Surviving at the top

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Surviving at the top

Established carmakers do not fret over horsepower and speed, trying painstakingly to cut 0.1 second in the time it takes to zoom from zero to 100 kilometers per hour (62 miles per hour ). But in the sports car world, being the fastest is everything. That 0.1 second could make a whole lot of difference. What defines a top carmaker sometimes is not having the top-selling model, but having the one with the best performance. However, internal performance alone cannot speak for a supercar. It must maintain the stunning sleekness and elegance of the exterior, as well. Otherwise, it could never join the luxury ranks.

In smartphones too, different standards are required for luxury competition. The market is bigger in the affordable middle and low-end segments, where profit margins are low. It is a Red Ocean full of different versions of the same thing targeting the same group of consumers. With a cascade of knockoffs from China, prices drop every day. Except for Apple and Samsung Electronics, which also have premium lineups, few phone makers profit. Samsung and Apple equally shared global operating profit from smartphone sales in the third quarter last year. Since the fourth quarter, Apple took home 93 percent. It was a landslide defeat for Samsung’s Galaxy S5.

Samsung is showing signs of a comeback with the reinvented Galaxy S6. It has caused a splash since it was unveiled to the world last month. Various test versions comparing the latest iPhone and Galaxy models are available on YouTube. They are dropped from high places, banged with a hammer, cut with knives and even boiled. People in the United States and China have to wait for new stock to arrive because the first batch was already sold. At this rate, Samsung may be able to beat its sales record of 70 million units of the Galaxy S4 series.

After the disastrous setback with the last flagship, Samsung put everything it had into the S6 version and created a phone entirely different from archetypal Galaxy phone inside and outside. IT market surveyor IHT tore down an S6 Edge and estimated it would cost Samsung $290 to build it, compared to a $263 bill of materials for a 128G iPhone 6 Plus. Samsung used a sleek metal frame instead of a plastic one and to differentiate it from Apple added a unique curved touchscreen display. Inside, it contained the most up-to-date and powerful Exynos 7420 mobile processor that was developed by the company. The phone has become stylish and unbelievably thin with an ultra-responsive mobile pay system and camera. Technology pundits around the world gave the S6 and S6 Edge a thumbs up and called it the best phone of the year so far. Samsung also gave up its title for a real showdown with Apple. It erased the Samsung brand name off the phones sold in the Chinese and Japanese markets.

In November, I wrote an article about why Samsung cannot beat Apple. Galaxy needed a game-changing makeover instead of adding additional layers of waterproof or bio features. It had to be entirely new, instead of feigning to be new. It had to create new value instead of adding functions. I am pleased to see the reinvented flagship phone from Samsung. We cannot know if it is enough to become a game-changer. It must stand strong until the iPhone 7 arrives sometime this fall.

Samsung proved two things with its latest flagship. It demonstrated that the real competition is in the premium league rather than the affordable one. Competition from China and wearable devices still lag behind. Samsung must not forget its humiliating experience during the past six months when it was completely overwhelmed by Apple. Consumers are no longer awed by smartphone hardware wonders. The quality must be kept up to the highest standards. But the reason behind why the iPhone 6 series sold in excess of 130 million units and why consumers are more drawn to the costlier S6 Edge than the S6 model must not be underestimated. Consumers are willing to pay more if a product really wins their hearts. Looking back, the Galaxy S3 was a game-changer. The following series benefited from its brand value and the last version fell from grace because it solely relied on its dominant rank. Both the Galaxy S6 and iPhone 6 emulated the strongest merits of each other. The iPhone screen got bigger and the Galaxy S6 did away with the plastic frame and removable battery. The two rivals however cannot enjoy market dominance merely by copying one another.

Samsung has taken a huge risk with its latest phone. If it beats the iPhone, the company could generate its largest-ever profit; if it loses, it could incur the largest-ever loss. Samsung called its S6 venture “Project Zero.” It must start from the zero stage for every new phone. It is the only way to survive at the top.

JoongAng Ilbo, April 21, Page 30

*The author is an editorial writer of the JoongAng Ilbo.

by Lee Chul-ho

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