Samsung and Android: The next Wintel or destined for divorce?

Samsung and Android: The next Wintel or destined for divorce?

Summary: As Samsung unveils its next flagship Android device, there are things happening behind-the-scenes that could threaten the future of the Samsung-Google alliance.

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TOPICS: Software, Samsung
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(Image: Kent German/CNET)

Samsung's pole position in the Android ecosystem is about get another boost when the Korean electronics giant unveils the Galaxy S4 in New York on Thursday night. But, while it’s all glitz and glamour this week, there's an underlying tension between Samsung, Google, and the Android ecosystem that is about to reach a crossroads in 2013.

The Android leader

Samsung's current flagship phone, the Galaxy S3, became the best-selling Android device in the world in 2012. In its first six months on the market, the Galaxy S III sold over 40 million units. In the third quarter of 2012, it even passed the iPhone as the single best-selling smartphone in the world -- though Apple snatched back that distinction in Q4 with the launch of the iPhone 5.

Now, Samsung is so bullish on the S4 that it is reportedly ordering enough parts to handle sales of 10 million phones per month. With much of the world still converting from old-style cellphones to smartphones, there’s certainly a solid case for that kind of bullishness. But, it also assumes that Samsung will remain Google’s pre-eminent Android partner over the next 12-18 months. The big question is how safe that assumption is.

If you want to know how key Samsung has been for Android, just look at the fact that when Google bought Motorola in May 2012, Eric Schmidt flew directly to Samsung’s headquarters in South Korea to personally assure its executives that Motorola would not get special status in the Android ecosystem.

"I told them that the [Android] ecosystem has to be favored at all costs," Schmidt said. "The Motorola products can't be unduly favored, unless you're also unduly favoring Samsung. If it looks unfair, and then the ecosystem unravels, then it's a terrible mistake."

True to Schmidt's word, Google has not shown Motorola any outward favoritism. Since the acquisition, Google hasn’t even tapped Motorola to build any of Android’s flagship Nexus devices. And, during the past year, Samsung’s leading role in the Android market has only been enhanced, with the help of runaway hits like the Galaxy S3 and the Galaxy Note.

Samsung now owns 40% market share of all Android sales. Second place? Huawei with about 7%.

Samsung has certainly earned its success. You can’t begrudge it that. The company has out-executed other Android device makers in both hardware design and software enhancements.

It also did a better job of emulating best practices from Apple than any of the others Android vendors. While that strategy cost a lot in legal fees after a protracted court battle with Apple (that revealed just how closely Samsung was stalking Apple’s moves), it ultimately came to a stalemate. Meanwhile, Samsung devices soared to the head of the class in Android.

The bottom line is that Samsung and Google forged an Android alliance that successfully stemmed Apple’s momentum in mobile devices. Ironically, it was very similar to the way Intel and Windows stemmed Apple’s momentum in personal computers a generation ago. And, let’s not forget that Samsung is also the leading seller in the Android tablet market and the leading laptop seller in the Google Chromebook market.

The Google-Samsung combination is the most potent new partnership in computing and it is putting tremendous competitive pressure on Apple and Microsoft. But, can the partnership hold together? There are several competing interests that are driving a wedge between the two companies, as is common with these types of partnerships. However, in this case, the future of both companies in the mobile business as well as the overall health of the Android ecosystem itself is at stake.

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(Image: Google)

Emerging threats

The first issue is that Samsung’s lead over the rest of the Android phone makers is beginning to evaporate. Just as Samsung skillfully executed plays from Apple’s playbook, now other Android vendors are emulating Samsung.

HTC is taking a page out of the Apple and Samsung playbooks by consolidating down to one flagship smartphone. In this case, it’s the HTC One, a sharp new device that was announced in February and is generally drawing strong reviews. Remember, HTC was the leading Android phone maker before Samsung’s recent ascent.

Meanwhile at CES 2013 in January, Chinese device maker Huawei unveiled a pair of high-end Android devices that are aimed squarely at Samsung’s two hit products, the Galaxy S3 and the Galaxy Note. The 6.1-inch Huawei Ascend Mate is a phablet that goes even a little larger than the Galaxy Note, with a very similar design.

