Samsung on to a winner with S4

Malik Kamal-Saadi/Informa Telecoms & Media
18 Mar 2013

Informa Telecoms & Media believes that the soon-to-be-released Galaxy S4 will be an evolution rather than a revolution in the smartphone world – but it will still be enough for Samsung to maintain its number-one position in the market.

Samsung is announcing the fourth generation of its flagship Galaxy device today. Its form factor and industrial design are expected to look almost the same as the Galaxy S3 but significant enhancements in terms of performance are anticipated. In the current market, this is probably enough for Samsung, which already has a clear lead in terms of innovation.

The new device will strengthen Samsung’s position as the world’s number-one handset and smartphone vendor. It has been steadily building its reputation as the leading provider of Android smartphones since the launch of the first Galaxy S in 2010, and there’s no immediate possibility that this lead will suddenly collapse. The superior user experience of Galaxy S3 together with a large (nine-digit) marketing budget dedicated to promoting it has helped Samsung establish Galaxy as one of the most desirable brands in the mobile market.

With the S4, Samsung will capitalize on the strength of the Galaxy brand in a similar fashion to Apple with its iPhone upgrades over the last four or five years. In fact, in many markets, sales of Galaxy smartphones have now caught up with – or are even outselling – iPhones, thanks to Samsung’s aggressive marketing and its incentivizing of operators and retailers to give more prominence to Galaxy S3 on their shelves than other competing devices, including the iPhone. While investing massively in marketing the Galaxy brand, Samsung has also managed to secure a very good margin, thanks to the tight control it has over its hardware supply chain. In fact, about 50% of the different device components are manufactured in-house, better than any other handset vendor.

However, while Samsung continues to increase its Galaxy shipments quite impressively, the company is undermining its own position in the broader ecosystem by giving Google a huge mobile platform from which to influence consumers, application developers and advertisers. It is very difficult for Samsung to achieve that level of influence itself as long as it depends on Google to supply device software and key applications and services through Android. This is fine so long as Samsung is happy in the role as a vendor of huge volumes of devices. However, the lack of a powerful ecosystem of its own clearly positions the company lower down in the value chain than either Google or Apple.

Clearly Samsung will have to address this issue and differentiate itself from the generic Android ecosystem and bring more innovation to market. But the South Korean giant put the innovation barriers so high with the Galaxy S3 that it will be hard for it to come up with yet another revolutionary product just one year later. That’s why Informa believes that the Galaxy S4 will be nothing more than an evolutionary upgrade to the Galaxy S3 with no additional “wow” features, functionalities or UI capabilities.

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