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Samsung's Smartphone Strategy Takes on iPhone

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engineering.)

"The research process is unimaginable," said Chang Donghoon, an executive vice president of Samsung who leads the company's design efforts. "We go through all avenues to make sure we read the trends correctly." He said that when the company researches markets for any particular product, it is also looking at trends in fashion, automobiles and interior design.

Song Hangil, a Samsung product designer, described a visit to the Marina Bay Sands resort in Singapore, where he said he was amazed by the views of the sky, the cityscape and the water. He wanted to create an effect where water was overflowing from the screen. As a result, taps on the Galaxy S III's phone screen create a unique ripple effect.

The genesis of the wide Galaxy Note phone reflects that same kind of consumer research. From focus groups and surveys, Samsung found that many respondents wanted a device that was good for handwriting, drawing and sharing notes. Asian-language speakers, in particular, found it easier to write characters on a device using a pen than typing. Those insights led to the Note, a smartphone that comes with a digital pen.

To be sure, some of that research appears to come closer to copying. Apple sued Samsung in U.S. Federal District Court last year for patent infringement and won a $1 billion judgment. One of the most explosive pieces of evidence was a detailed report breaking down each hardware and software feature of the iPhone and how each compared with Samsung phone features. Samsung is fighting the decision in court.

Reading the market helps the company persuade the wireless carriers to aggressively sell the Samsung phones and tablets. "That's kind of the secret sauce," said Kevin Packingham, chief product officer of Samsung. (Samsung also spends heavily on advertising globally. It outspends Apple and Microsoft.)

Daniel Hesse, Sprint's chief executive, called Samsung a "terrific partner" because of its willingness to work with the carriers on the creation of phones. For carriers, that could be a refreshing alternative to working with Apple, which completely controls the design of its iPhone's hardware and software. "They work with the carriers, they want to hear from you what you want, they don't tell you what it's going to be. It's very two-way," Mr. Hesse said.

Samsung differs in one other important way. It remains a manufacturer, while Apple contracts out the assembly of its devices. Horace H. Dediu, a mobile industry analyst at Asymco, said that historically Samsung built its business around producing and selling components to other manufacturers, including Apple, Sony and Hewlett- Packard. While Samsung had been making and selling consumer electronics in South Korea and developing markets for decades, these relationships taught it a lot about competing with -- and beating -- the biggest names in the industry.

By working with so many companies, it gets insight into how to plan investments for successful products. And it can use the same resources to build its own products, Mr. Dediu said. This is why Samsung has gained a reputation of being a "fast follower," he added.

Apple has been one of Samsung's largest customers. Samsung's flash memory processors, graphic chips, solid state drives and display parts have appeared in Apple's iPhones, iPads, iPod Touch devices and MacBooks. But for some of its latest mobile products, Apple has been seeking other vendors like Toshiba, Elpida and Sharp to use their components instead.

Having worked closely with Apple and other companies for years, Samsung, which earmarked $21 billion last year -- almost twice as much as Apple -- for capital expenditures, can easily get a sense of how to plan production and distribution of a successful phone, Mr. Dediu said.

He warned, however, that Samsung had made no serious investment in the "cloud," where content is stored on remote servers and pulled from people's devices over the Internet. The cloud could play a more crucial role as mobile products shift away from big screens toward wearable devices, like glasses and wrist devices, he said.

But then, the one thing Samsung may have trouble knowing is how exactly Apple is going to swerve next.



Source: (C) 2013 International Herald Tribune. via ProQuest Information and Learning Company; All Rights Reserved


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