The rise of Android’s biggest OEM: The Samsung story

October 25, 2013

    Samsung

    It has been 75 years since Lee Byung-Chull founded Samsung with just 30,000 won (about $28). It would be fair to say that the South Korean company has come a long way since then. In the third quarter of this year Samsung cleared an operating profit of 8.12 trillion won (around $7.4 billion). Much of that profit derives from Samsung’s position as the number one smartphone manufacturer in the world with a market share north of 30%.

    The story of the rise of Samsung is intertwined with the rise of the Android platform. The world’s most popular mobile OS is pushing for an 80% share of the market and Samsung manufactures around 40% of all Android smartphones.

    The Galaxy brand looks unassailably strong. Samsung’s marketing machine is formidable and the company leaves no rock unturned in the race to cover every form factor and be first to market with new cutting edge technology. Recent unveilings, after a heavy investment in R&D, suggests the company is determined to shake off the copycat allegations and prove it is a real innovator. Samsung wants to get comfortable at the top, but just how did the company become Android’s biggest OEM?

    In the beginning

    Samsung started out in 1938 as a trading company exporting fish and vegetables to China. It grew over the decades and spread its tentacles into a number of other businesses like textiles and insurance, but it wouldn’t start on the electronics path that would eventually lead to its domination of the smartphone market until the late 1960s.

    In 1970 Samsung’s first black-and-white TV went on sale. The following decade saw the company expand into heavy industry, and it began manufacturing washing machines, refrigerators, and microwave ovens. By the 1980s Samsung was focused on electronics and it had a telecommunications wing which started with switchboards and fax machines, before moving into mobile with a car phone in 1986.

    The king is dead, long live the king

    When Lee Byung-Chull died in 1987 his son, Lee Kun-hee, took over. He was to transform the company beyond recognition, but his 26-year reign has not been without controversy, as The Verge has pointed out.

    Lee_Kun-hee

    Samsung began to produce mobile phones in the late 80’s after investing in ten Motorola mobile phones for benchmarking. The first mobile phone it produced was the SH-100, but the quality was very poor. In fact the quality issue was company-wide and Lee soon moved to modernize Samsung and change its ethos. In 1993 he famously commanded his employees to “change everything but your wife and kids”.

    The new emphasis on quality was neatly summed up by the SH-700 which was a new, lighter, more compact design than Samsung’s previous cell phones. Every handset off the line was thoroughly tested and Lee showed his determination to improve Samsung’s reputation by burning faulty handsets worth 15 billion won. The new “Quality is Pride” motto was to be taken seriously.

    First mobile success

    In October 1994 Samsung released the SH-770 under the brand name “Anycall”. This improved version of the SH-700 was backed by a serious marketing campaign and a charm offensive on distributors. Within a year Samsung had eaten Motorola’s South Korean market share and become the biggest mobile phone manufacturer in its homeland.

    The Samsung SCH-100 and SH-770 at the Samsung museum.

    Mobil The Samsung SCH-100 and SH-770 at the Samsung museum.

    As CDMA service launched in 1996 Samsung was ready to capitalize with its first digital handset, the SCH-100. The same year Samsung signed an exclusive agreement with Sprint to provide phones for the U.S. market and this sparked an international assault by the company. By the late 90’s Samsung was going up against Nokia, Motorola, and Ericsson in Europe. By 2005 Samsung was the third largest mobile phone manufacturer in the world behind Nokia and Motorola. It claimed second place in 2007, but it would be 2012 before it would claim the number one spot.

    Smartphone revolution

    It took a while for smartphones to come down in price and capture the public’s imagination, but when they caught on they really caught on. Samsung did develop its own smartphone platform; Bada OS was announced in late 2009, but the company had already released its first Android smartphone, the i7500, or Samsung Galaxy, in June of that year. Success was far from instantaneous, but it soon became clear where Samsung’s future lay and Bada was quietly ditched.

    Samsung i7500 Galaxy for O2

    Samsung i7500 Galaxy for O2

    The Samsung Galaxy S was announced in March 2010 and went on sale in June. Samsung has sold more than 25 million Galaxy S handsets since then. The original boasted a 4-inch Super AMOLED capacitive touchscreen display, a 1GHz ARM Hummingbird processor, 512MB of RAM, and a 5MP camera. It wasn’t a world beater, but it certainly didn’t look out of place at the cutting edge of the Android charge.

    Samsung bent over backwards to cater for the U.S. carriers and while all the variants (Vibrant, Captivate, Epic, Fascinate, and Mesmerize) may not have helped Samsung’s brand image with consumers, they did build bridges with distributors.