The Huawei Ascend D2 also emulates Samsung’s thin plastic design and features a quad core processor, 32GB of built-in storage, 2GB RAM, a 13 megapixel camera, a screen with 443dpi pixel density (surpassing both the S3 and iPhone 5), and a 3000mAh battery that rivals the Droid Razr Maxx. Those are eye-popping specs that the Galaxy S4 will struggle to match when it is unveiled on Thursday.

After the Samsung Galaxy S3, the next hottest Android phone of 2012 was the Nexus 4, built by Google in partnership with Samsung’s Korean rival LG. In fact, the Nexus 4 would likely have taken a bigger chunk out of Galaxy S3 sales if the product hadn’t been sold out for most of the fourth quarter due to overwhelming demand.

With Google subsidizing the Nexus 4 so that it could be sold for US$299 (8GB) or US$349 (16GB), one of the Nexus 4’s greatest features was clearly its price tag -- since the device is unlocked and does not require a contract with a wireless carrier. The unlocked version of the Galaxy S3 costs US$500 to US$600.

The Nexus 4 price tag is great for consumers and for Google, who simply wants to get more Android smartphones in the hands of more people because it makes money off of people using its mobile platform. However, it’s not so great for Samsung, which makes its money off of selling devices. And, that is where the major conflict comes into play.

Bolstered by the success of the Nexus 4 and a similar scenario with the Nexus 7 tablet (built by ASUS), we have to expect Google to get even more aggressive in selling inexpensive Nexus smartphones and tablets directly to consumers to help free them from expensive and onerous contracts with wireless carriers and to help get more Google-centric devices in the hands of more people.

Google has been betting on this scenario since the launch of the Nexus One in January 2010 and it finally generated significant momentum around the concept in 2012. As such, I fully expect Nexus devices to take a bigger chunk out of Samsung’s Android market share in 2013.

While fighting low-priced Nexus devices on one front, Samsung will also have to deal with the re-emergence of HTC and the rise of Huawei, which could steal customers away from its core business of selling subsidized phones to consumers on traditional wireless plans.

Since Samsung's devices are based on standard industry hardware components that any of the electronics companies can use and the Android software platform is open for any company to co-opt, that leaves Samsung very little room to innovate as an Android device maker. And when there's little room to innovate, the primary differentiator becomes price.

Samsung's parachute

The primary product innovation that catapulted Samsung into the lead in the Android ecosystem in 2012 was arguably that it did a better job than its Android competitors of integrating hardware and software.

While Samsung’s Android success can also be attributed to its go-to-market strategy (getting its devices sold everywhere with wireless carriers and retailers), its massive advertising budget, and its ability to get parts inexpensively from its affiliates, the demand for its products was ultimately driven by a perception of quality and ease-of-use.

Again, Samsung had a jump on its Android competitors by being able to watch how Apple carefully integrated hardware and software on the iPhone since Samsung was one of Apple’s key parts suppliers for the product during its early years.

s-voice-032013

Samsung learned those lessons well and by the time it launched the Galaxy S3, it had included a variety of unique feature that showed its growing savvy in software as well as strengths in hardware-software integration, including:

  • S Beam sharing that lets you tap two Galaxy S3s together to share photos, videos, or files
  • Smart Stay eye-tracking technology that automatically keeps the screen bright for as long are you’re looking at it
  • Best Photo camera feature that takes eight continuous photos and then suggests the best one (and lets you override it and manually select the best one of the eight)
  • Direct Call lets you lift your phone to your ear to automatically call someone that you had been texting
  • S Voice (right) for enhancing the built-in voice commands that come with Android (read this TechRepublic article for some great S Voice tips)
  • Split-Screen Multitasking that lets you run two programs at once

For more on Samsung software features, read James Kendrick's Samsung Android: Better than Google's Android.

While Samsung is likely to continue this kind of innovation in Android to help its devices stand out against HTC, Huawei, Motorola, LG, and others, these types of software add-ons will inevitably remain outside of the core Android functionality and will be overlooked by lots of mainstream users, who are more likely to be influenced by price and ease-of-use.

