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Can Samsung innovate?

Jay Alabaster | March 6, 2013
The Korean giant now dominates the smartphone and tablet era, but it is built for steady progress rather than big breakthroughs.

The group's electronics unit was originally founded in 1969 to make appliances like refrigerators and TVs, and was eventually merged with its semiconductor business. DRAM is where Samsung had its first real international success -- it started years behind rivals in the U.S. and Japan, but steadily outworked them, gaining ground with each chip generation until it took the technology lead in the early 1990s.

Long-time Samsung watchers say this intense focus on small, steady technical improvements is still the company's core approach.

"Samsung never comes up with any new products. It improves it and comes up with the next generation of product -- much better and much cheaper, and much faster," said Sea-Jin Chang, a professor of business policy at the National University of Singapore, who wrote a book about the company's emergence over now-struggling Sony.

"Samsung's success comes from this DRAM experience, because it was the first business they actually made any money in," he said.

The company's consumer electronics are now its largest source of profit. But it is still the world's dominant producer of components like NAND flash memory and DRAM, LCD screens and mobile processors.

Samsung still approaches both businesses the same way, Chang said. The "digital sashimi" philosophy holds across all of its product lines.

As with the semiconductors used in memory and screens, which gradually increase in complexity with each generation, the current wave of smartphones and tablets can be seen as a steady progression. Each new model gets thinner, with better screens and faster processors, plus hardware add-ons such as NFC (near field communication) chips, but the overall concept doesn't change.

"Samsung is like the Japanese companies when they were at the their peak, pumping out tech products for cheaper and cheaper," said Hiroyuki Shimizu, an analyst at Gartner.

Shimizu said one way out of this spiral is software, but Samsung has had little success in developing its own. The company has largely abandoned its Bada OS, first announced in 2010, and is almost entirely dependent on Android for core content like maps, apps and video.

"Samsung emphasizes speed and execution. But this is contradictory to creativity. If you want speed and execution, you don't expect to create something new," said Chang. "Software is more individual and requires out-of-box thinking."

Still, Samsung has opened up new segments of the smartphone market.

While it has yet to create an entirely new type of device, its ready supply of components makes it easier to gamble on new slices of the market. When it launched the original Galaxy Note in 2011, a phone with an oversized 5.3-inch screen, the device's marketing phrase was "Phone? Tablet? Its Galaxy Note!"


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