Why Samsung Should Dominate Home Automation

Samsung could be the Apple of home automation – if only the company decided to truly focus on this growing market.
Posted November 12, 2014

Mike Elgan

The coming explosion in home automation, which is the consumer dimension of the Internet of Things revolution, is going to be dominated by some company, or some small number of companies.

I think the most obvious leader in this burgeoning category is none other than Samsung Electronics.

Samsung's Dilemma

Samsung succeeds in the all-important smartphone handset industry in two ways, and fails in two ways.

It succeeds above all in terms of market share. Samsung currently has nearly 24 percent of all smartphone handset sales worldwide -- double Apple's share. And Samsung succeeds in profitability in handsets. In fact, only three companies are now making significant profits at all: Apple, Samsung and Xiaomi. In a market where dozens of major companies and hundreds of minor ones break even or lost money, Samsung raked in some $4 billion in the most recent quarter that ended in September.

That's the good news. The bad news is that all trends point south. Samsung's market share is being eroded rapidly by Apple on the high end, and Chinese startups like Xiaomi and Lenovo and others on the lower end. In just one year, Samsung's share dropped from one third to one quarter.

In truth, the middle and low end of the smartphone market is a sucker's game. Nobody will ever make Apple-like profits at the bottom of the market because the competition is fierce and margins are razor thin, if they exist at all.

The profit picture is even grimmer, with Samsung's profits dropping nearly 74% in the most recent quarter.

It's a near certainty that for the foreseeable future, Samsung will continue to report huge drops in both markets share and profits.

And that's one reason why Samsung has always had Apple envy. Apple makes big bucks on selling hardware. They make a killing selling software. They make money with their big one-third cut on third party software and content.

Apple is like a printing press, and Samsung wants that. That's why Samsung created Tizen. Because it wants an iOS-like platform it can control. It's why Samsung has created innovation centers in Silicon Valley and New York City to incubate startups that might create Samsung-specific products.

The reason for Samsung's current slide is the same reason for its former glory. The company's culture, and approach to developing, designing, making and marketing products is precisely what gave Samsung such a huge lead in the first place -- and also what has placed it in a position of decline.

Samsung's opportunity

Samsung excels at the rapid implementation of new technology into a very wide range of consumer electronics products. They're not visionary -- they have no idea what consumers want before they want it. But they're very good at combining creative innovation with blatant copying to offer a kind of agnostic but impressive range of options in each category. And then Samsung is great at pushing some of those options out globally, right-sizing for each market.

It's also worth pointing out that Samsung makes a lot more than smartphones.

First and foremost, Samsung makes components for itself and the rest of the industry. The company makes chips, flash memory, lithium-ion batteries, LCD panels and more.

And it makes a very wide range of consumer products, including TVs, cameras, printers, washers, dryers, refrigerators, microwaves, dishwashers, stoves, vacuum cleaners, home theater systems, LED lights, home security systems and others.

Right now, there's an explosion in home automation products from a wide variety of companies (including one Samsung recently bought, an outfit called SmartThings).

But despite the new entrants, consumers are hesitating to jump in, mainly because of the myriad competing standards and protocols and options are confusing the market.

Samsung has Apple envy, and wants the position Apple's got in the smartphone industry. But that will never happen. They could, however, become the Apple of home automation.

In fact Samsung is by far in the best position to dominate home automation.

Home automation devices are, in a nutshell, an infinitely variable collection of devices with a multitude of interfaces that need to network with each other and be simple enough for consumer to use while offering customization options for power users and enthusiasts.

When electrical power became widespread in the United States a hundred years ago (give or take a decade or two), every home appliance was made electric. Ice boxes became refrigerators. Fire-heated flat-irons became electric irons. Candles became electric lights. Everything was transformed.

Something like that is about to sweep through the house again, but this time with processors and wireless radios instead of electricity. Refrigerators will become Internet-connected smart refrigerators. Washer and dryers, air conditioners, door locks, toasters, smoke alarms, lamps, ovens, curtains and more will all get connectivity, smartphone control and algorithmic intelligence.

Samsung has everything it needs to jumpstart and dominate this revolution. They've got the component parts technologies. They've got manufacturing know-how. They've got the partnerships. They've got smartphones and tablets. They've got the home appliances.

But most of all, Samsung has a culture of cranking out a massive variety of options for consumers that function well and have the latest component technologies.

And Samsung appears to have the vision, too, if their YouTube videos are any indication.

Samsung is in a uniquely powerful position to completely dominate the growing home automation market and become the Apple of the smart and connected home.

They only need one thing: the will to take it.

What Samsung needs now is to develop a clear and singular platform for the smart home -- an "operating system," if you will, a set of protocols that is open to other companies and a total bet-the-company push to support its own platform with every product they make.

They can have in the home automation industry tomorrow what Apple has today -- the profitable sweet spot. But they've got to embrace singularity and clarity and focus and vision.

That's what Apple would do. That's what Samsung can and should do. But will they?

Photo courtesy of Shutterstock.

Tags: automation, Apple, Samsung, home automation

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