So, unless Samsung can leap forward by being the first to integrate a groundbreaking technology like the flexible OLED displays that its affiliates are developing, then it’s destined to face long-term trouble in the Android market where it is going to become a race to see who can sell advanced smartphones at the lowest price. With Google being willing to sell Nexus devices at cost and Huawei being able to take advantage of Chinese manufacturing to bring its costs super-low and make profit on volume, Samsung could very likely get squeezed or be forced to lower prices and jeopardize its mobile profits.

That’s why Samsung is doing Tizen, which could eventually become its parachute for jumping off the Android bandwagon.

Tizen was originally the next-gen mobile OS to replace Symbian, back when Intel and Nokia were collaborating on it and it was called “MeeGo.” But, when Nokia hired Steven Elop as CEO and he burned all bridges and moved the mobile pioneer exclusively to Windows Phone, that left MeeGo abandoned. So, Samsung swooped in and picked up the pieces. It formed a new partnership with Intel, integrated its own LiMo project into the platform, and Tizen was born.

tizen-screen1-032013

It seemed like a minor, futile endeavor when Tizen was announced in September 2011, but it’s increasingly looking like it could become a critical part of Samsung’s future. At Mobile World Congress 2013 last month in Barcelona, Samsung put the spotlight on Tizen and gave the tech industry a sneak peek at the platform (see screenshot on right). Our sister site CNET has reported that the first Tizen phones will arrive this summer.

Tizen is still very raw, but it’s clear that Samsung is getting more and more enthusiastic about the platform. It not only folded its LiMo project into Tizen but it has now reportedly also folded its other pet project, Bada, into the Tizen platform as well.

Don’t expect the Tizen phones released in mid-2013 to be much of a threat to the Galaxy S4 or the iPhone, but you should keep an eye on how many software innovations and hardware/software integrations like the ones we’ve seen from Samsung recently are integrated into Tizen. Many of the Galaxy features Samsung rolled out last year are core functions that could form the heart of an excellent mobile platform.

Samsung will be testing the waters. It won’t quickly abandon the Android ecosystem and put a lot of potential phone sales at risk. Any time the question of Tizen is brought up, the overwhelming reaction on Internet forums from existing Samsung phone users is that they would likely stick with Android and switch to an HTC or Nexus phone if Samsung went all Tizen. So, this isn’t going to be something radical that happens in 2013.

But, 2013 could be the sea change.

I’ll give you one scenario to consider. If the Galaxy S4 remains the best-selling Android phone in the world (but with greater competition) and Tizen becomes a modest hit (with Samsung giving it a few exclusive features), then we could see Samsung move a lot more aggressively. For example, what if Samsung used the equity of the Galaxy brand to push Tizen? What if the Galaxy S5 or the Galaxy S6 becomes a Tizen phone? What the Galaxy Note 3 or 4 becomes a Tizen tablet?

Sure, Samsung would lose some users in those scenarios, but it would protect the profitability of its popular high-end devices. It would also gain the ability to make money off of services on the devices, rather than only making money on the hardware sales and then letting Google make all of the money from services, as Samsung currently does with Android. That’s why the Tizen experiment is more than just a hedge or a negotiating tool to get a revenue-sharing deal with Google to get a cut of that services money.

If the Android ecosystem becomes a race to the bottom on smartphone prices and Google refuses to share any services revenue with Samsung, then Tizen could become the platform where Samsung redirects mosts of its energy. Even then, I doubt it would completely pull the plug on Android devices, but it could certainly bet on the Samsung brand and Samsung products being just as appealing to the market as Android.

In other words, Samsung isn’t likely to market Tizen phones under the Tizen brand. It will focus on the Samsung brand, and it will attempt to create not just a device but a platform and an ecosystem. In the long run, that’s where almost all of the innovation -- and the profits -- will be as the mobile device market matures.

The thing to watch will be how effectively Samsung can create its own platform and ecosystem versus how aggressively Google makes concessions to keep Samsung primarily focused on the Android platform and ecosystem.

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Topics: Software, Samsung

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  • Man, You Are Really Stretching The Analogies

    "Wintel" refers to the Microsoft-Intel duopoly: Microsoft owns the dominant desktop OS, and Intel owns the only hardware architecture it can run on. Since most of the software (including Windows itself) is proprietary and difficult to port to any other OS or architecture, this gives those two vendors the ability to charge whatever prices they like for their products, and the customers and OEMs just have to shut up and take it.

