Samsung Electronics will invest in artificial intelligence (AI) and games jointly with Tencent, the largest information technology (IT) company in China and the largest online game company in the world. This means that the two leading Korean and Chinese IT companies are building an alliance in the sector of artificial intelligence devices in the global market where Apple and Google are taking the initiative.
According to the investment banking (IB) industry on February 21, Samsung Electronics and Tencent will jointly invest in the development of artificial intelligence speakers and games. "In the beginning of this year, Samsung Electronics and Tencent decided to jointly invest in artificial intelligent speakers and game solutions and are now discussing matters at the working level," an IB industry official said. “Their partnership is expected to become a joint venture or take a form to share speakers and game solutions after developing them."
Samsung Electronics is expected to attempt to recover its share of the smartphone market in China which dropped to 3% by using Tencent as its partner. Tencent is also seeking a new breakthrough in online gaming, which accounts for more than 70% of its sales. Tencent earned 167.5 billion yuan in online games, more than 70% of its estimated sales of 239.4 billion yuan last year. "We contacted Samsung Electronics at the Las Vegas Consumer Electronics Show (CES) in January,” said a high-ranking official of Tencent in China. "We cannot disclose details but we will strengthen our cooperation with Samsung Electronics by starting cooperation in the Chinese market."
Cooperation between Samsung Electronics and Tencent will satisfy each other’s needs. Samsung Electronics is expanding its "Bixby" service, an artificial intelligence assistant not only into mobile phones but into home appliances and displays. Tencent is taking the lead in the global market as well as the Chinese market in terms of internet platforms where Samsung Electronics is weak. Mobile messenger Wichat has 980 million monthly active users (MAUs). Tencent is currently using its artificial intelligence technology in the news sector, and planning to expand it into the field of autonomous vehicles in the future.
The final destination of the Samsung Electronics and Tencent Alliance is the smart home market. Especially, the development of artificial intelligence (AI) speakers, which are the core of the smart home field, is an item on which information technology (IT) companies are focusing these days. Along with smartphones, AI speakers are expected to play an important role as hubs for home appliances in the future. The cooperation between Samsung Electronics and Tencent, the world's largest IT companies, started with a common understanding that they are latecomers in the smart home market.
It is analyzed that Tencent decided to cooperate with Samsung Electronics as Tencent lacks artificial intelligence technology compared to its Chinese rivals -- Baidu and Alibaba. Tencent is the world's largest game company and the largest Internet platform company in China, but Tencent was behind both competitors as the company presented its artificial intelligence strategy late in the financial report of the second quarter of last year. "We will continue to invest in artificial intelligence steadily and prospectively," Tencent said officially last year. Tencent is currently investing in five US artificial intelligence companies. "The combination of Samsung's smartphone technology and Tencent's Internet platforms will bring out the most ideal AI-related products and services," said an official at Tencent.
This year, Samsung Electronics will load voice recognition service Bixby into its artificial intelligent speakers. It is said that Samsung Electronics, which has strengths in device manufacturing was also late in tapping into the artificial intelligent speaker market. Especially, Samsung Electronics on a downward spiral in the smartphone market in China can recover its market share again if it cooperates with Tencent in the combination of smartphones and artificial intelligent speakers. Only in 2014, Samsung Electronics was No. 1 in the Chinese smartphone market in terms of shipments, but its market share in China dropped to 3% in the fourth quarter of last year.
This is the first time that Tencent and Samsung Electronics which are leading IT companies of Korea and China, have banded together. "Tencent has constantly developed artificial intelligence software, but no hardware yet," an IB industry official said. "This need drove Tencent’s collaboration with Samsung Electronics which has strengths in artificial intelligence software and device manufacture."
The two companies are also considering making a foray into the global market hand in hand, going beyond Korea and China. Google, the world's largest IT company, is already bent on supplying Android-based AI speaker 'Google Home'. Besides, HomePod (Apple) and Echo (Amazon) are also making every effort to secure early control of the market. In Korea, Naver and Cacao are fiercely competing to pre-empt the artificial intelligent speaker market.
"Currently, both Alibaba and Baidu are expanding the market by introducing artificial intelligence speakers. Tencent is a little slower than its competitors," said Baek Seung-hye, a researcher at Shinhan Financial Investment. “In particular, it is said that Tencent is weak in the manufacture of devices. But Tencent’s partnership with Samsung will enable Tencent to secure leadership in competition over artificial intelligence among Baidu, Alibaba and Tencent."