Suggested citation: Jin, Joon Yung, "Samsung IoT Strategy", June 11, 2020. Available at http://jinjjan.blogspot.com/2020/06/mba-case-studysamsung-iot-strategy.html
Samsung paves its way to the internet of things (IoT) space. The South Korea-based conglomerate shows an intriguing position as a non-US company that has multiple business divisions from electronics to apartments. Samsung is a traditional industry incumbent in electronics field, but also is a digital giant in semiconductor and smartphone space. Although its appearance in the IoT industry is not strong compared to its other businesses, one study found that Samsung is the leading company that holds highest number of IoT-related patents as of 2019 [1]. Therefore, we are witnessing Samsung’s move from “experimentation at the edge” now to “collision at the core” in terms of IoT. This means Samsung recognizes the next S curve and gives an effort to connect the current curve with the next in order to be a high performer along the evolution of industry.
A subsidiary of Samsung Group, Samsung SDS, is a control tower of the group’s IoT strategy as it develops information technologies to support across the divisions including manufacturing, retail and smart home, and this forms vertical integration [2]. Leveraging SDS’s competency, the huge household appliances company tries to build its home IoT world: “digital ubiquity” at home. Recently SDS collaborates with Raemian, an apartment brand of Samsung C&T, to foray into the home IoT segment [3]. This platform connects home appliances with house operating system to enhance customer value. Furthermore, it analyzes patterns of a resident lifestyle so that it can be automatically controlled without manipulation. They call this platform A.IoT which is a compound word of artificial intelligence (AI) and IoT. It is an open system middleware compatible with platforms provided by competitors in South Korea such as LG and SK building its own ecosystem (Exhibit 1). Samsung started to develop home IoT before 2017 with household consumers as their major audience, but it is still in the introduction phase in business life cycle (“experimentation at the edge”) according to the consumer perception. Its primary market, South Korea, is emerging (as opposed to mature) market in IoT, so it is hard to say Samsung is dominant currently.
The vertical integration and synergies between divisions described above is an internal approach. Samsung also used external approach capitalizing on ecosystem with new entrants mainly via acquisition. For the IoT business (not limited to home IoT), Samsung has started to acquire IoT platform companies since 2014 [4] (Exhibit 2). Among them, VIV Labs, acquired in 2016, enabled Samsung to have Natural Language Understanding and Machine Learning capabilities which has advanced Samsung’s voice-powered digital assistant platform, Bixby. This is a crucial milestone for Samsung’s home IoT business.
Despite the ecosystem Samsung is building, the dominant ecosystem in and around home IoT are being built primarily by incumbents together with digital giants. A digital giant, Amazon, which has its IoT technology penetrated into household with Alexa, partnered with LG Electronics. LG could save 80 percent in development cost thanks to AWS IoT platform [5]. As such, incumbents in the home appliances are taking advantage of the software and platform solutions provided by digital giants.
The vertical integration gives Samsung an opportunity to control entire value chain and to deliver the voice of customer straight to the upstream. And in South Korea, the company has dominant power to orchestrate the ecosystem of IoT. But at the same time, sticking to the local market could be a big challenge of Samsung to be a global player. In addition, its competency in software development is relatively weak [6]. It could be overcome with partnering with global software companies as LG utilizing AWS or even Samsung itself partnering with Google to carry Android platform into Galaxy. In addition, given the life cycle of household appliances are long, if Samsung adopts the outcome-based business model like GE [7], it will bring another revenue stream interacting with customers in real-time. Finally, a Korean company is inclined to be a fast follower rather than a first mover. Samsung needs to upend this culture to be a global dominant player in the new arena, IoT.
Exhibit 1. Samsung Home A.IoT Platform and Its Ecosystem
Exhibit 2. M&A Activities of Samsung in IoT since 2014
References
1. Internet of Things: Leading patent owners worldwide 2019 (n.d.). Retrieved June 6, 2020, from https://www.statista.com/statistics/992118/worldwide-internet-of-things-top-patent-owners/
2. Samsung SDS. (2020, June 04). Retrieved June 06, 2020, from https://en.wikipedia.org/wiki/Samsung_SDS
3. 삼성물산, 인공지능·사물인터넷 결합한 '래미안 AIoT 플랫폼' 개발. (2020, April 08). Retrieved June 06, 2020, from http://www.aitimes.kr/news/articleView.html?idxno=15966
4. 삼성전자, 해외 인수·합병 광폭 행보 '사물인터넷 주도권 잡기'. (2016, November 16). Retrieved June 06, 2020, from https://news.v.daum.net/v/20161116220343924
5. AWS Case Study: LG Electronics. Retrieved June 06, 2020, from https://aws.amazon.com/solutions/case-studies/lg-electronics/?cs=1
6. 삼성의 SW역량 반성 "초가집 짓는 수준". (2016, July 05). Retrieved June 06, 2020, from https://biz.chosun.com/site/data/html_dir/2016/07/06/2016070600442.html
7. Iansiti, M., & Lakhani, K. (2014, November). Digital Ubiquity: How Connections, Sensors, and Data Are Revolutionizing Business. Retrieved June 06, 2020, from https://hbr.org/2014/11/digital-ubiquity-how-connections-sensors-and-data-are-revolutionizing-business
8. Lee, I., & Lee, K. (2015). The Internet of Things (IoT): Applications, investments, and challenges for enterprises. Business Horizons, 58(4), 431-440. doi:10.1016/j.bushor.2015.03.008
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