Quick Thoughts: Galaxy S4 – All That and a Bag of Chips?


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–          Samsung announced its hotly anticipated Galaxy S4 with a Radio City Music Hall extravaganza that emphasized a laundry list of new bells and whistles for its TouchWiz Android skin.

–          The S4 hardware pushes processor performance, screen resolution, and camera megapixels to predictably impressive levels – but have the spec wars hit the point of diminishing returns?

–          The many software innovations were an intriguing surprise, but only time will tell which of them will click with consumers and deliver real daily utility rather than mere marketing sizzle.

–          Samsung is casting its net wide for the next big smartphone differentiating technology, but doesn’t seem to have found it for the terrific and sure to be successful, but still incremental, Galaxy S4.

The history of the cell phone is chock-a-block full of wrenching changes. Just when one competitor thinks they have it all figured out, someone comes out of left field with some unanticipated innovation that happens to capture the zeitgeist and power them to the top of the market share charts. Nokia doubled the size of the display just as text messaging took off and invented an internal antenna, zooming past Motorola and Ericsson to the lead. Seven years later, just as Nokia, with its 44% global market share and 24% operating margins, seemed invulnerable, Motorola returned the favor with the RAZR, and suddenly thin was in. Next the BlackBerry made QWERTY keyboards the rage for a while, only to see Apple change everything with the iPhone. I wrote about this pattern two weeks ago as one of “TMT in 2020 – 8 Things We Think”.

Today, the phone to end all phones is the Samsung Galaxy S4, the culmination of several generations of ever faster processors, increasingly high resolution AMOLED displays, and growing image sensor pixel counts. Samsung blocked traffic in midtown Manhattan for a couple of hours last Thursday to officially announce it in a theatrical event at Radio City Music Hall that it simulcast to the giant screens in Time Square. The press made a lot of the symbolism of holding the launch event on “Apple’s home turf” as though New York was Cupertino’s twin city, and that Steve Jobs had already claimed dibs on every theater within 12 blocks of an Apple Store. Still, Samsung’s rise to the top of the Android heap has clearly stolen quite a bit of wind from Apple’s sails.

Samsung posted 29% smartphone market share in 4Q12, beating Apple by a substantial 700bp despite the ramp of the iPhone 5, driven by the older Galaxy S4 and the relatively new Note2. Arguably, Samsung’s big, beautiful, self-supplied, AMOLED displays have had a lot to do with the surge to leadership, particularly vs. Apple which stubbornly refused to acknowledge the appeal of a larger screen in much the way that Nokia pish-toshed super-thin clamshell form factors when confronted with the Motorola RAZR in 2004. Samsung also leverages more of its own technology in its Exynos processors, image sensors, and flash memory, giving the new flagship Galaxy S4 market leading processing power from an 8 core CPU, absurd 1080p/441 pixel per inch display resolution with the vivid contrast characteristic of AMOLED technology, and a 13 megapixel camera, all in a thinner, lighter form factor than the stalwart S3. These specs set an extraordinary mark for competitors, including Apple, to shoot for, but the question is whether performance on these parameters could be nearing a level where further improvements are of decreasing marginal utility to the consumers that buy them.

Recognizing the reality that hardware advantages can be fleeting, Samsung has put a lot of investment against its proprietary overlay to the Android software that it licenses from Google. This software skin, trademarked “TouchWiz”, customizes the basic interface in subtle and sometimes less than subtle ways, and adds a range of Samsung exclusive applications to the Android mix. With the S4, Samsung is adding apps like an on-board 11 language translator, a health and fitness tracker, and several clever camera functions, such as the ability to take pictures from both front and back cameras simultaneously or to integrate audio files with your photos. Samsung has also added new ways to control the device – eye tracking technology will pause a video if you look away, scrolling through documents or web sites takes a simple flick of the wrist, and users with greasy fingers can register touches hovering just above the screen surface. All of these are creative and cool, but it is not clear that any of them rise to the level of “must have”.

Samsung is also taking a run at BlackBerry’s enterprise stronghold with a comprehensive security suite that it is calling Knox, as in Fort Knox. The details are a bit sketchy, but the solution appears to partition off a piece of the smartphone and put it under the control of enterprise IT. Ultimately, this is a rational approach to supporting both personal and work use on the same smartphone, but Samsung is hardly an enterprise powerhouse, and may lack the sales position and broader industry support to establish its solution as more than a niche. It WOULD be an easier sell if other device makers supported it.

So the S4 is a fantastic smartphone that pushes the usual specs to new heights while introducing a raft of nifty new software functions and apps. Samsung will sell a LOT of Galaxy S4s, extending its global smartphone leadership and earning big profits for itself and its investors in the process. Nonetheless, I would resist the temptation to crown Samsung as smartphone ruler for life – look how well that worked out for Nokia investors back in the day. Someone is going to come up with a startling new form factor or I/O technology, or cloud service integration or something else that changes the game, leaving everyone else to play a desperate game of catch up. It could be Samsung, it could be Apple, or perhaps it will be Huawei, or ZTE, or Google, or Microsoft, or some Indian brand that few westerners have ever heard of.

For our full research notes, please visit our published research site.

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