Samsung – Edge dancer.

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Samsung is left with very little on Android devices. 

• Following the disaster of the Galaxy Note 7, Samsung really needs the Galaxy s8 to be resounding success to repair its damaged reputation but I see it being limited in what it can do by its deal with Google on the ecosystem.
• In January 2014, Samsung and Google signed a deal where Samsung agreed that it would no longer compete with the Google ecosystem and would consign itself to places where Google decides not to play (see here).
• Since that time, Samsung has managed use the fact that it outsells its nearest Android competitor by more than 2 to 1 to gain significant scale benefits to bring its margins back to double digit territory.
• However, with Huawei snapping hard at its heels it is once again looking to see if it can also use software and services to eke out some differentiation instead of relying purely on scale.
• To that end the Samsung Galaxy s8 is expected to sport a new look and feel to the user interface, more control of battery usage as well as features to make the user experience more intelligent and intuitive.
• This is where Samsung’s acquisition of digital assistant Viv comes in and it is here that I see real problems.
• This is because Google already has a service called Google Assistant and it is almost certain to be part of the agreement that Samsung signed with Google in 2014.
• This means that on Samsung’s own devices it will be Google Assistant that sits on the home button and Google Assistant that will be set as default.
• This leaves Viv out in the cold and it appears that Samsung aims to use it as part of making search and discovery on the device more intelligent which is something Google Assistant does not really do.
• Viv has been demonstrated as a very cleaver assistant that understands complex multipart questions as well as context but Samsung will be unable to do anything meaningful with this functionality on Android devices.
• This is a great example of how Samsung is left with very little on Android and will be permanently left dancing around the edge of the Google ecosystem.
• Samsung remains completely free to do whatever it likes on Tizen smartphones but the problem is that no one buys them as they have no ecosystem and no 3^rd party apps in volume.
• This will leave Samsung still fully reliant on the volume advantage that it has over Huawei for its long-term profitability because the users are still almost certainly going to identify with Google when it comes to software and services.
• Fortunately for Samsung, Huawei has had a pretty tough year in its home market with the gains made by Vivo and Oppo (see here) and whether it has the stomach for a very expensive battle with Samsung is increasingly unclear.
• The net result is that I don’t think that innovations around artificial intelligence (Viv) and UI tweaks will curry much favour with the user base leaving Samsung still dependent upon volume.
• Samsung’s share price has more than recovered following the Note 7 recall and is once again close to my KRW1.8m valuation.
• Hence, I remain pretty indifferent to Samsung especially as the brand damage from the recall has yet to make itself clear.