An analyst wrote a paper predicting the shutting down of Samsung's mobile division in the next five years. He asserts that the smartphone market will become unprofitable for the South Korean OEM.
Ben Bajarin, principal analyst at Creative Strategies, identifies Samsung's problem as "The Innovator's Dilemma," a situation where a tech pioneer faces competition from rivals who offer comparable features for a smaller price. Bajarin points out that, in his opinion, there is no exit from the downward spiral the electronics manufacturer is on.
The concept is borrowed from Clayton Christensen. In The Innovator's Dilemma, Christensen explains that entities who innovate early on are at an advantage initially, but later on they stop being competitive due to cheaper versions of their inventions.
It is visible how this applies to Samsung's case: a number of Android smartphone manufacturers, such as Xiaomi, OnePlus or Lenovo flooded the market with affordable handsets. The price tags of such devices make them viable for markets in the developing countries, putting Samsung on the bench in those areas.
"Once the market embraces good enough products, the innovator can no longer push premium innovations as their value is diminished once a good enough mentality sets in," Bajarin pointed out.
He detailed his affirmation, saying that the average user prefers "good enough" Android smartphones which have a price of $200-$400. This means that the $600 handsets from Samsung remain outside of the main game and reach only narrow niches of the market.
For iOS fans whose heart skipped a beat while reading this, Bajarin has good news. He says Apple is in no danger to follow Samsung's path, due to its exclusive iOS system.
Samsung understands the risk of being isolated in a high-end zone and released the Tizen OS, designed to power Samsung's phones in emerging markets. A number of handsets sporting the new OS are already in important countries, such as India.
"The innovator's dilemma will make it very tough to commercialize true premium innovation in Android at any scale," Bajarin underlined. He added that soon enough, Android fans will see devices featuring strong specs and staying below the $400 price tag.
A recent statement from Samsung said that the company's mobile division expanded by 8 percent since last year. According to sources, the South Korean OEM shipped 84 million devices, only 40% of which have a price tag topping $301.
