CES 2015 – Day 1 – Samsung spotlight

Samsung Smart Home will live or die in software.

• Samsung headlined day 1 at CES but its press conference was pretty subdued with a distinct lack of new and exciting ideas.
• Instead what was presented was an evolution of its current line-up of Televisions now to be using phosphor-based LED dots (Quantum Dots) as backlights.
• This is supposed to offer better picture quality and better colour saturation and is being called ColorPrime by LG and SUHD by Samsung.
• Whether the consumers will notice the difference is yet to be seen but this is not the kind of innovation that is likely to cause consumers to rush out and replace their already perfectly good TVs.
• All of its TVs will also now run on Tizen giving Samsung an opportunity to develop its own ecosystem for the home without running afoul of its relationship with Google.
• LG, Sony and many others also launched new 4K TV’s but there was nothing here that is likely to halt the rush to the bottom pricing of TVs.
• Of much greater interest was Samsung’s announcements around Internet of Things (IoT).
• Here Samsung has launched its SmartThings Hub which aims to be the brain that connects multiple devices together in the home in an intelligent way.
• This is very similar to Google Smart Home, Apple’s HomeKit and ARM’s mBed. (see here).
• There are two differences between Samsung’s offering and those of Google and Apple:.
  • First: Samsung is making its system completely open.
  • This means that devices will be able to operate on multiple smart home ecosystems.
  • In practice this means that Samsung devices will operate on every smart home system and every device will be able to operate on Samsung’s Smart Home system.
  • Second: Of all the providers of smart home ecosystems, Samsung has widest range of devices already in its portfolio.
  • Furthermore, it has a strong market position in many of these appliances ranging from refrigerators and TVs to mobile phones and tablets.
  • This ensures that there will be a good range of devices available for its system at launch.
  • This will encourage other device makers to make their devices compatible with Samsung’s system as well stimulate third party software development.
• However, as with everything Samsung, the Achilles heel is software.
• The system needs to be robust and reliable as well as easy and fun to use.
• Samsung does not have a good track record in this space and if SmartThings fails, it will be because the software did not meet the above criteria.
• Apple, Google and Microsoft are much better at developing software and Samsung will have to dig very deep to ensure its offering measures up.
• Samsung has a much better chance of succeeding here as long as it does not repeat its 2014 mistake of ceding control of the ecosystem to a third party.
• In that vein, I remain deeply concerned in regard to the profitability of the handset business which I think could go negative in 2015E.
• This will drag down the EBIT of the whole company and I fear that the worst is not yet over.
• I continue to prefer, Microsoft, Google and Apple.