Sam­sung wants to be big in Ja­pan

The com­pany can no longer af­ford to cede the No. 3 econ­omy “The over­all smart­phone mar­ket will re­main dif­fi­cult”

Bloomberg Businessweek (Asia) - - CONTENTS - −Bruce Ein­horn, Pavel Alpeyev, and Jun­gah Lee The bot­tom line Af­ter re­port­ing a quar­terly profit al­most 40 per­cent below ex­pec­ta­tions, Sam­sung is try­ing harder in Ja­pan.

The first thing shop­pers see when they en­ter the mo­bile phone sec­tion of Bic Cam­era, a seven-story elec­tron­ics store in cen­tral Tokyo, is an ad for the iPhone 6S that stretches from the sales counter to the ceil­ing. Nearby are com­pa­ra­bly large bill­boards for Sharp’s Aquos and Sony’s Xpe­ria phones. Con­spic­u­ously ab­sent from the mar­ket­ing blitz is Sam­sung. Its Galaxy S6 is stashed in a cor­ner, next to a Sharp­made flip phone aimed at re­tirees.

One-fifth of the smart­phones shipped around the world are Sam­sung’s, but in the No. 3 econ­omy, it’s hard to find one. Sam­sung has just 6 per­cent of the 36 mil­lion phone mar­ket in Ja­pan, ac­cord­ing to re­searcher IDC, while

Ap­ple has close to 50 per­cent. Glob­ally, the Korean com­pany still leads Ap­ple, but in Ja­pan it trails lo­cal brands such as Sharp, Fu­jitsu, and Ky­ocera.

While Sam­sung was grow­ing quickly in mar­kets like China and In­dia, it could af­ford to be some­what san­guine about treat­ing Ja­pan as an af­ter­thought. Now, not so much: The con­glom­er­ate’s Jan. 28 earn­ings re­port brought a fresh round of bad news, in­clud­ing a quar­terly profit al­most 40 per­cent below ex­pec­ta­tions. With de­mand for smart­phones sput­ter­ing glob­ally, an­nual op­er­at­ing in­come from Sam­sung’s phone divi­sion has dipped below that from its semi­con­duc­tor busi­ness for the first time since 2010 and looks to be headed lower still. “The over­all smart­phone mar­ket will re­main dif­fi­cult through­out this year,” Lee Kyeong Tae, vice pres­i­dent for Sam­sung’s mo­bile com­mu­ni­ca­tions busi­ness, said on a con­fer­ence call fol­low­ing the re­port.

So sud­denly, Sam­sung wants to talk about Ja­pan again. The coun­try is “a very im­por­tant mar­ket,” says Hiroyuki Tsutsumi, who heads op­er­a­tions there. His plan, broadly, is to per­suade peo­ple they should buy Galaxy smart­phones to take ad­van­tage of Sam­sung’s smart­watches and vir­tual-re­al­ity head­sets, which re­quire the phones to vary­ing de­grees. The com­pany’s Gear watches link wire­lessly with its smart­phones and are close to, but not quite, stand­alone items. The com­pany’s Gear VR head­set re­quires a Galaxy to func­tion.

In Ja­pan, Sam­sung says, it will more than dou­ble its ros­ter of busi­ness part­ners this year, pro­vid­ing mo­bile devices and ac­ces­sories to a se­lect group of biotech com­pa­nies, au­tomak­ers, and oth­ers. Mit­subishi

Es­tate Home, one of Ja­pan’s big­gest real es­tate de­vel­op­ers, is us­ing Gear VR as a sales tool, let­ting prospec­tive home­buy­ers vir­tu­ally visit prop­er­ties. Fuji Soft has agreed to bun­dle its note-tak­ing and sched­ul­ing apps with Galaxy phones and tablets in hopes of cre­at­ing an Ever­note for busi­ness. IDC an­a­lyst Melissa Chau says that while the deals can’t hurt, in Ja­pan Sam­sung has nei­ther the vol­ume nor the growth po­ten­tial to sig­nif­i­cantly strengthen its global per­for­mance.

Sam­sung’s quar­terly profit was 3.24 tril­lion won ($2.7 bil­lion), and it gained global smart­phone share in 2015. But ship­ments grew just 0.8 per­cent last year, es­ti­mates re­searcher Strat­egy An­a­lyt­ics, so Sam­sung will have to work harder to dif­fer­en­ti­ate it­self. In Ja­pan, “we are set­ting our sights on 2020, aim­ing to be the top player on An­droid by then,” Tsutsumi says.

That won’t be easy, says Neil Shah, re­search di­rec­tor of Coun­ter­point Tech­nol­ogy Mar­ket Re­search. Be­sides Ap­ple, no for­eign com­pany has man­aged to win over Ja­pan. In the Bic Cam­era store, Yoshikazu Shi­na­gawa, a 34-year-old of­fice worker brows­ing the aisles, says he’s not in­ter­ested in the Galaxy or any of Sam­sung’s other gad­gets. “Sam­sung as a brand just isn’t prom­i­nent,” he says. “It’s com­pletely over­shad­owed.”

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.