Just last week, South Korean giant Samsung unveiled its newest flagship smartphone, the Galaxy S4, after months of actively building hype with a broad (and pricey) marketing blitz. Over the past year, Samsung has grabbed the spotlight as the top smartphone vendor in the world, and perception has grown that it has copied its way to success.
"The Next Big Thing" may not be a big threat
However, the Galaxy S4 proved to be something of a disappointment, with Samsung shares selling off 2.6% the day after the debut while Apple (NASDAQ:AAPL) rallied on relief that "The Next Big Thing" may not be that big of a threat after all.
One of the prominent criticisms of the device was that Samsung continues to utilize cheap plastic casings on its high-end flagship devices. This comes at a time when competitors continue to push the envelope with materials design.
Both Apple's iPhone 5 and HTC's One utilize aluminum unibody casings to house the guts of their newest gadgets. Both flagships immediately stand out as premium offerings, in part because of their external hardware designs. Nokia (NYSE:NOK) is about to launch a redesigned version of its flagship, the Lumia 928, that's getting a revamped aluminum casing as well. Lumia sales are picking up, and the emphasis on design is a contributing factor to the rise.
Samsung's incremental hardware design left something to be desired.
Following the Galaxy S4 unveiling, a couple of HTC execs took the opportunity to slam their South Korean competitor. Chief marketing officer Ben Ho said the "continuation of a plastic body" was "more of the same," adding that Samsung has "spent more on marketing than innovation." (Case in point.) HTC North American president Mike Woodward said he was actually rather "pleased to see no innovation in the design itself."
Samsung design exec Dennis Miloseski recently spoke at Engadget Expand, and partially explains why the conglomerate chose to focus on the softer side of things.
Miloseski downplayed the focus on materials, instead trying to shift the focus toward "building a meaningful relationship with technology." As such, the Galaxy S4's marketing tag line is "life companion," and Samsung spent an awful lot of time at the event undermining Google (NASDAQ:GOOGL) Android in favor of showing off its newest software features. For a device that promises to be the best-selling Android device, Samsung spent very little time actually talking about Android.
The designer says that the "global design process has been raised" and now goes beyond just hardware. With all the internal sensors that modern smartphones now include, the goal is to design a device that can "improve over time," and Samsung's goal is to "create a soul for a device." Miloseski added:
The design process doesn't start with a material. It doesn't start with us saying, "Okay, we're going to make a device that uses metal." The design process starts with a story. For a device [like the Galaxy S4], which is global and sells around the world, it's a matter of going into many different tastes.
The time of focusing on "more layers of hardware and glass" is in the rear-view mirror, according to Miloseski, and that future mobile evolution will hinge on connecting people.
Forget the past
In many ways, it's almost as if Samsung believes that smartphone hardware is becoming irrelevant, and that software is taking the driver's seat.
Miloseski's comments are indicative of an important shift in Samsung's broader strategy, since the company has historically been a commoditized hardware vendor. Samsung is fully aware that hardware companies tend to face slim margins due to intense price competition, and it is very clearly trying to expand into software differentiation by adding a plethora of new features.
Samsung doesn't want to have to rely on Google forever, even as right now their fates are inextricably linked in the smartphone market.
Having it both ways
Ultimately, the truth lies somewhere between the extremes. Specifically within the higher end market for flagship devices, consumers expect both hardware and software to be premium. Quality software in lackluster hardware may suffice in the low-end and mid-range market segments, but buyers paying top dollar are going to have top-notch demands.
That's why investors were disappointed with the Galaxy S4, because rivals are emphasizing hardware innovation as well as software innovation, while it seems that Samsung is only focusing on the latter at the expense of the former.
Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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