Benedict Evans digs into the bind that Samsung is in, maybe a response to Ben Thompson’s Why Samsung Will Fall posted on July 8.
But Evans goes a step beyond Thompson’s analysis, suggesting that Samsung is being unbundled by the entire Shenzhen ecosystem, not just being trapped in the middle between Google and Apple on one side, and low-cost manufacturers on the other.
Benedict Evans, Unbundling innovation: Samsung, PCs and China
When you unbundle an industry, you get new and different types of innovation in different layers of the stack. The skills you had in the bundled world may well still apply in the layer you find yourself in. Hence Samsung carries on doing interesting and impressive things in components, and can innovate up to a point in handsets, with things like phablets, so long as they do not depend on concessions from other parts of the stack. Equally, for example, Dell created an entirely new type of PC company – the PC company as a highly specialised logistics business – without differentiating at the operating system layer at all.
But what’s happened for PCs and smartphones and, to a large extent, mobile networks is that it’s that top layer of the stack, that the PC and Android OEMs and operators struggle to play in, that’s where most of the differentiation happens…ged these adjacent strengths to create better products and a stronger market position. Samsung has used the scale of the component business and access to those components to drive the devices business and vice versa, despite failing, mostly, to create compelling software differentiation. This leveraging of scale, combined with some great execution, has taken it to at least half of the total Android market.
The problem is that Samsung is increasingly competing with another sort of scale effect – it is competing with the entire Shenzhen ecosystem. Before, it was competing with individual companies (many of which happened to use that ecosystem), and like Nokia before it was fortunate in the relative weakness of most of its competitors. As for Nokia, that luck was bound to run out. Now Samsung is starting to face competition with new companies who are finding ways to build new types of handset businesses on top of that ecosystem – taking that ecosystem and using it to unbundle Samsung.
So Samsung is hosed because they can’t dominate any specific part of the stack. Again, their only avenue is Tizen, but they keep fudging the launch.