Samsung Bets on Smartphones, Tablet

By JUNG-AH LEE

Pressed by the competition's new generation of sophisticated gadgets, Samsung Electronics also has been seeing demand for some of its products soften amid the European debt crisis. In response, the South Korean electronics giant—the world's No. 2 maker of cellphones by shipments—is betting on a new smartphone and its own tablet personal computer to help drive its growth this year.

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Samsung

'We are cautiously optimistic about achieving our sales target thanks to Galaxy S and Wave,' says J.K. Shin, president of Samsung's mobile communications division.

J.K. Shin, the 55-year-old president of Samsung's mobile communications division—the division that makes mobile handsets and telecom equipment and accounts for around 25% of the company's revenue—sat down with Jung-Ah Lee at Samsung's headquarters in Suwon, South Korea, to talk about Samsung's next device, its outlook for the handset market and the company's earnings outlook. The following is a translated version of the interview.

WSJ: With Apple's iPad being very successful, we're curious about Samsung's plans in this segment. Does Samsung have any plans for a similar device?

Mr. Shin: The next important change in the mobile industry will be long-term-evolution, or LTE, technology [LTE is a fourth-generation technology that is designed to increase capacity and speed of mobile networks]. We are considering producing a lot of smartphones or other devices based on LTE technology. In that sense, network capacity will have to be significantly increased. I can also say that we are planning to launch a tablet computer, named Galaxy Tab, no later than in the third quarter of this year.

WSJ: How has your business fared so far in the second quarter? Are you seeing any impact from the European debt crisis?

Mr. Shin: Our two biggest pillars of growth in the handset business are North America and Europe. There is great uncertainty over how the market will develop going forward due to the unstable currency and economic situation in Europe, and that may have an impact on the company's handset business in the second quarter. However, we are cautiously optimistic about achieving our sales target thanks to Galaxy S and Wave [smartphones]. Samsung has a well-balanced market portfolio in terms of regions, such as Europe, Asia, and North and Latin America and that makes our position comparatively better than other mobile phone manufacturers despite the difficult market situation in Europe.

Samsung

The Galaxy S is Samsung's latest attempt to gain share in the profitable smartphone segment. It is 9.9 millimeters thick and features a 1-gigahertz CPU and a 4-inch AMOLED screen. It has a 5 megapixel camera and 16 gigabytes of memory storage. The touch-screen device also allows video calls, and users can tap into Google's various applications including Gmail and YouTube.

WSJ: What's your view on the outlook for the mobile handset/smartphone market?

Mr. Shin: The global handset market is expected to grow to around 1.2 billion units this year and will continue to grow by 7% to 8% annually. This year, smartphones will account for around 260 million units of the total handset market and will grow further to 300 million units next year. The transition from traditional phones to smartphones will pick up speed. The smartphone will mark a big turning point just like when the black-and-white television made a major shift to color television.

WSJ: Do you think smartphones will become the mainstream device in the handset industry?

Mr. Shin: Yes. I definitely think smartphones will eventually become the mainstream in the handset industry. Even next year, smartphones will have a greater presence in the market than they had this year as the range of smartphone offerings will also increase, while the prices of such devices will vary.

WSJ: Analysts say that Samsung needs to do more with software to compete better with Apple and others. What's your view?

Mr. Shin: People see Samsung as a strong player in the hardware segment, but somewhat as a weak player in the software space. We learned that it is hard to convince the market just by making distinctive hardware. So we have invented our own mobile platform, "Bada," which operates our own app store, "Samsung Apps," and for us, this is a big step forward. It is true that we were somewhat late and behind in terms of quantity of applications when compared with some global competitors. We are also looking at possible acquisition targets in the software space. If necessary, we will do acquisitions.

WSJ: Do you plan to align with a specific operating system when you launch smartphones?

Mr. Shin: Samsung is the only company that has offered smartphones using a variety of operating systems. That is our strategy. Since the market wants various kinds of mobile platforms, I think it isn't appropriate to offer only one operating system. We will leave that up to the customers to decide.

WSJ: What's the reception of Galaxy S in the market? Is it helping to lift average selling prices and profits?

Mr. Shin: Galaxy S will boost the overall average selling price and if that price goes up, it will surely help improve our operating profit. I expect that we can sell around one million Galaxy S units every month. I'm very confident that Galaxy S will be well accepted in the market since more than 100 mobile operators around the world have selected to offer the phone. [Samsung's overall average selling price for handsets was around $116 in the first quarter.]