large amount of memory (up to 512K, which was eight times the typical 64K maximum memory limit of personal computers in 1980), graphics that would go up to 560×192 in monochrome, built-in 6-bit audio (vs 1-bit on the Apple II and IBM PC released later, in 1981), and an onboard clock chip. Its operating system was similarly advanced for a microcomputer in 1980, with configurable device drivers for different types of hardware (even the keyboard and serial ports were accessed via device drivers) and a disk operating system that supported hierarchical storage of files in subdirectories, as well as hard drive volumes of up to 32 MB.

      If the Apple /// hadn’t had so many hardware problems, like overheating due to the lack of a fan, poorly sourced sockets which allowed the chips on the motherboard to become unseated when it got hot inside the case, bad clock chips from National Semiconductor, and incomplete backwards software compatibility with the Apple II+ (mainly a lack of accommodation for the tricks that Apple II software was using to exceed the base Apple II+ capabilities, such as lowercase characters and 80-column text display), it may indeed have replaced the Apple II line. If that had happened, Apple wouldn’t have been beholden to Microsoft to continue their BASIC license for Applesoft BASIC which expired in 1985.

      Instead what happened was that the Apple II continued to be produced, and profits from that line propped up Apple all the way into the late 1980’s, funding and subsidizing the development of not just the Apple ///, but also the Lisa, the Macintosh, and everything else Apple did. It was because of this that John Scully at Apple agreed to the conditions of the renewal of the license in 1985 for Applesoft BASIC, which led to Microsoft getting a perpetual license to the Macintosh user interface, as well as the cancelation of MacBasic (see ).

      Luckily for Apple, the Apple II line was such a robust platform that it could continue to be improved and remained viable for many basic computing tasks all the way through the 1980’s and well into the early 1990’s when it was finally discontinued. (It was the combination of the Mac LC in 1990 and the Apple IIe Card for it in 1991 that finally allowed many schools for make the switch from Apple IIs to the Mac.)

      (Full disclosure: I was an Apple II software developer in the 1980’s and I acquired an Apple /// system as a curiosity some time in the late 1990’s.)

      1. Apple had their own Basic written by Steve Wozniak himself. Unfortunately it had no floating point math support. Steve Jobs tried to get Woz interested in adding floating point math support to the Basic they already had. Woz never did it and so Microsoft got the job.

        The leverage I referred to hurt Apple post Apple ][.

  12. Tim , this post has the underline assumption that Samsung can create good software and ecosystems,ones that are as good as than Google’s or Iphone’s. But they repeatedly failed at that. Just read gadget forums about the quality of Samsung’s software[1] or try to list the active developer communities they had so far.

    In that light, Samsung has gotten a great deal from Google, and made plenty of money.

    [1]Heck, samsung’s galaxy launcher is so bad that even small companies do better.

  13. Samsung just completed building the largest single smartphone manufacturing plant in the World in Vietnam. All together now, their factories there will be producing 50% of all phone there. All at far greater cost and tax savings than they even had in China, when they moved there for it’s cheaper labor market in 90’s. This new factory will be producing over a 100 Million smartphones alone, when fully ramped in just days. That’s a quarter of their expected 400 Million smartphone sales this year. It’s a well educated young population of workers (not just farmers, etc) and technology and sciences are taught from an early age to people eager to learn. This is one of the reason both LG and Samsung are moving there. Along with half the wages of Chinese workers!

    Samsung is still building more factories, working to help them build infrastructure infrastructure with Samsung C&T and taken over construction of deep water port shipyard in the World in Cam Ranh Bay. They’ve been contracted to build a Geothermal Power Plant and the shipyard project. Samsung as of this summer will be responsible for a full 30% of Vietnam’s GDP!

    So this is the reason Samsung was so upbeat about September and December quarter’s earnings and profits forecast this year. That in spite of losing some market share the last few quarters, while building this plant. They can now actually export Galaxy phones into China and sell for less than the Chinese makers can! 😀

    Note the pic is old of their first factory in Vietnam three years ago. This one was primarily solar powered:

    This year by August, they’ll be producing 50% of Galaxy line smartphones in these Vietnam factories including their new Super Sized Smartphone plant, when fully ramped up in August!

