Market Insight

Samsung makes smartphones smarter with sensors, but risks overshooting market needs


Samsung's just-announced flagship smartphone, the Galaxy S4, contains numerous features:

  • An eight core Samsung-designed Exynos application processor, the first smartphone to offer eight cores. However, in the US and select other countries S4 models will include Qualcomm's quad core chip instead.
  • Numerous software customisations to create new user experiences based on the long list of sensors built into the S4: S Health activity tracking; Smart scrolling and smart pause using automatic eye tracking; Air gesture to allow screen interactions without contact with the screen; S Voice Drive for voice controls, etc.
  • Included sensors are: Accelerometer, RGB light, Geomagnetic, Proximity, Gyro, Barometer Temperature & Humidity, Gesture. The S4 is the first smartphone to include a humidity sensor.
  • Both 4G/LTE and 3G support. Samsung will release variants of the S4 with either 3G/HSPA+ at 42Mbps or also category 3 4G/LTE at speeds of up to 100Mbps, across six different band sets, dependent on country. A model with support for the TD-LTE standard popular in China will ship later in the year.
  • A full HD 1080P five inch screen with 441PPI. This is the first 1080p screen to use Samsung's in-house Super AMOLED technology. The screen will respond to touches even if the user wears gloves.
  • A 13 megapixel rear and 2 megapixel front facing camera. Both can be used simultaneously for photo or video capture at 1080P quality. The S4 also includes numerous shooting modes and special effects shots such as 'beauty face' and 'sound and shot'.
  • Samsung Knox security software, that delivers a hardened version of Google's Android OS to keep corporate and personal data and apps separated on a single device. This also supports a secure payment initiative where Samsung is partnering with Visa.
  • WatchON is a custom remote control app that uses the S4's infrared transmitter to control TVs, set-top boxes, DVD players and other home devices.
  • A total of 327 mobile operators will carry the S4, starting from late April. All four major US mobile operators will range the S4.

 

The Galaxy S4 will cement Samsung's existing position as the leading mobile handset maker globally. This flagship smartphone will act as a halo device that will boost Samsung's mobile brand and support sales of all of Samsung's handsets at all price points.

As a result of Samsung's new flagship mobile handset launch, we forecast that Samsung will extend its mobile phone market lead from 4 to 11 percentage points over the next largest handset maker. Globally, Samsung will ship 29% of all mobile phones in 2013.

The Galaxy S4 has so many features that Samsung is building up the potential for a market entrant to damage them in the medium term, two to three years out. Building mobile devices is all about the trade-offs that a product designer makes. Samsung has chosen to include everything. The result is a relatively large and expensive handset (although it's much lighter than the Nokia Lumia 920 that pursued a similar design rationale).

Many of the features of the S4 overshoot current consumer needs. For example, if a consumer can't see the dots on a screen with 720P HD at 300PPI, what benefit does 1080P HD at 441PPI provide? Offering an eight core processor is a similar overshoot. The dual core iPhone 5 and Nokia Lumia 920 are very responsive in use and so is the quad core Nexus 4. Does current software need eight cores to function fast? No. Even Samasung appears to agree: the quad core and eight core variants of the S4 deliver the same software features.

Nothing lasts forever. Nokia was toppled as mobile handset leader. Microsoft was replaced as the dominant technology company, as IBM had been before it. There are numerous challengers seeking to beat Samsung, most notably Chinese handset makers such as Huawei and Lenovo, but also including a revitalised Sony and the still struggling Nokia. Samsung will have to continue to innovate and execute to maintain its market position. The S4 demonstrates extensive innovation by Samsung.

But, given the extent to which the S4 overshoots current consumers needs, Samsung must also continue to release compelling mid and entry level smartphones. This continued focus on simpler smartphones is essential for Samsung to stop disruptive competitors from successfully implementing the lessons of Christensen's Innovators Dilemma by undercutting a feature-laden mature product such as the S4 with a cheaper less capable alternative that still meets the market's needs

In reality, the S4 is a family of flagship handsets sharing common branding, software and case design but that use different application processors -- either Samsung or Qualcomm -- and different combinations of 3G and 4G modem technology to support the mobile network conditions in different countries. Samsung's scale makes such a broad launch possible. And, Samsung's extensive marketing spend drives awareness of the Galaxy S handset model brand to straddle over all of those hardware variations and tie them together into one marketing message.

But for component makers, this should be worrying. If consumers and operators choose Samsung's Galaxy S4 flagship based on that brand, irrespective of what is under the bonnet, then the mobile market entry strategy of Intel with its "Intel Inside" marketing will struggle to gain traction. Similarly, Nvidia hopes to establish Tegra as the preferred consumer-facing brand for high powered graphical mobile experiences. Both assume that consumers care about component branding. The world's largest mobile handset maker, and a leading mobile component maker itself shows it disagrees by marketing its handset brand above all else. 

The reason for Samsung's choice of Galaxy S4 tagline, "Life companion" is because the word "mobile" in mobile phone is highly misleading. Smartphones are most importantly about personal experiences, not mobile ones. Many of the new features that Samsung is adding into the S4 are about the immediate vicinity and even inside the home, and not focused on really mobile life. The S Health app tracks activity but also connects to bathroom scales. The remote control app is for use in the living room, not the bus or car.

With the S4, Samsung is making smartphones that are becoming vertically integrated despite using Google's 'open source' Android operating system as a basis. Samsung combines its own-designed components with an optimised version of Android that takes advantage of new sensors and input mechanisms, offers increased security with Samsung Knox, and connects with Samsung's own app store, wallet, video, music and game hubs.

Increasingly, this software and services innovation places Samsung in competition with Google's own services such as Google Wallet and the Google Play app and digital content store. Neither Google nor Android were mentioned in the launch event, although the S4 ships with a broad selection of Google mobile services, including: the Google Play store, Gmail, Maps, YouTube and GoogleTalk among others.

The Galaxy S4's Visa payWave integration signals Samsung's unambiguous strategy of putting all the pieces in place to dominate the smartphone ecosystem and all the ancillary monetisation channels enabled by a device which aggregates cards, identity, tickets, location, calendar, and preferences.

Visa's payWave applet will come pre-installed in the handset and can be securely loaded with users' cards over-the-air and into a secure chip independent of the SIM; this removes one of the biggest concerns of banks and financial institutions: the secure provisioning of payments details into the handset irrespective of which mobile operator with whom a user has a contract. This places Samsung in potential competition with operator business plans.

Regardless of the above concerns, the Galaxy S4 will ship in vast numbers because it's a very strong handset design, with significant marketing spend behind it, and one that everyone will sell: 327 operators, in 155 countries, starting at the end of April (it's only another 38 countries to reach every UN member state).

The Samsung Galaxy S4 will be a very successful smartphone. It will enable Samsung to extend its leadership position in mobile handsets during 2013.