Jun 11, 2012Business
Samsung Staying Strong

The Samsung Galalxy S3, scheduled for release in the US on June 21st, has broken Android sales records worldwide.Anyone with a basic grasp of surfing knows full well that waiting until the wave breaks over your head is not a winning strategy. Catching waves is about keeping just far enough ahead of it. The world of technology operates on a similar set of rules, and Samsung is proving that they have a good command of this concept. In fact, starting this analysis forces a difficult decision as to which of their moves these past few weeks deserves to be the central focus. The acquisition of Nanoradio AB seems a strong contender, but the $1.9 billion investment towards cutting-edge mobile processor manufacturing seems stronger still. This is all not to mention rumors pertaining to a potential Nokia takeover and the Apple IP litigation directed at stalling the Galaxy S3 smart phone from attaining success in the U.S. When looking at this array of forward-thinking objectives, stakeholders in Samsung should be able to rest easy that moves are being made to maintain top contender status in the mobile phone industry. 

Samsung is a fully integrated device manufacturer (IDM), meaning that their value chain is inclusive Samsung's PC game: Visitors look at the Samsung's All-in-one PC series 7 during the 2012 Computex exhibition last week.of every process necessary to create their technology from start to finish. This is potentially a source of substantial competitive advantage. Samsung's proposed investment of nearly $2 billion towards ensuring their manufacturing processes remain industry leading from a technological standpoint is nothing to scoff at, as many a semiconductor company has suffered severely from falling behind this fast-paced technological evolution. The new manufacturing capabilities are directed at using 20 nanometer (nm) and 14 nm processes on 300 mm wafers, which would result in less power draining and smaller designs. The production of chip sets is a game of trade-offs, performance and battery life constantly struggling against one another as more of one means less of the other.  The only way to avoid these trade-offs is through growing the technology. Samsung is poised to do just that.  Good call.

As we are on the technology note, what about that Nanoradio acquisition? Nanoradio is a fabless (meaning all manufacturing is outsourced) semiconductor company, with a core competency in wireless components. Some perceive this core competency to be narrower still, with a distinct advantage in WiFi battery usage.  The above snapshot alluding to their manufacturing expansion in order to capture the value of new technology looks right on track with this acquisition. Avoiding the trade-offs in lieu of speeding up tech innovation is a reasonable strategic focus, and these two moves imply that Samsung has it's eye specifically on better battery life.  Nanoradio, as a fabless player in the semiconductor industry, will soon have access to top of the line manufacturing facilities.  Samsung, an IDM with a focus on moving towards the iPhone status, improves their technological capacity.  The pieces appear to fit.

Speaking of iPhones, the distinct success of the Galaxy S3 has motivated Apple to go on the offensive in a critical market: the US Claims of IP infringement, pertaining primarily to search applications and data pattern identification, are expected to delay Samsung's newest smart phone from a June 21st launch in the US.  Samsung makes the case that their product is unique, reassuring the media that they will be able to proceed with the launch.  A delay in launch is of strategic importance to Apple however, and it's hard to say how this will resolve itself at the moment.  Apple perceives the new Galaxy phone as a substantial competitive threat, particularly considering rumors surrounding the newest iPhone may soon be released.  The competitiveness of the industry keeps this interesting, and Samsung is proving they intend to stand toe to toe with the much-loved iPhone. 

Bottom Line

Samsung is staying strong technologically, and their newest smart phone has brought down the ire of the mighty iPhone.  All signs of success if you ask me. Samsung seems strategically focused on ensuring their manufacturing capacities remain top notch, not to mention the Nanoradio research and development potential towards battery-lean internet access. This implies that, though the Galaxy 3S is the current Samsung spotlight, long-term objectives remain the corporate focus. Companies that look ahead stand a much better chance of survival as the wireless semiconductor market continues to consolidate, treading water is just not enough anymore. If one were to ask whether the wireless semiconductor market will see Samsung sink or swim, I would have to put my money on swim.


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