Samsung walks the Nokia path. I wonder where does it lead?

There is this huge industry giant, let’s call it “X”, that dominates smartphone/mobile device market. And collects almost half of all industry profits. Billions and billions of dollars a year.

Every year  they come out with a new flagship device, each one more successful than previous one. This flagship very quickly becomes one of the most popular mobile handsets that year, with very few other vendors capable of producing a device to match or exceed it in unit sales volume.

But while the flagships are extremely profitable, this mobile giant is no one trick pony. It actually produces mobile devices at every price point, in every popular form factor.

And does so profitably. In fact, its financial resources, logistics, supply, manufacturing and distribution is of such a scale, that only small regional upstarts with pre-baked device designs from Schenzen China are able to compete with it. But only locally, and barely. They have no close competitor on Global scale.

Sometimes X misses a hot new trend, and smaller competitor releases a device that becomes a big hit. That doesn’t bother the X in the least. They simply muster their manufacturing and logistics base, and quickly come up with an answer, copying the most important features of the hot gadget. Then it start replicating that successful design up and down the price tiers, adding better spec’d more expensive stuff, removing features or using cheaper components to produce cheaper variations, etc; And floods the market with a plethora of models for every taste. In a few quarters it’s X, who is the biggest player in the hot new category.

Speaking about the number of models X is able to churn out each year. It’s simply mindboggling. Even the most ardent fans can not easily name even half of them.

X is also not afraid to take risks. Sometimes these risky products are complete duds, but sometimes they can create, define and then dominate new category for years.

And X has a very good idea where the mobile industry is headed. They can see the ever increasing importance good software/platforms and online services will have on their business. X has already made getting good at software and creating world class online services one of strategic goals for the whole company.

Few years ago, X also got the first taste of what having a winning software platform might mean for business. But they didn’t own that smartphone platform, which was made and owned by another company, and available on the same terms to everyone else. They then tried to get into mobile software platform game themselves, by creating mobile OS of their own. Complete with its own app store and and SDK.

While busy trying to make their first platform a success, X also had an open source project with Intel as a partner, to create the future proof next generation mobile platform. They talked about the new platform and its bright future a lot. Promised all developers app compatibility between the old platform and the new. And yet,  didn’t release mass market/consumer ready product for years.

And, X embarked on software/online service company buying spree. Gobbling  up numbers of promising start-ups, with quite a few very interesting and useful features making it to their phones. But never resulting in a coherent integrated offering, always described by reviewers along the lines of “hodge podge of software features and services randomly thrown together”.

Care to guess which company I am talking about?

Samsung?

Nope. I was talking about Nokia in 2003-2009. But it could have as easily been Samsung:

Nokia

Samsung

dominated mobile industry, owning 30%+ of the mobile phone and 70-30% of smartphone market dominates smartphone industry with almost 30% market share, and 40% share of Android
had 50%+ industry profit share in 2007 had 34% of smartphone and over 90% of Android profit share in 2012
was several times the size of its closer competitor, is several times the size of its closer Android competitor. By estimated unit volume – now about twice the size of Apple
with unmatched mobile phone logistics, manufacturing and distribution scale with unmatched mobile device logistics, manufacturing and distribution scale.
successfully defended against first generation cheap Shenzen phone attacks. Even in China successfully defends against first  Shenzen smartphone attacks in China, India and everywhere else.
successfully recovered after missing a major trend – clamshells, color display phones,  RAZR like thin devices, QWERTY smartphones successfully recovered after being somewhat late to modern smartphones/Android/tablets, beat HTC to become dominant OEM, then proceed to beat Apple in smartphone market share, may soon start closing in on tablets
created or pioneered new device categories – cameraphones, smartphones, communicators created and still dominates phablet category
had quite a few flops, e.g. ‘N-Gage had quite a few flops, e.g. Bada, original Galaxy Tab
had a mindboggling amount of new models every year has a mindboggling amount of new models every year
clearly saw the trend towards mobile computing – N-Series, E-Series “multimedia computers”, communicators clearly sees and rides the trend towards mobile computing. On Android
ruled the smartphone with software platform owned by another company – Symbian Ltd. Which licensed the same platform to Motorola, Sony Ericsson and others rules the smartphones with software platform owned by another company – Google’s Android
had its own app store– Nokia Download, OVI store,  proprietary S60 SDK, etc; had its own app store and SDK for Bada, now its own app store on Galaxy phones
bought Symbian, tried to make it their own and failed, killing alternative UIs/SDKs, preferencing own needs and devices. Failed created its own Bada platform, which failed to catch up and was abandoned
started an open source Maemo project to create next generation mobile computing platform, later merged with Intel’s Mobilin and renamed Meego started an open source Tizen project to create next generation mobile computing platform, with Intel as a partner
promised transition/compatibility for Symbian app developers via Qt promises transition/compatibility between Bada apps and Tizen
1 consumer/mass market ready Maemo/Meego device after 6 years of development 2 years and counting since Tizen announcement. No commercial products yet
went on a buying spree between 2006 and 2010, acquiring 17 startups/software/service companies to build-up its software/online service offerings, spending close to $10 billion in the process in the midst of the buying spree, to build-up its TouchWiz/S-whatver offerings. Ready to spend billions
tried to unify its software/services under OVI brand. Failed to create an integrated, consumer friendly product. Constantly bashed by fans and foes alike for lack of integration and consistency. from Walt Mossberg’s Galaxy S4 review: “I found Samsung’s software often gimmicky, duplicative of standard Android apps, or, in some cases, only intermittently functional.”

