Samsung – Dancing round the edges

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Hardware alone cannot restore lost margins.

• Samsung’s launch of the Galaxy s6 and s6 Edge clearly demonstrated how little is left for Samsung to play with now that Google has taken the whole ecosystem.
• Samsung launched the Galaxy s6 and a double edged variant at a large but somewhat subdued event in Barcelona.
• Samsung has really pulled out all the stops when it comes to innovating in hardware and in that regard, the Galaxy s6 is different.
• The new processor is a 14nm FinFET processor which offers more performance in a smaller footprint with less power consumption.
• The user replaceable battery is gone but in return Samsung has integrated wireless charging and LoopPay into a device that is only 6.8mm thick.
• LoopPay (see here) is the wireless payment company that Samsung has just acquired that transmits payment data to the magstripe sensor in any payment device.
• Both front and rear cameras have been improved with the real emphasis being placed on low light performance.
• The combination of a wider aperture of f1.9 and software interpolation gives impressive results in low light even compared to the mighty iPhone 6.
• Samsung also announced improvements in the screen but adding 77% more pixels to the already impressive s5 is unlikely to make users notice.
• Furthermore, the screen curving around both edges of the device is little more than a pointless gimmick as even Samsung could not come up with a good use for it.
• However, in high end devices if a pointless gimmick is perceived to be cool it can trigger very high volumes at good prices.
• Pointless gimmicks can sell phones but the lack of excitement that was generated around the first Galaxy Edge does not fill me with hope.
• It did not surprise me that Hyun Lee from the Samsung user experience innovation did not have much to say.
• This is because since January 2014, Samsung’s hands have been tied with regards to the changes that it can make to the overall user experience.
• Samsung has made a few cosmetic changes here and there but this remains first and foremost, a Google device.
• Users will make their primary ecosystem choice and then choose which device manufacturer to use to run it.
• This means that whatever kudos Samsung can win with its hardware innovation will be secondary to what is in the user’s mind at the point of purchase.
• This means that there is no real scope for these innovations to give Samsung’s back its ability to price its products at a premium, leaving it as a commodity just like everyone else.
• However, if Samsung can hang onto its current market share it may be able to get its margins back to 10-11% through scale but no further.
• With a plethora of new devices hitting the market driving more and more capable devices further down to the mass market, usage of smartphones is likely to continue growing.
• In the Google ecosystem, the only beneficiary is Google, as its handset partners continue to cut each other’s throats to drive more traffic to Google servers.
• Consequently, Google is the only stock I would consider within the Android camp but I would still prefer Microsoft over all.