Samsung Electronics, a leading information technology (IT) company representing Korea, and Tencent, a leading Chinese IT company, will forge an alliance to face Apple and Google in developing artificial intelligence (AI)-based devices.
According to the investment banking industry on July 28, Samsung Electronics and Tencent are jointly investing in AI speakers and game development. "At the beginning of this year, Samsung Electronics and Tencent agreed to jointly invest in AI speakers and game solutions. The two are now discussing practical business affairs," an IB industry official said. "They are expected to set up a joint venture company."
Samsung Electronics is expected to seek to recover its share of the smartphone market in China, which dropped to 3%, by using Tencent as its partner. Tencent is also looking to find a 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.
The cooperation between Samsung Electronics and Tencent will meet the two companies' needs. Samsung Electronics is expanding its Bixby service, an AI assistant, not only into mobile phones but into home appliances, displays and more. Tencent is leading the global market as well as the Chinese market in internet platforms, an area where Samsung Electronics is weak. Mobile messenger Wechat of Tencent has 980 million monthly active users (MAUs). Tencent is currently using its AI technology in the news sector and plans to expand it into autonomous vehicles in the future.
The ultimate goal of the alliance between Samsung Electronics and Tencent is to take the lead in the smart home market. In particular, AI speakers are the core of the smart home sector that could make or break IT companies. AI speakers are expected to play the role of a hub for indoor and outdoor home appliances with smartphones in the future. The cooperation between Samsung Electronics and Tencent, the two world-class IT players, started with a common understanding that they are late comers in the smart home market.
Tencent's cooperation with Samsung Electronics is intended to take a leap in AI, an area where it lags behind its Chinese rivals Baidu and Alibaba. Tencent is the world's largest game company and the largest Internet platform company in China. But it has been slow in developing AI to such an extent that it began to present its AI strategy only in its financial report of the second quarter of last year. Tencent is currently investing in five US AI companies. "The combination of Samsung's smartphone technology and Tencent's internet platform will create the most ideal AI-related products and services," said an official at Tencent.
This year, Samsung Electronics will load its voice recognition service Bixby into its AI speaker. The Korean IT giant is also considered to be somewhat late in making a foray into the AI speaker market. Samsung may be able to turn around its sluggish smartphone business in China if it can combine smartphones and smart speakers through cooperation with Tencent. In 2014, Samsung Electronics was No. 1 in terms of smartphone market share in China, but its market share dropped to the 3% level in the fourth quarter of last year.
The two companies are also considering advancing into the global market beyond Korea and China. Google, the world's largest IT company, is already keen on selling the Android-based AI speaker Google Home. In addition, the HomePod from Apple and the Echo from Amazon are competing for initial market control. In Korea, Naver and Kakao are fiercely competing in order to preempt the AI speaker market.