Like with all such comparisons, this one is not exact, deliberately overlooks some differences and artificially enhances some of the similarities. And, of course, history doesn’t really repeat itself.

More importantly, Samsung has a couple of things going for it, that Nokia didn’t: Apple – to keep it on its toes and act as a “source of inspiration”, and Google – to prod it in the right direction.

Still, taken together, all those similarities above, are uncanny. Especially the foray into the software and services.

Except for a few American companies with software/online services in their DNA, nobody has yet created a globally successful consumer/mass market software platform during the last 30 years of personal computing revolution. Even though countless tried.

As for the hardware vendor successfully transitioning to where Samsung wants to go? If anyone can do it – its them. But only if it is possible at all

 

 

Author: Stasys Bielinis

While I like to play with the latest gadgets, I am even more interested in broad technology trends. With mobile now taking over the world - following the latest technology news, looking for insights, sharing and discussing them with passionate audience - it's hard to imagine a better place for me to be. You can find me on Twitter as @UVStaska'

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  • Stefan Constantinescu

    Nokia never made their own components, that’s the key thing. Samsung can stop making phones tomorrow, but they’d still be one of the largest display makers, *the* largest NAND manufacturer, and the largest producer of DRAM. And that’s just components, Samsung also has the TV business, home appliance business, plus all their infrastructure projects. You’re comparing Nokia as a company to one division of many at Samsung.

  • Chaka10

    Your distinction is flawed. Nokia had (still has) a leading telecoms infrastructure/equipment business. For many years, especially during the initial cellular buildout, that was one of the largest industries around, with the likes of Lucent, Alcatel, Nortel, Ericsson, Motorola, Siemens, and yes, Nokia. Not accurate to paint Nokia as simply a handset maker.

  • Max

    The phone division might be one of many at Samsung, but it is responsible for most of their profit. They make more money from phones than everything else put together. Those other business have become low margin, commoditized businesses. Check the recent earnings report of Samsung.

  • Kaylix

    Ridiculous, don’t try to be relevant. Just post the news.

  • MartyX

    That’s wrong. The core of Nokia was it’s own superior radio chip (modem, baseband, RF). Nokia was (and still is) big manufacturer of network infra.

  • taramorris

    In now a day every company is running for earn the Money and increase the demand even customer are more and attracted to this company but there is more competition in the market .

    http://www.scribd.com/doc/174664070/Clear-Cleanse-Pro-Supplement-Staying-Healthy-and-in-Shape-is-Must

  • http://www.staska.net Staska

    Don’t agree. Components had little to do getting Samsung to the top, and have little to do keeping them there. Other divisions might help in the lean times. But mobile is now 60%+ of Samsung Electronics revenue and 65% of profits.

    If Samsung misses some major disruption in mobile, and things turn bad – it might get very painful. Not that I expect any major disruptions anytime soon. And Samsung, with its fast follower DNA, will probably catch any new wave again.

    On the other hand, who the heck saw the double whammy of iPhone/Android coming, or could imagine anything like what happened, happening to Nokia, in 2006?

  • Chaka10

    The similarity described very well in this article is no coincidence. Before Apple, Samsung had set its sights on Nokia as the then dominant market leader — studying and frankly seeking to duplicate all aspects of its success.