My attention was drawn to the news, reported by the FT, that LG and Samsung are starting to see competition in their home market of Korea from store brands and low cost brands. Although the companies do not rely on their home markets for volume to the same extent that the Japanese brands do, but still the firms want to dominate their base. The FT points to a ‘project’ sale of 32″ sets made by TPV and sold through E-Mart. The development and sale of lower cost sets puts pressure on the big brands who are trying to sell premium Smart and 3D TVs.
As we reported in Display Monitor, Samsung is now at 34% of the market in Europe – a very strong position and the first time, we believe, that anyone has had that kind of dominance. I also think that Samsung will find it harder and harder to increase its share. Once this level of dominance is reached, brands often have strong resistance to further penetration by the very channels that have delivered that success. Large retailers will resent the degree of control that such a brand would effectively have over the business and smaller retailers will not like to sell the brand because the retailer wants to differentiate itself from others.
For Samsung’s TV business, that means real difficulty in achieving growth in revenues. The firm can try to move its customers up market to higher specifications, but that has the danger seen in Korea, that the premium is simply too much for some consumers. The company can also try to expand geographically and we recently reported on the firm’s plan to try to get into the Japanese market, where it has had no presence at all historically (Display Monitor Vol 19 No 1). It can push its products in the developing world, but we know that the largest market, China, wants its own TV business to grow and develop. And I have said many times, engineering beats science, economics beats engineering, but politics beats economics.
Finally, Samsung can try to move buyers to larger sizes, but while this trend continues in the market, the rate of progress is likely to be too slow for Samsung’s management.
So what can Samsung do to develop its business? It could, of course, try to simply wipe out competition by aggressive pricing, but that seems unlikely as the firm does not have and, as far as we can see, cannot create a cost advantage big enough to do that without simply pouring money into the market. It can do what it is trying to do with OLED – develop a better technology that others can’t match, but that can be sold at a premium.
The other alternative is to try to build a business, like Apple’s, where content and software is as important as the hardware. Samsung is clearly trying to work out how to do this. This brings us back to the point that I discussed in the report on Panasonic’s TV range launch last week. Can TV companies become ‘media companies’? Sony’s experience has shown clearly that simply owning content and media is not enough to guarantee anything. I’ve said before that Samsung will find it hard to change its culture to compete with US companies such as Google and Apple. However, over the years, Samsung has often achieved things that I wasn’t sure it could do, so at the moment, I wouldn’t bet against it!