More than an hour into the launch of the Galaxy Note 9, DJ Koh, Samsung’s president and CEO of IT and mobile communications, ended his address with an unguarded, clearly off-script comment. “You inspire us to push through barriers and make the Note better every year,” he said, pausing slightly. “It’s not easy every year, frankly speaking.” Following the rigid, heavily scripted presentation, Koh’s honesty was revealing, and the collected audience of employees, analysts and technology journalists responded, issuing what could be described as a genuinely sympathetic laugh.
The reason this aside stood out? For Samsung, Apple, Google, LG – and all the other companies making vast sums of money from satiating our rabid appetite for new hardware – the effort required to succeed is substantial. And despite this never-ending grind, their efforts are usually not enough to sate the demand for actual leaps forward with functionality and software.
Take the new Note 9, if you read the speculative coverage before the announcement not only would you have been hoping for and looking forward to a handset with a huge storage bump, but also extras such as an under-screen fingerprint sensor. Instead Samsung just moved it’s position. Cue disappointment (despite the repositioning fixing a critical flaw on the Note 8). Apple suffered with this, too, as many hoped the iPhone X would have such a feature.
We should all have seen this wasn’t going to happen, though. The new Synaptics Clear ID optical sensor which makes this sub-screen functionality possible was never going to available in the quantities necessary for such large-scale manufacturers. Synoptics only announced Clear ID was in mass production in December 2017, but a top-end Samsung phone would require some ten million units, an iPhone even more. Also, although you get a cleaner aesthetic on your mobile with no visible buttons and acres of pristine screen real-estate, the tech right now is slower than ultra-fast capacitive scanners – and annoying lag doesn’t fit with a flagship device. Fickle consumers, the very ones demanding the new tech, would inevitably get grumpy.
On the other hand, as it’s the Note you can’t blame people for hoping to see more experimental tech deployed. After all, previous Notes have seen Samsung testing features that go on to become part of the entire S-series. The Note Edge, for example, was the first with Galaxy with a display that curved around at the side, now this is on all high-end Samsung mobiles. The iris scanner first appeared in 2016’s ill-fated Note 7, and dual camera lenses debuted in last year’s Note 8.
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Plus, as we reach hardware parity, consumers are not as willing to automatically upgrade handsets – and it takes something with serious wow-factor to get them to do so. Even Apple felt the pinch when it didn’t make significant alterations to its iPhones for three consecutive years. Last year’s iPhone X brought an end to this, however, and Apple this month became the first public company to be worth $1 trillion.
While speaking of the iPhone X, another factor to consider is that Samsung really needs a sure-fire smash hit. The Galaxy S9 and S9 Plus had sluggish sales. Despite improved cameras and audio, in this year’s second quarter (after the S9’s launch in March) Samsung lost more market share than any other major handset maker, posting its worst performance since the second quarter of 2013. Shipments fell 11 per cent from the previous year to 70.8 million units. Increased competition from the likes of Google, Huawei, Xiaomi and OnePlus are eating away at its dominance in the Android sector.
The Note line used to shift more than 40 million units. Now the big-screen USP has been eroded, Note device sales now average 25 million units. This is all without mentioning 2016’s Note 7, where exploding, expanding or overheating batteries led to the recall of 4.3 million handsets, costing Samsung anywhere between $3.1 billion to $6bn.
Aside from increased storage, DJ Koh is banking on the Note’s remaining USP: the S-Pen stylus to make it a winner. The Galaxy Note is not the only stylus phone, but it’s so far ahead of any competitor it may as well be. The trouble is that most Note users never in reality use the S-Pen. But now the new version has Bluetooth, like Apple’s Pencil, it becomes far more useful: click the button on the pen to take pictures, or advance slides in a presentation you are running from the phone itself, and so on.
Whether more storage and a new S-Pen is enough to make people switch to the new Note remains to be seen. It doesn’t feel like it. It’s hardly as exciting as the Samsung Galaxy X folding phone supposedly being unveiled next year. So should the Korean company have ducked out of the yearly treadmill and waited to release something killer - especially since Samsung itself described the high-end smartphone market as “stagnant” back in July?
Daniel Gleeson, senior analyst, consumer technology at Ovum, says the risks of reducing the frequency of product launches are very real. “With less difference and less of a performance gap between the premium brands and challenger brands, having the latest and greatest specs becomes more important – similar to how the PC market has evolved,” he says. “Without new releases, it’s difficult for handset manufacturers to retain their places in operator’s store shelves, or to sustain consumer excitement in the face of newer devices - even if the difference between the handsets is minimal.”
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Gleeson argues that Apple, in some ways, is already employing this strategy. Its releases get major design updates every second year or so, with the in-between handsets more focused on internal changes and software tweaks. “You can see that Apple’s sales spike when there is a big change in physical design. Apple, though, is unique in that its users will wait for new releases and put up with specs that may be lagging behind the competition. Android manufacturers generally do not have the same luxury.”
The big problem with this approach is that the expertise needed to create these occasional superstars will be left dormant or at least under-utilised for a period following each launch. “There will also be ramp up/scaling issues across basically every part of the business – marketing, manufacturing, sourcing of key components, etcetera,” says Gleeson. “Apple’s structure where it is organised by function rather than by product means that it doesn’t face the same downtime problem, but HTC, for example, simply does not have the product portfolio to attempt this.”
Carolina Milanesi, principal analyst at Creative Strategies, adds that the problem with not releasing a phone for two or three years is that as the majority of sales in mature markets are upgrades, not new sales, so "you are basically sentencing yourself to seeing your sales decline". Milanesi goes further, stating that users will not see a year-old or two-year-old phone as “new”, and this would impact the price vendors could sell them for.
"The problem with phones is there is such a focus on big events at specific times of the year that missing or delaying would attract a lot of attention and impact stock. Technology cycles sometimes just do not line up. Plus, we seem to forget how good these phones are today, which makes expecting something amazing every time quite unrealistic," says Milanesi. "One last point is that a lot of the value-add today is given via software, and both commentators and consumers still do not give this the same weight they give to hardware innovation."
Samsung, therefore, to ensure its dominance, is seemingly locked into producing new hardware every year, whether it has anything to really shout about or not. Hence DJ Koh's glimmer of laudable honesty and the audience’s polite, knowing laughter.
This article was originally published by WIRED UK
