Samsung Galaxy S5, iPhone 5S show smartphones have less in store for hardware innovation

Innovation is the new challenge facing smartphone companies. After the disappointment caused by Apple with iPhone 5S launch, now it’s the turn of Samsung to repeat the history with its latest product Samsung Galaxy S5, says Frost & Sullivan.

The research firm says there is not enough for the Korean smartphone major to claim in its new product. This, according to Frost & Sullivan, is due to lack of innovation happening in smartphone designs.

Despite this, the market is going to see sustaining improvements as the market reaches maturity. Much of the innovation is going to come from the introduction of sensors into the phone, and the improvements in software, and how the phone will interact with the range of wearable devices, Frost said.

Precisely the innovation will move away from hardware towards the kinds of services and platforms that are enabled on the phones. Services such as ordering taxis, mobile payments, and location-based services will add value on top of the smartphone platform.

In the premium segment, Samsung’s scale and supply chain strength is less of an advantage. The key to success in this segment is differentiation, and as the market has matured it is less about features and more about design and brand, the research firm said.

As competitors such as HTC, Huawei and ZTE catch up quickly on design, brand differentiation is critical, as well as the omnipresent Apple, its success with the premium line comes down to a huge marketing budget and a huge spend across the channel.

Galaxy S5 -1

Samsung is now completely unable to differentiate on the software side with Google driving Android consistency.  According to the agency 25 percent of Android handsets sold in China last year did not include Google services, and therefore were not as valuable to Google.

The company is therefore preventing fragmentation of Android, making it even harder for Samsung to truly differentiate itself.

Margins are coming under continuing pressure and price leadership has been difficult to maintain in emerging markets with OPPO, Wiko, Micromax, all producing handsets in the $100-200 segment. The bulk of Samsung’s business, despite the high profile nature of its Galaxy line, is in the mid to low end.

This is where Samsung is losing share as other cheaper manufacturers build capacity and experience, and can utilize lower labor costs. The bulk of growth in the market will come at the $200 and less price points, and these segments are simply less profitable than the high-end. For Samsung this means increasing pressure on margins, Frost said.

Further, proliferation in Internet-enabled devices will offer vast hardware opportunities for Samsung, especially with its expertise manufacturing hardware such as refrigerators, washing machines, and TVs.

Samsung already has the largest portfolio of hardware, and it has a huge opportunity to connect these and really add value for the customer. However, Samsung does not have the internal software and machine learning capabilities to provide best-in-class solutions in the post-mobile world, Frost said.

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