    Samsung wins

    Before long Samsung’s triple pronged approach of quality hardware, marketing muscle, and good distributor relations, was paying dividends. The Galaxy S2 was released in May 2011 and it was jaw-droppingly good. The 1.2GHz dual-core processor, 1GB of RAM, 4.3-inch display, and 8MP camera met with widespread acclaim. It was a big contender for best smartphone on the market. Sales were strong and Samsung has shifted over 40 million S2 handsets to date.

    samsung galaxy s2

    Filling in the gaps between Samsung’s flagship Galaxy S series was a tidal wave of cheaper Android smartphones and experiments with new form factors, most notably the Galaxy Note series which seems to have kicked the phablet category into gear.

    In the first quarter of 2012 Samsung finally overtook Nokia to become the world’s largest mobile phone maker by sales. It was a great start to the year and things were only going to get better with the release of Samsung’s most successful Android smartphone so far in May. The Samsung Galaxy S3 boasted a 4.8-inch 720p display, a 1.4GHz quad-core processor (1.5 GHz dual-core in the U.S.), 1GB or 2GB of RAM, and an 8MP camera. It has deservedly sold more than 50 million units (10 million in the first three months on sale). Cutting edge specs and interesting software features, combined with a serious marketing push, and strong branding put the “latest Galaxy” alongside the iPhone in terms of desirability.

    galaxy-s3-sales-samsung-ces-2013-1

    Amidst its greatest success Samsung was pulled back down to earth by Apple’s $1 billion patent case win. This looked like an indictment of the company’s supposed Achilles’ heel. Analysts have long leveled the same complaint at Samsung, namely that it knows how to dominate an existing market by analyzing the leaders and beating them at their own game, but it has no idea how to truly innovate.

    Copycat, copycat

    You could argue that human advancement itself is a story of taking what works and building upon it to improve things. There’s no room here for an in-depth analysis of the patent wars in the smartphone market, suffice to say that many lines of human endeavor are not subjected to the same claims of ownership (though many are). The basic truth remains that only the most determined Samsung apologist could overlook its policy of copying the competition.

    apple-samsung-patent-claims

    The company started out analyzing Motorola and trying to best it. Samsung’s focus on Nokia nearly led it down a dead end. Nokia’s continuing hold on the number one spot masked its overreliance on the dying feature phone market. Documents that emerged during the Apple case revealed that Samsung execs felt there was a “crisis of design” at the company and there was a realization that it should be competing with Apple not Nokia. That led to a concerted effort to beat Apple, which began with analyzing, and sometimes copying, what was good about the Apple experience.

    It’s possible to sneer at Samsung for being derivative, and many people do, but no company grows this successful without delivering a good product to its customers. It’s also a perfectly legitimate approach in many industries which is why Samsung executive vice president, Kim Hyun-suk had no qualms about telling the New York Times, “We get most of our ideas from the market. The market is a driver, so we don’t intend to drive the market in a certain direction.”

    Leading the field

    With 2013 nearly at an end we can see evidence that Samsung is adjusting to its new found status as a leader. The gap has arguably narrowed as the S4 is not streets ahead in hardware terms compared to the rest of the Android flagship pack. Samsung clearly tried to add value with its software features, but any drive towards its own ecosystem is going to clash with Google’s services and they’re part of what makes Android so great. The Note 3 is more clearly the best device in its category, but the phablet wars have only just begun and we’re seeing a lot of new releases that will compete.

    Galaxy Gear Note 3 find my device

    Samsung’s more interesting moves, in the shape of the Galaxy Gear smartwatch, and the Galaxy Round, aren’t looking too impressive. The Galaxy Gear is horribly limited and it’s no surprise the reviews are not glowing. There’s no substantial improvement on what Sony and others have already done in this space. The Galaxy Round looks like a determined effort to announce a flexible display device before LG. The benefits of its design are far from clear and the news that it will be a limited release to test the market can only dampen any potential excitement.

    Before we get too negative let’s point out that Samsung is seriously outspending the competition on research and development. It spent $10.6 billion in 2012, compared to Apple’s $3.4 billion. It will take time for that investment to bear fruit and the company has a lot of work to do to change the mindset that has served it so well. The fact it is spending this much on R&D suggests awareness that staying on top requires true innovation. Only time will tell if Samsung can transition to pacesetter and make that number one spot its own for the long term.

    Comments

    • dodz

      admit it, samsung is the best and most successful electronics company, unlike apple’s R&D which only consists of suing and outsourcing other companies for the parts of their so called iphone.