    Android was developed by Google. But Google do not own Android to the extent that Microsoft owns Windows; not only is Android Open Source, but it also copies heavily from other Open Source projects.

    Similarly with the hardware: Android devices run predominantly on ARM CPUs, but ARM Ltd is no Intel: ARM chips can be bought from dozens of different suppliers, nobody has a monopoly.

    On top of which, Android, being Open Source and portable, can run on other architectures, and is currently also available for MIPS and Intel.

    So, in short, there is NOBODY in the Android ecosystem with monopoly power anywhere close to that enjoyed by Microsoft or Intel on the desktop.
    ldo17
    • Fair enough

      Android is an open system, unlike Windows, but Google clearly controls the primary and most important branch of it -- the one that the ecosystem is built around.

      While I doubt we'll ever see anything in mobile that approaches the Wintel duopoly, the Android-Samsung partnership is the most powerful pair-up in mobile right now and it is gaining in strength. That obviously makes Google nervous and it's bolstering Samsung's confidence that it could go it alone and run its own platform and ecosystem. That's the main point.
      jasonhiner
      • Ah but Samsung doesn't own ARM

        What Samsung has to watch is that anyone can build a phone and step into their shoes as all the parts to do what Samsung are doing is available to anyone else. The hard part (and where the money is) is the software ecosystem as you correctly point out which is Microsoft's greatest selling point. It could all be bluff on Samsung's part that they might want a slice of Google's revenue stream from Samsung devices, I'm pretty sure you will see ChromeOS and Android come together, let's see what happens then.
        Alan Smithie
        • Licensee

          They may not own ARM, though they could if they tried ;-). but they are a licensee and able to adapt to what they want - See their Exynos 5 range, and with future BigLittle stuff on the hoizon Samsung will continue to bite at the heels of Qualcomm and NVidia.

          It would be dark irony is Samsung could succeed with Tizen (was MeeGo, was Maemo etc..), as Intel have the partnership cash to spend, and are still desperate to get into mobile after cutting their noses off to spite their faces when they sold in 2006 their (ex DEC business to Marvell semiconductor of XScale ARM processors as in Dell Axim;'s and Compaq iPaq's of yore) in favour of Mobile Intel, which has only get some rtraction this your with Motorola Razr'I's and a few Surface Pro tabs.
          neil.postlethwaite
        • Complex picture

          There's a lot of reasons why competitors are finding it hard to match Samsung, so I think it isn't quite that simple - the parts may be available, but you need to get scale to get the costs down.

          And of course, one of the reasons Samsung has scale is because Apple helped them achieve it. I don't mean that in the 'Samsung ripped off' sense, but purely in the sense that by using Samsung to supply millions of CPUs and flash memory chips, Apple helped Samsung build up their production capacity. By pre-paying, they provided capital that helped Samsung's own phone business.

          The other thing Samsung have done really well is marketing. If anyone asks me about Android, I tell them to get a Nexus - that they are the best value Android devices you'll get, because you're pretty much just paying for the device, rather than any marketing.
          And with Samsung spending something like five times more than Apple on marketing, that's a lot of marketing cost.

          But no one outside of tech circles has even heard of Nexus. The mobile phone resellers don't stock or push them (and why would they, there is no kickback).

          There is a lot more to it than building a better device - and it is noticeable that people are responding to Samsung as a brand, not Android. (I've even noticed a Samsung 'halo affect' where people with Samsung Galaxy phones have gone on to buy Samsung Windows based laptops, Samsung TVs - partly the new Sony, partly the 'anti-Apple brand').

          So I think they could make it work, especially if they ensured new phones were backwardly app compatible with Android, while Tizen 'native' offered richer APIs . . . but I don't quite see what's in it for them, given that they could continue to fork Android, as Amazon do.
          JulesLt
          • Who did what?

            If anyone stole technology, Apple pinched it from Samsung that has produced mobile phones for years. Stop commenting if you don't know, or is not interested in the truth.