    1. You are right that Samsung has tremendous scale, which gives it a production cost advantage. However, their marketing and sales incentive spend is very high. Also, many of their low cost competitors operate in countries with little or no IP protection, which reduces their costs.

      In short, Samsung’s position is more precarious than might seem obvious. Scale is great if you can fill your production lines, but if you are forced to operate below capacity it could be very costly. It will be interesting to see how Q3 plays out.

    2. This is interesting information about the cost advantage of factories in Vietnam. Thanks.

      If other companies move operations to Vietnam (or other low-wage countries) from China, that would put China’s prosperity at risk. Obviously not every manufacturer can or would move out of China, but the opportunity to save 50% on wages will obviously drain jobs from China year after year.

      By the way, a 50% labor cost saving is worth about $3.50-$3.75 on an iPhone. However, Apple’s unit costs for an iPhone are lower than Samsung’s cost for top-line Galaxy phones by an even greater amount. A few months ago, various tear-down analysts reported that materials costs for iPhone 5s was $199, for the Galaxy S4 $242, and Moto X $214.

      Foxconn is converting to robots, and may also be able to reduce assembly costs by about 50%. That, too, would reduce Chinese jobs in large numbers.

  14. Rock. Hard place. Frying pan. Fire. My heart bleeds for samsung. Not. This is unlikely to play out well for them on either (or any) path and analysis is only likely to estimate the rate of decline in any scenario.

  15. Samsung is always ready to buy success, so I suggest that it offer to Tizen developers a reward for high-quality apps: Triple whatever income they earn from selling apps on the open market — original app sales, not in-app purchases. After following that policy for a couple of years, it would have tens of thousands of apps.

    At the point when Tizen proves feasible, Google will negotiate a profit-sharing deal with Samsung. Without Samsung, Android’s mobile ad revenues would primarily depend upon iOS (it pays Apple $1+ billion annually) and various phone makers who target less-affluent customers, typically overseas. If Apple then eliminated Google as the default search engine on iOS devices, Android’s mobile ad revenues would fall precipitously. Google can’t afford to put its mobile search business in Apple’s hands, so it would deal with Samsung.

    1. Listen…. buddy…. Apple are the ones who try to always buy steal or copy success. From OS X from NeXTStep (came from Open Source Open Step, FreeBSD, Mach Kernel Open Source Project) to iMaps fiasco and Siri as well as buying Authentec out from under Samsung to keep them from being first with their Fingerprint scanner in Home Button Patent in 2011. Where as a matter of fact Samsung was just getting ready to use Authentec Touch Sensor in Galaxy S3 before Apple only bought them.

      Samsung also had been using Authentec Touch ID Fingerprint sensors in their Secure Door Locks since 2004 as Authentec’s first customer. They had also been making Fingerprint Sensor Door Locks since 2002!!!

      Now with Tizen, don’t forget Samsung ground up developed Bada OS. Which was selling more phones than all competition except iOS and Android. They even beat out WP8 for the 3rd spot and Bada is the basis of Tizen with a application framework way ahead of either Apple’s or Google’s OS’s designed on W3C HTML5 .wgt Web Widgets!!!! …..if anything, right now Samsung is about to take the drivers seat in OS innovation with Tizen running on their own Future Proof F2FS (Designed for Solid State Drives) File System, when HTML 5 Web gets fully cranked up!!!

      btw… Samsung is now in the Top 5 Open Source Contributors with Google, IBM, Apache and Intel!

  16. I think as a generalism in business, there is always a problem when you start competing with your customers. Short term or long term. The reasons for wanting to compete with your clients/customers, often boil down to greed, fear or hubris. This has happened to Google, Microsoft, Samsung and countless other companies outside tech in the past. It never ends well.

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