Samsung hopes to emulate Apple success in the services business
With stagnating hardware sales and declining profit margins, Samsung is reportedly looking at services as a growth avenue. The Korean company apparently hopes to emulate Apple’s $50bn-a-year success in the services business in the coming years. The news comes from a report in The Financial Times, which quotes an unnamed senior executive at the Samsung campus in Suwon, South Korea.
“Now we are at the stage where we are trying to package these major software investments into meaningful customer experiences,” the executive told the publication, talking about the company’s investment in software in recent years. The source didn’t provide any concrete details about the planned services but said that new technologies like IoT, AI, 5G, etc. will open up opportunities for the company to build a viable services business.
The Korean company has never reported any revenue from services so far, while Apple generated a whopping $12.5bn in revenue in the last quarter from its services business that includes Apple Music, iTunes, Apple Care, App Store, Apple Pay, and more. A good amount of Apple’s success here comes from the preferential treatment its own services enjoy on IOS. That’s a difficult model to replicate for device manufacturers like Samsung given the openness of the Android ecosystem.
Samsung has already made a few half-hearted attempts at services in the past, but none of them lasted long or made a dent in the market. Some of the analysts that FT spoke to for the report are skeptical of the company’s ability to build a robust services business. Samsung, however, believes it can take advantage of the existing 1 billion customer accounts to expand platforms like SmartThings in the next couple of years.
If you’re wondering whether any of this means a new music or a video streaming service from Samsung, the answer appears to be, thankfully, negative. The Samsung executive acknowledged the difficulty in the content business and said the company sees the likes of Spotify and Netflix as partners rather than competitors. So, even if Samsung decides to focus on services, its approach may be different from that of Apple.