As Samsung Australia move to cut staff due to falling sales of tablets and smartphones the Korean Company is also setting themselves up for a new future in the SmartHouse automation market.
Last week Samsung, who have to find new markets to survive before they go the same way as Sony, Nokia and Blackberry, aquire a US home automation Company called Smart Things, then 24 hours later they aquire for an undisclosed sum Quietside, a US air conditioning distributor.
The announcement heralded a new future for Samsung who have to build on its huge suite of electronic products to become a leader in the fast growing “internet of things” market.
Arch rivals Google and Apple are also battling to establish a foothold in the automation market due to new Wi Fi and networking technology enabling the delivery of Wi Fi and Bluetooth enabled devices that allow users to control a vast range of devices, including sound systems baby monitors refrigerators, washing machines and thermostats, with a few taps of their smartphones.
Senior Samsung executives are nervous about the company’s growth prospects with several employees already laid off in Australia as the Company moves to cut costs.
Samsung’s mobile handset and tablet business has peaked and earlier this year the Company got out of the PC business.
After three years, gaining and then consolidating a position as the world’s leading smartphone maker by unit sales the Company is now witnessing the downside of that growth due in part to competition from cheaper Chinese competitors such as Hisense in the TV market and several Chinese Companies in the smartphone market.
Samsung’s operating profit fell 24 per cent in the second quarter of this year, the third consecutive quarterly decline.
A successful dive into the internet of things could reignite the performance of Samsung’s household appliances division, long seen as a dull, low-growth and low-margin business. While Samsung is the world leader by sales in TVs, and #1 in Australia with 54% share the global market in many other household electronic devices remains fragmented between a large number of regional companies, CW Chung, an analyst at Nomura told the Financial Times in the UK.
“But if people know Samsung products can be networked, they might be willing to pay a premium,” he says, adding that the “networking effect” could encourage customers to buy a suite of Samsung home appliances.
Apple has already exploited a similar dynamic – many of its customers are attracted by the ability to “sync” between their MacBook computer, iPad and iPhone – and the US group may prove a strong competitor for Samsung in the smart home space. It has launched a platform, HomeKit, that software developers can use to pair household devices with the iPhone, and has been developing a “hub” to co-ordinate these devices, say people familiar with the company’s plans.
Google is also investing aggressively in this field, having spent $3.7bn over the past eight months on Nest Labs, which produces “smart” home thermostats and smoke detectors, and DropCam, which makes household security cameras.
“They’re all different plays,” says Mark Newman, an analyst at Bernstein. “Samsung has all the important pieces of hardware, while Google is coming from the operating system side, and Apple has a much more integrated model.”
Unlike Apple, which has allowed only a few companies to work with HomeKit, Samsung is opting for an open platform model where different groups work together. Last month, it formed a partnership with Intel and Dell to develop standard technologies that will make smart appliances made by the different companies compatible. Days later it announced a similar tie-up with Nest and chip designer Arm Holdings.
Yet while the smart home concept is receiving heavy attention, it has already been pursued for years with little success, warns Daniel Kim, an analyst at Macquarie. “It sounds great conceptually, but adoption of these devices has been very slow,” he says. “Home appliances are so fragmented by region.?.?.?and it’s a very slow-moving industry.”
Yet Mr Kim sees the sector’s attraction. “I don’t think any other sector is big enough to offset the slowdown in Samsung’s smartphone business,” he adds, noting the company’s slow progress in developing other targeted long-term growth businesses such as solar power and LED lighting.
In Australia where a building boom is taking place new home automation technology and the introduction of fibre to the node is set to become “the norm” in homes and this lays down the foundations for a bright future for Samsung claims analysts at Price Waterhouse Coopers.