            To the rest of you, Android is Linux without the x11 window manager, where Google has made their own. It is fully possible/easy to place Ubuntu or Redhat on a Samsung S3. You need to "root it" and install it. Add to that KDE and 10 years of UI code, you get Tizen or Jolla's Sailfish. Sailfish can run most Android "Apps" so expect the same to be the case with Tizen.
            Then Google can do what they want, Apple can sail away, and the rest of us can get on with life.Samsung have followed their business strategy for decades before Apple was founded: Never rely on anyone external - so they make screens and sell to Apple and any American company that wants to buy it. The difference is just that it was invented by Samsung. They do not rely on anyone, did not rely on Nokia and will not rely on Google and definitely not Apple. Waste money in the US on lawyers, but they have never created a thing.
            knuthf
          • Who did what?

            If anyone stole technology, Apple pinched it from Samsung that has produced mobile phones for years. Stop commenting if you don't know, or is not interested in the truth.

            To the rest of you, Android is Linux without the x11 window manager, where Google has made their own. It is fully possible/easy to place Ubuntu or Redhat on a Samsung S3. You need to "root it" and install it. Add to that KDE and 10 years of UI code, you get Tizen or Jolla's Sailfish. Sailfish can run most Android "Apps" so expect the same to be the case with Tizen.
            Then Google can do what they want, Apple can sail away, and the rest of us can get on with life.Samsung have followed their business strategy for decades before Apple was founded: Never rely on anyone external - so they make screens and sell to Apple and any American company that wants to buy it. The difference is just that it was invented by Samsung. They do not rely on anyone, did not rely on Nokia and will not rely on Google and definitely not Apple. Waste money in the US on lawyers, but they have never created a thing.
            knuthf
          • Who did what?

            If anyone stole technology, Apple pinched it from Samsung that has produced mobile phones for years. Stop commenting if you don't know, or is not interested in the truth.

            To the rest of you, Android is Linux without the x11 window manager, where Google has made their own. It is fully possible/easy to place Ubuntu or Redhat on a Samsung S3. You need to "root it" and install it. Add to that KDE and 10 years of UI code, you get Tizen or Jolla's Sailfish. Sailfish can run most Android "Apps" so expect the same to be the case with Tizen.
            Then Google can do what they want, Apple can sail away, and the rest of us can get on with life.Samsung have followed their business strategy for decades before Apple was founded: Never rely on anyone external - so they make screens and sell to Apple and any American company that wants to buy it. The difference is just that it was invented by Samsung. They do not rely on anyone, did not rely on Nokia and will not rely on Google and definitely not Apple. Waste money in the US on lawyers, but they have never created a thing.
            knuthf
          • Samsung as a brand - or is it high quality products?

            JulesLt says "I've even noticed a Samsung 'halo affect' where people with Samsung Galaxy phones have gone on to buy Samsung Windows based laptops, Samsung TVs".
            I'm very much not a fanboy but in 2009 I wanted a cheap phone to use in the USA as my old Nokia (with which I was very happy) was limited to Europe. Two independent phone retailers recommended the Samsung E250 so I bought one and I was amazed at how much better it was than my old Nokia. Yes it had modern technology on its side but it was so much easier to use - and I thought the Nokia was easy.
            At work we use Samsung monitors and it was on one of these that I saw for the first time a true yellow on an LCD.
            Last year the Samsung Galaxy S2 (before the S3 came out) was recommended to a friend of mine by an Apple enthuiast who owned an iPhone.
            And on the laptop front, Samsung is one of the very few manufacturers to produce laptops with matte screens - so much easier on the eyes than the more widely available mirror screens found on most laptops.
            I have had a couple of negative experiences with Samsung products (my Galaxy S3 occasionally goes into repeated reboot and a WB850F camera I tried had a very slow response to the shutter button) so they're not perfect but overall I find Samsung a trustworthy brand and certainly their products are very easy to use.
            I must admit that my decision to go for the Galaxy S3 rather than an iPhone did involve a small degree of anti-Apple bias after my experiences with iTunes and my Mac Mini with which I didn't get on at all well due to incompatibility with non-Apple hardware. In contrast with my iPod, I had no trouble whatsoever copying music and photos to my Galaxy S3.
            JohnOfStony
      • Re: but Google clearly controls the primary and most important branch of it

        In Open Source, you only keep your dominance at the sufferance of the community. As soon as they get the feeling you are getting too big for your boots, they will fork off the software into a new, more amenable project.

