Targeting Each Other’s Home Turf

Samsung Electronics and Google, two of the leaders in the global IT industry, are showing different strategies to jockey with each other in terms of hardware and software.

Specifically, Samsung Electronics, which has no operating system of its own and is highly dependent upon Google Android, is working on the new OS called Tizen, and trying to integrate it with various industries such as IT, automobiles, and finance. Google, on its part, is expanding its business into smart phone and wearable device manufacturing, while cooperating more closely with mobile carriers around the world in an attempt to create new profit models.

Samsung Electronics has dominated the global smart phone market with the Android-based Galaxy series handsets, but is striving to reduce their dependence on the OS. According to president Shin Jong-kyun, head of the IT and Mobile Communication Division of Samsung Electronics, they are expected to unveil the Tizen OS with Intel sooner or later. “We are anticipating that Tizen will be utilized in not just IT devices like smart phones, tablet PCs, and cameras, but also different industries such as biotechnology, finance, and automobile,” he said, adding, “We will be more than good at the convergence because we are manufacturing a variety of finished goods and components.”

In the meantime, Google is still relying heavily on search ads even though it is dominating the IT market with its Android OS. Advertising income accounts for no less than 95% of its gross sales, approximately 70% of it being derived from search advertisement and close to 30% from online and mobile ad solutions. The mobile market makes up about 17%, which is somewhat insignificant given the rapid growth of the Android OS.

“The current situation may pose a dilemma to Google with Android phone users’ mobile data traffic on the rise to lead to a slower growth of the online ad market,” said manager and senior researcher Lim Yang-soo at the KT Economic and Business Research Institute. He went on to say, “The problem on the part of the search giant is that the growth of the mobile ad market is very slow, about one-fiftieth of the online counterpart.”

At the same time, the 79.5% global market share of Android phones is not leading to profits for Google. “Many people might think that the Android OS installed on the phones will result in the provider’s profits but, in fact, applications such as Facebook and Twitter are taking away the data traffic,” the manager explained, continuing, “Besides, its mobile search market share in Korea stands at around 8%, which is lower than those of local portals like Daum and Naver.”

To deal with the situation, Google is working on new Nexus phones and tablet PCs, the Moto X, Google Glass, and other projects to reduce the traffic acquisition costs paid to Samsung Electronics and Apple. The amount increased by US$400 million or so in the second quarter of this year to US$3.01 billion. Also, it is working closely with telecom operators in order to increase its presence in the smart device distribution market.