- The Korean giant’s early bet on mobile phones helped it hit the $10-bn mark in India, but in its 25th year it might need a refresh
At the just concluded CES, the tech event that opens the year for the consumer electronics industry, Samsung’s aggression was palpable. From bespoke refrigerators for millennials, to a fast new chip to power its smartphones, the world’s largest manufacturer of consumer electronics flexed its innovation muscle with “A Better Normal” pitch.
In India, where the South Korean giant crossed a revenue mark of $10 bn (Rs 75,000 crore) in 2019 and is celebrating its 25th year now, Samsung is upping the ante, with a forceful, new vision. In a high decibel campaign hashtagged as #PoweringDigitalIndia, it has launched a spate of youth-focussed initiatives. But the core of the Korean chaebol’s new strategy for India is going to be a refreshed R&D.
Though Samsung has had a dream run here, the change of gears is needed. Competition in consumer electronics has really heated up, especially in mobiles phones – a category that has got Samsung a bulk of its revenues and a dominant brand presence here.
Then again, Samsung is no stranger to fierce market battles in India, having slugged it out with its Korean peer LG in the early years, then taking on Nokia and unseating it to take top spot and later finding itself challenged by Micromax and more recently Xiaomi.
The journey to silver
Dipesh Shah, MD, Samsung Research Institute, Bengaluru (SRI-B) describes how Samsung entered India in 1995 soon after liberalisation and how its growth trajectory has been moving in parallel with the country’s. “Over the next few years, when India is poised for bigger growth, we want to play our part to increase the R&D and intellectual property capacity of the country, powering Digital India,” he says.
Shah, who was among the very first employees of Samsung in India, and has seen all the stages of the company’s evolution, says, “For the first four or five years, people used to travel to Samsung offices worldwide. We learned the quality benchmark for a global product. Then came a very interesting phase for about 14 years. We call it solution-oriented R&D.” From 2000 to 2012, he describes how Samsung India created some of the best solutions that went into the company’s products worldwide.
SRI -B is the company’s largest R&D facility outside Korea and has been a significant contributor to its India growth. From the labs here have emerged cutting edge innovations in wireless communication, from 3G to 5G, multimedia and image processing, artificial intelligence in vision, voice and text technologies, and Internet of Things (IoT).
To explain it simply, the much talked about image processing capability of Samsung’s smartphone cameras is thanks to the work of SRI-B engineers. When you take a photo on these phones, the AI module written by SRI-B engineers understands the scene and context – how much light is needed, what is the dynamic range needed, what is the object in the frame – and optimizes the process to give you the best shot.
Samsung has two other big R&D facilities in India. While its set up in Delhi works on high-end smart televisions and digital media products, the Noida unit focuses on mobile software development and testing.
But while the company credits its big investments in R&D (globally it spends close to the range of $15 billion annually, and in 2020 actually increased it) for its success here, its large retail presence has paid off too. It has 200,000 retail outlets and over 70,000 employees. In 2018, it also set up the world’s biggest mobile phone factory in India.
Powered by mobility
Looking back, Samsung’s growth in India has been powered by mobile phones. Today almost 60 per cent of its Rs 73,085 crore turnover comes from mobile phones (see chart).
Veteran marketer and former CMO Motorola, Lloyd Mathias, describes how in the 90s, the Korean company was a relatively small player in the consumer durables industry that was dominated by Indian players.
As Mathias reflects, Samsung made a few missteps in its first few years. It was LG that hogged all the early hype. “Around early 2001-2002, that’s when Samsung started getting its strategy right. But the big leap for Samsung came in 2008- 2009 with the onset of the mobile revolution,” he says.
Showing lethal agility, Samsung dethroned Nokia. Its ability to produce smartphones at an affordable price point was a winner. Samsung was among the first to understand the Indian consumer’s need for two SIM cards in the same phone – a peculiar local trait because users here liked to shift between operators frequently to take advantage of price differences.
“Dethroning Nokia gave them a strong anchor. They also slowly consolidated on their consumer durable portfolio,” says Mathias.
Localisation pays off
While Mathias credits Samsung’s early bet on mobile phones for its success, Sanchit Vir Gogia, chief analyst and CEO, Greyhound Research feels localisation too played a big role. “It invested in these general partners and built retailer programs to infiltrate the country. That’s a very brilliant localisation from a company perspective,” he says.
Even from a product perspective, he says, Samsung cracked the price sensitive Indian market.
If you look at Samsung’s 25-year graph in India, then 2015 was a defining year. That was when it put in place a ‘Make in India’ policy and got its R&D units to gather insights into Indian consumers. As Shah admits, “Prior to 2015, we were just bringing mostly products launched in Europe. But, in 2015, we did primary consumer research, building hardware, software and user experience specifically for India.”
Highly localised products like a refrigerator in which you could set curd, a microwave in which tandoori rotis could be cooked were the result of these insights.
Moving forward, we will see a lot of focus on Artificial intelligence, 5G, IoT and cloud technologies in India, says Shah.
Significantly, the 4G network deal with Reliance Jio gives Samsung a foot into the telecom network market now dominated by Ericsson and Nokia Networks.
Samsung has also begun an aggressive student outreach programme and making overtures with the local start-up communities. “It’s not just Samsung engineers who will create the next set of experiences, we will work with local universities and start-ups,” explains Shah.
There has also been a Covid19 reset to its product strategy after observing changed consumer behaviour during the pandemic. For instance, it has seen how consumers who are now staying more at home are opting for larger refrigerators and TVs, how even Tier 2 and rural markets are embracing smart TVs, and how hygiene has become a strong buying factor.
Catering to these lifestyle changes, Samsung has even launched new products like a clothing care solution called AirDresser that claims to remove dust, pollutants and germs.
The road ahead
The biggest challenge for Samsung is the competition. Xiaomi is breathing down its neck, even grabbing the mobile phone throne before Samsung recently took it back. However, the wave of nationalism and anti China sentiments is probably going to help Samsung.
As Mathias says, there are pressures on Samsung at two ends, One is Apple at the premium segment and the iPhone Series. “At the bottom, there will be pressure from a lot of Chinese brands, which have great feature sets at much lower prices.”
However, Mathias feels that Samsung will be able to retain the middle ground as people are familiar with a lot of their interface.
Gogia points out that in the premium segment, Samsung’s policy of having differentiated processors in India and the United States has not gone down well with mobile phone owners here. It has to fix that.
From a manufacturing perspective, Gogia says Samsung needs to invest in the country further and not just for mobile telephones, but also the broader consumer electronics segment.
Meanwhile Samsung itself is banking on more innovation from its R&D labs and a challenging brand philosophy of “Do What You Cannot” to stay ahead. – Thehindubusinessline