        Don't believe this can happen? Look at what has happened to Oracle.
        ldo17
        • Well, by definition, Google cannot control open-source development either.

          Open-source may foster innovation but it also fragments markets. Eventually, the number of Android vendors is going to dwindle to a handful of the most popular vendors.

          Samsung has partnerships with Apple, Google, and Microsoft so Samsung has a bright future no matter what. Other Android vendors cannot be so confident.

          Nor should any one be ignoring Windows Phone. Microsoft has been the sleeping giant during these "phone wars". Now that the giant is awake and prepared to unite its various windows offerings under one umbrella, they may be the wild card.

          Microsoft may have Apple in its sights but, Apple can ride out any threat posed by a future surge of WP8/WinRT popularity far better than most Android vendors - leaving Samsung in a position to enjoy the spoils, or conversely, shift its own strategy away from Android.
          M Wagner
          • Re: Open-source may foster innovation but it also fragments markets.

            For example?
            ldo17
          • Kindle

            For example the most popular Android Tablet that is not a Samsung is the Kindle. Kindle is a fork of a fragmentation of Android.

            I could be wrong but I'm betting a Kindle phone comes around soon, too.
            rhyous
          • Re: Kindle

            Can a Kindle not run Android apps? If it can, then what exactly is "fragmented" about it?
            ldo17
          • That's the whole point

            It is android, but cannot run Android apps. Probably an evolutionary dead end, but it is Android.
            Cynical99
          • Re: It is android, but cannot run Android apps

            Can it run any apps at all? If not, what's the problem?
            ldo17
          • For Example

            You ever tried to figure out what Linux distro to install? Open Office and Libre Office, and the rest seem to be niche products.

            Even Android - while there is supposedly one line of Android, the speed Google released Android at left a plethora of 2.0, 2.1, 3.2 and 4.0 before slowing down and some vendors adopted the latest version. How many of those devices were updated to the latest versions? Few if any. This poses issues for developers to keep it all straight.
            Cynical99
          • Re: You ever tried to figure out what Linux distro to install?

            Yes, I have used lots of them. And changed my mind lots of times, and was able to keep exactly the same user files I had before, without the need for any conversion or copying steps.

            And I have switched from OpenOffice to LibreOffice, just as easily.

            So where exactly is this "fragmentation" problem, again?
            ldo17
      • Google is NOT Nervous

        Why would they be? Am I the only one that notices that Google wants their services on EVERY device. Google has the services. Android is just one medium.

        Let's pretend Samsung stops making Android phones. Does Samsung have the services that Google has more than adequately provided for Android, iOS, OS X, Windows OS.

        DO I really have to answer that?. Samsung isn't going anywhere. These articles are completely out of left field. What would Samsung be without the services? It would have never reached the jaugernaunt it has become.

        Nervous, Google LOVES it!
        ahmazin
      • I don't quite see it

        Samsung is the largest phone maker already and Android is the biggest growing OS. That's not likely to lead to divorce. The picture is bigger including Linux playing an (even bigger) role in our lives growing away from power hungry x86 chips and OS. Companies like HTC going to one universal super phone is more because of Qualcomm and their GOBI line of chips that include CDMA and GSM on one wafer as well as thier upcoming universal LTE chip. This is good for everyone. One phone will work on all carriers with little to no hardware changes.

        My hope is that google integrates more of Motorola's excellent exchange implementation into AOSP. That will help gain corporate acceptance. Only Moto, HTC and iPhone have acceptable implementations.

        Android has the right balance between Windows' completely bloated and vulnerable OS and iOS' completely locked down and useless. I could see Android netbooks powering the next computer age when apps like accounting, video editing, (real) photo editing and database appear on the platform.

        People have heard mentality. They won't leave platforms that work and others use for one that is new. iOS, Android, Windowsx86, Linux, OSX are the choices for people. They might move between these but they aren't likely to risk WinRT, BB, Palm, Tizen very easily.
        LarsDennert