Samsung Acknowledges an Apple Advantage

Depending on how you measure it, you could argue that Samsung is winning its war against Apple (NASDAQ: AAPL  ) . The South Korean conglomerate had set a corporate goal for itself this year: "BEAT APPLE."

If you look at global smartphone shipments, Samsung is No. 1, with 56.5 million units shipped in the third quarter. That's more than twice the 26.9 million iPhones that were sold. The two are gobbling up the market; Research In Motion (NASDAQ: BBRY  ) ranked a distant third with 7.7 million units. When it comes to profit share, it's a different story: Apple accounted for over 70% of the industry's profits in 2011.

It turns out that Apple has another key advantage over Samsung that a Sammy exec is now acknowledging. In a recent interview with MIT Technology Review, Samsung's new chief strategy officer Young Sohn talked about why he personally uses Apple gear at home, despite his company's ongoing thermonuclear war with Cupertino.

Stop me if you've heard this one before
Apple's biggest advantage over Samsung right now is its ecosystem. Sohn describes how Samsung has always been viewed as primarily a hardware company. The South Korean conglomerate makes things like semiconductors, displays, and smartphones. An "innovation ecosystem" is something that Samsung needs to remain competitive with Apple in the long term.

This is exactly why Sohn uses a Mac, iPhone, and iPad at home (he also has a Galaxy). The proprietary nature of Apple's ecosystem is what keeps him in, since he can communicate more easily with friends and family across the world. He still thinks the Galaxy Nexus is a superior device to the iPhone, but it has a disadvantage on the ecosystem front.

Sohn said he uses Samsung devices at work and Apple devices at home.

Can Sammy do it?
Building a compelling and sticky ecosystem is easier said than done. Samsung's historical role as a hardware player doesn't give it good odds at building one, since commoditized hardware companies generally have a poor track record here.

Have you ever heard of AcerCloud? Probably not, and that's the problem (for Acer). AcerCloud is essentially identical to Apple's iCloud (with a PicStream instead of a Photo Stream), and is the company's shot at building a cloud service ecosystem. HTC tried this years ago with HTCSense.com but gave up on that earlier this year.

Since hardware companies only generate low profit margins upfront, building and maintaining an ongoing cloud service infrastructure isn't sustainable, especially when you acknowledge the fact that the going price for these services is $0 per month thanks to the companies currently offering them for free like Google (NASDAQ: GOOGL  ) , Apple, or Microsoft (NASDAQ: MSFT  ) .

Besides, that's always been Google's strategy with Android anyway: give away the operating system for free in order to reinforce its online services and ad businesses. Android users are far more loyal to Google than they are to the Samsungs, HTCs, or LGs of the world. It's unlikely that the software modifications that OEMs add are effective at instilling brand loyalty.

Bada bing
That's partially why Samsung has tried to push its Bada operating system. The company said last year it was making Bada open source, but there hasn't been any word since. Even though most consumers probably aren't familiar with Bada, it actually has a higher market share than Windows Phone. Gartner pegged Bada at 3% of the market in the third quarter, higher than the 2.4% that Mr. Softy claims.

That's up from 2.2% a year ago, but still a drop in the bucket compared to the rise of Android and iOS. Samsung's played no small part in Android's rise, but that's been more of an ecosystem benefit to Google than itself.

Hardware OEM history 101
Sohn isn't the only executive of an Apple competitor that uses Apple products. For example, Hewlett-Packard (NYSE: HPQ  ) executive Chairman Ray Lane uses a MacBook Air even as HP tries to mimic its designs.

Samsung is at the top of the smartphone world right now, thanks to Android. Sohn is hoping to build Samsung's ecosystem so it can stay at the top, but history is not on his side.

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  • Report this Comment On December 14, 2012, at 7:52 AM, applefan1 wrote:

    Old and boring OS? What Android did was go from a 2D GUI to more 3D and in the process they add some themes and different transitions. That's about the major differences, which are superficial. Android gets two awards.

    The EYE CANDY Award

    and the

    MORE CHEAP PRODUCTS THAT HAVE LOW MARGIN AND NO PROFITS AWARD.

    Face it, Andriod users don't like paying for anything except the actual hardware, everything else like content, apps, third party products, they just expect for FREEEEEEEEEEEE! I seem to run into a tremendous number of gadget collectors that buy Android devices, but they have several things in common, they don't pay for music and video, they pirate it, they like hacking games so they can have a chance at winning the game, and they don't really use their product other than playing around with them trying to change the themes and put different OSs on their devices since that's about all they do with these things. Maybe that's why there isn't much internet traffic with the Android platform. They collect them, but they don't really use them.

  • Report this Comment On December 14, 2012, at 7:54 AM, jdmeck wrote:

    Too bad Samsung steals or copies most everything it makes.

  • Report this Comment On December 14, 2012, at 8:03 AM, magnaman1969 wrote:

    RIM has all the tools to compete and will with BB10.

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