Samsung Takes Low-Key Approach on Cellphones After Reaching the Top
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Version 0 of 1. BARCELONA — Samsung Electronics, which sells more cellphones than any other company — and, at times, more smartphones than Apple — is on top of the industry. But despite its ranking, the South Korean consumer electronics giant lacks a critical element that usually accompanies success: the lucrative brand mojo of an Apple. After all, you don’t hear anything about Samsung fanboys, right? But this year, here at the Mobile World Congress, the industry’s largest convention in Europe, Samsung appears to be taking a page from Apple. In the mobile telephone phone business, success seems to breed reticence. Apple has never exhibited its products at the Barcelona event. Now, Samsung is becoming less visible. In the vast, blue-and-white Samsung stand in Hall 3 of the Fira de Barcelona convention center, there are rows and rows of digital cameras, laptop computers, notepads, audio docking stations and even car infotainment systems. As what seems like an afterthought, there a few smartphones. Anneka Patel, a public relations executive who represents Samsung, said the company was consciously taking a low profile with its line of mobile phones, preferring to promote its other products. And instead of seeking publicity, the company was declining interview requests to discuss its phone business, she said. David Ffoulkes-Jones, the chief executive of WDS, a unit of Xerox in Poole, England, that provides technical support for Samsung smartphones in Australia and other markets, said Samsung was intent on honing its brand image, creating the same lasting, indelible connection Apple has with its consumers. The new low profile that Samsung is seeking for its smartphone line appears to be more a reflection of the company's growing self-confidence, but it could also be the first step toward building a more exclusive image for its devices. “Samsung’s challenge is to have a broader, deeper relationship with their customers than they now do,” Mr. Ffoulkes-Jones said. One analyst said Samsung, which had preferred brash product introductions in Barcelona attended by dozens of employees, was reverting to its introspective, engineering roots. “My theory is that Samsung never enjoyed having to promote its mobile phone business,” said John Delaney, an analyst at the market research firm International Data Corp.in London, who said he had also noticed Samsung’s soft-sell approach. “Now that they’re on top of the business, they don’t have to.” Overt or covert, the company’s success in mobile devices has enhanced its global luster. In a 2012 ranking of brands by the consulting firm Interbrand, Samsung climbed to No. 9, ahead of Toyota, Mercedes-Benz, BMW and Disney, and up from No. 17 a year earlier. Apple was No. 2, up from No. 8 and trailing only Coca-Cola. Apple’s brand value, estimated at $76.6 billion by Interbrand, was more than double that of Samsung’s, at $32.9 billion. Indeed, while the maker of the iPhone sells only about 6.5 percent of smartphones around the world, it takes 71 percent of the industry’s profit, according to Canaccord Genuity, an investment bank. Senior executives at mobile network operators, the companies that sell the bulk of Samsung and Apple phones around the world, said Samsung’s rise to the top had not been an accident but the product of a methodical, long-term strategy to offer a more affordable, accessible alternative to Apple. “I think one of the reasons Samsung is very big is because Samsung has been very adaptive and very flexible,” said Olaf Swantee, the chief executive of EE, the largest British mobile operator and a joint venture of France Télécom and Deutsche Telekom. “They haven’t driven one strategy. They are working with operators. They are working in different markets. I think their flexibility has been one of the key reasons for their success.” Vittorio A. Colao, the chief executive of Vodafone, the largest mobile operator in Europe, said he had clinched a wide-ranging deal a few years ago with Samsung at the Barcelona convention to sell Samsung cellphones through Vodafone’s operator network. That network includes Verizon Wireless, the U.S. market leader, in which Vodafone owns a 45 percent stake, and fully owned subsidiaries across Asia and Europe. “We made an agreement and set targets, and we reached those targets — exceeded them, in fact,” Mr. Colao said. One example of Samsung’s ability to work with a range of partners is its cooperation with General Dynamics, a U.S. government contractor, to develop a line of smartphones with the highest existing levels of software and hardware security. The security software the two companies designed for Samsung Galaxy smartphones, which incorporate GD Protected software, are approved for use by the highest levels of U.S. government and military officials. Samsung also produced a set of enhanced software security controls with General Dynamics’ support for Galaxy smartphones intended for the general public. The phones will run the Samsung Knox platform, which protects data stored on the smartphone and data sent and received by the device. The Knox platform, announced by Samsung on Monday in Barcelona and developed with support from General Dynamics, will be available in some Galaxy models in the second quarter of the company’s business year, which runs from April through June. Samsung’s cooperation with General Dynamics, which began a little more than a year ago, is the most extensive by the U.S. company with any maker of cellphones, said Mike Guzelian, a vice president in General Dynamics’ C4 Systems division, which is in charge of secure voice and data products. Tony Cripps, an analyst in London at Ovum, a research firm, said Samsung’s collaboration with General Dynamics could give the South Korean company an edge in distinguishing its smartphones, most of which run the Google Android operating system, from other Android vendors. “This could be an important differentiator,” Mr. Cripps said. Samsung similarly seeks to create win-win propositions for operators, offering to help pay for joint marketing campaigns for its phones and giving operators a relatively free hand to sell the devices as they see fit, said Kjell-Morten Johnsen, head of European operations at Telenor, a Norwegian operator with networks across Europe, Russia and Central Asia. He said Apple tended to control the marketing of iPhones tightly, in some cases obtaining a percentage of operators’ revenue from data generated by the devices. “It is pretty much a win-win with Samsung because it comes pretty much with no obligations, so people are betting that it will be a good product and they can push that into the market,” Mr. Johnsen said. But the same executives cautioned that the company’s tenure at the top of the industry was not guaranteed, in part because of the fickle nature of consumer tastes and the resilience of Apple. Even in some Central Asian countries where the iPhone is unavailable, the phone makes its way in through resellers and the gray market, said Mr. Johnsen, the Telenor executive. “The reason the iPhones are there is because people simply want them,” he said. But Samsung is competing more effectively now with Apple, he said. “I don’t think they are a company that will peak and fall from the top,” Mr. Johnsen said. “But over the long term, who knows?” |