It's been a year of transition for Samsung (NASDAQOTH:SSNLF) as it relates to its smartphone business. Earlier this year, the company refreshed its flagship Galaxy line of phones, bringing to market two versions -- the Galaxy S6 and the Galaxy S6 Edge -- to compete with Apple (NASDAQ:AAPL) in the high-end markets.
Unlike previous versions, however, Samsung went in an entirely new direction with its newest-generation smartphones. Where the Galaxy S5 and the relatively popular Galaxy S4 had a microSD slot and a swappable battery amid a plastic backing, the Galaxy S6 went for a unibody frame and luxury build quality at the expense of removable components. With the aforementioned changes, many critics faulted Samsung for making an Apple clone.
Unfortunately for the South Korean electronics conglomerate, it doesn't appear to have changed the company's high-end, post-Galaxy S4 struggles. Now those struggles have claimed its president of mobile communications.
Will Samsung shift to software?
According to Bloomberg, replacing Shin Jong Kyun as the president in the mobile-communications division is Koh Dong Jin; Kyun remains with the organization but relinquishes command of this important division. The most interesting point of this switch is Jin was previously responsible for software-related innovations such as the enterprise-security KNOX and the recent mobile-payments solution Samsung Pay. If past is prologue, this could signify that Samsung is looking to software advantages as its path forward.
However, that's easier said than done. Unlike Apple's walled-garden approach of controlling hardware, software, and operating system, Samsung partnered with Alphabet's Android for its OS. And although the company has a nascent competing operating system with Tizen, the vast majority of phone sales for Samsung are running Android. And that's a dual-faceted problem for a company looking toward software supremacy as a differentiator.
Fragmentation and competition
For insight into how tough it will be for Samsung to use its software as an advantage, look no further than Samsung Pay. While the point-of-sale technology appears to be top notch, even better than Apple Pay's as the former uses both NFC and MST technology, it faces issues Apple does not. On one hand, it has to compete directly on a device level with Android Pay, an option on most Android OEM phones, which could spur its adoption with end users and credit card issuers.
Next is a problem with fragmentation. The Android ecosystem requires input from Alphabet, the device manufacturer (Samsung), and even mobile carriers to upgrade to new versions of its operating system and each update needs to ensure all parties are on the same page to function properly. Even if Samsung's software and technology is top-notch, it's possible the end-user experience will not be reflective, especially when compared with Apple.
While I applaud Samsung for attempting something to reverse its smartphone woes, I'm not sure this is the right path forward. In the end, I think the decision that will continue to limit its growth going forward was made nearly a decade ago when the company decided to build its castle on another company's land. And while it would have been hard for any visionary to see a decade into the future, Samsung transition to software and its nascent Tizen system may be too late to reverse its smartphone woes.