      • cycad007

        They are also one of the most corrupt companies in the world. I’m fine admitting they can make great products. But they’ll do anything to make a buck. Their behavior in many ways is worst than Apple’s. Bribery, anti-trust behavior, falsifying reports of HTC phones, FRAND patent abuse, evidence destruction, price fixing, and patent infringement .

        I’ll never buy a Samsung-branded product ever again.

        • NeedName

          Hate to tell you this, but just about every major international conglomerate does “bad” things. . . just as bad as any other conglomerate. They’ve all become very very dirty because governments, around the world and especially in the US, cater to them these days.

          • Gator352

            Well said.

        • Jesus

          You either become the monster and take over the world, or be that shy little girl playing with her penis by the see saw.

    • Aniruddh

      Apple probably makes more money from lawsuits than from actually selling it’s products

      • LoRenx

        This is worse: Microsoft makes more money with Android than with Windows Phone.

        • NeedName

          THIS! and the death of Nokia is why I won’t buy another MS product.

      • JoyOfSpecs

        Where DO you guys get this crap? SERIOUSLY!

    • Barry Findlay

      I’ve been telling people to watch out for Samsung for years now. They also build supertankers, skyscrapers, satellites. We haven’t seen anything yet.
      Though KIES is just terrible. They should be ashamed of themselves for putting their name on that rubbish.

      • adam evans

        Big `hardware` companies can’t do software! I can’t think where one has managed it

        • monkey god

          Well Apple technically counts as a big ‘hardware’ company, i suppose. Well, they design and sell hardware anyways…

          • adam evans

            You think apple make good software ?

            • RanRu

              They make very stable and moderately useful software, so it depends on your definition of “good”.

            • adam evans

              Yeah I suppose their a bit of an exception, they do OK software in my opinion, nothing amazing. From what I understand siri was amazing before apple acquired it, then all of a sudden it turned crap, also things like icloud where terrible and still aren’t good

            • monkey god

              Every software company makes crap now and then. Look at Microsoft. But both companies are also known for making successful industry changing software (windows. Office. IOS. Osx). So by that measure, I think Apple can and does make good software.

          • Barry Findlay

            Apple((WTF has Apple even got to do with this? piss off with the Apple bs and stay on track. Besides the fact that Samsung were in the mobile business decades before Apple(Steve Jobs) even thought about it.
            without the investment of Motorola, Nokia, Ericsson, Samsung etc. Apple would have no ship to sail on, no shoulders to stand on.

    • Balraj

      Nice article
      I thought Samsung was 100 yrs old

    • beatles

      Nobody Stays On Top
      Crapsung

      • John Locke

        Trolls like you ruin this website.

        • beatles

          Trolls like you ruin all comments sections of all websites of all your crap sung

          • John Locke

            Yep, typical troll. Just get off this website.

            • beatles

              says the crapsung ‘authority’
              -
              k!’ll yourself

            • John Locke

              Dude, stop wasting your life. Btw, this website also likes HTC.

            • beatles

              it says in the article ‘copycat,copycat’ copycat crapsung

            • John Locke

              Don’t you get tired of trolling?

            • Gator352

              He’s having a hard days night on the yellow submarine. Maybe the pressure is getting to him a little?

    • Spencer

      Good article with good Grammer… Something that’s surprisingly becoming rare at AA

    • LOLOLOL

      Great article, but i think S2 was 4.5 inches not 4.3. at least in the U.S.

      • cam302

        No the epic touch was 4.5 inches stll the s2 just a better version from sprint

    • Miguel

      Thanks for the article, very interesting

    • Nitinart Nunthong

      good article. nice to read.
      I remembered so well that my very 1st cell phone was a Samsung C100.It was kinda cheapest phone having a color screen at the time (65000 colors on 1″ screen). And my 1st android phone was a galaxy S1. Though I am using a nexus devices (galaxy nexus , nexus 4 ,nexus 7 2012) , I still like samsung . (my laptop is samsung too). But I just get tired of their phones’ design, I want to see something new like their high end ultrabook. Look at the ATIV book 9 plus , it is one of the most beautiful ultrabooks . I would like to see something like that go to Samsung ‘s android flagship.

    • beatles

      Samsung is popular because of K-pop
      when K-pop dies Samsung dies

      • John Locke

        What are you talking about?

        • Gator352

          Not sure but he needs to lay off the liquor….

        • Richard Sequeira

          We can all assume that this person will post a “Black culture is popular because of hip-hop
          when hip-hop die Black culture dies”

    • thegeordieboy

      Recently I was REALLY low on money and debts were eating me from all sides! That was UNTIL I decided to make money.. on the internet. I went to surveymoneymaker dot net, and started filling in surveys for cash, and surely I’ve been far more able to pay my bills!! I’m so glad, I did this.. – g915

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