Samsung is one of the largest smartphone companies in the world. How was it able to dominate the market?
In 2009 Samsung announced its first Android phone, the I7500, better known as the first Samsung Galaxy. Ever since the company has been rapidly increasing its marketing budget and boosting its sales. How was Samsung Electronics able to generate such impressive sales and reach a market share of 19% in the last quarter of 2021?
Samsung was just a small player in the smartphone market
Samsung was a dominant player in television and just started to get into smartphone devices at the turn of the millennium with the I300. But things started to change rapidly with the release of the iPhone in June 2007 and Google’s Android starting to gain traction with manufacturers opting for the new operating system with the launch of the HTC Dream in September 2008. Just before the iPhone, the smartphone market looked vastly different. Nokia was the supreme leader with an astounding market share of 50.9% in the last quarter and an innumerable amount of phone variants.
Fast forward to 2009, Samsung joined the race to turn Google’s Android into one of the dominant smartphone operating systems. Brad Akyuz, senior analyst for mobile devices at the research firm Current Analysis, said to Wired that the I7500 could be a turning point for Android as a major electronics company joined the tech giant. The operating system didn’t enjoy broad support apart from announcements from manufacturers, now HTC and Samsung were creating handhelds and possibly reignite momentum for Google.
After Samsung was onboard, the smartphone market started to change rapidly. With Samsung now being fully committed to Android, Nokia started to lose market share quickly. At the end of 2009, Nokia’s market share had dropped to 38.6% and Samsung had just a measure 3.3%. Two years later, in the last quarter of 2011, Nokia had fallen to 12.2% and Samsung had already amassed 22.5% of the market. In that year Samsung overtook Apple as the largest smartphone seller. T.Z. Wong, researcher at IDC, said to the Financial Post that Samsung had successfully released smartphones that appealed to as many target audiences as possible through a wide variety of form factors and specifications. The astronomical growth of Samsung didn’t come out of thin air. Samsung saw the potential of the smartphone market and wanted to expand into this vertical.
Samsung expands manufacturing capabilities
To ramp up its output Samsung started to invest into manufacturing throughout the 2010s and 2020s. Samsung began manufacturing mobile phones in India in 2007 and ramped up its capacity in the country a little over a decade later. In 2018, Samsung expanded its Noida plant, becoming the largest mobile factory in India, increasing its annual production capacity from 68 million to 120 million units in 2020. In 2020, the hardware giant invested another $500 million into its Indian manufacturing capabilities, through the opening of a display manufacturing plant. The factory would produce screens for its mobile line-up and display enabled devices. In 2022, Samsung invested $920 million in its manufacturing operations in Vietnam, which would increase production output for printed circuit boards and phone components.
Apart from expanding its manufacturing capabilities, the Korean giant has also been acquiring and expanding its strategic partnerships to accelerate growth in key markets and add features to meet future consumer demand. In 2015, Samsung acquired LoopPay, a mobile payment solutions provider who developed a product that transforms magnetic stripe readers into contactless receivers. According to Samsung it enables communication with approximately 90% of point-of-sale terminals, which means that current merchants don’t need to upgrade their existing hardware. In the press release, President and Head of IT and Mobile Division at Samsung Electronics, JK Shin said that LoopPay’s technology will help accelerate the company’s vision to lead innovation in mobile commerce. The solution would create a mobile wallet solution which is secure and widely accepted than any other comparable solution. Not long after, in August of the same year, Samsung launched its mobile payment service Samsung Pay, which would be rolled-out first on its flagship devices the Galaxy S6 and S6 edge.
In 2016, Samsung acquired technology company HARMAN, which is best known for its high-end audio products under the Harman / Kardon label. Through HARMAN, Samsung not only wanted to strengthen its position in the automotive industry, but also create a competitive advantage for its mobile division through high quality audio solutions.
Samsung begins marketing dominance
Samsung is one of the largest advertisers in the world. In the US alone, Samsung Electronics spent over $15 billion in advertising from 2014 up to 2020. The company has been strongly increasing global spending since 2011. Its global spending in that year was $2.7 billion with spending peaking in 2017, reaching an upwards of $10.5 billion. The advertising budget has decreased slightly since then, but still accounts for $9.7 billion in 2019.
The company has been creating high value partnerships to generate maximum reach and impact amongst consumers. One such corporation was the Samsung GALAXY Note and GALAXY S 3, being part of the opening ceremony and the official partner at the London 2012 Olympics. Samsung invited 75 bloggers from 20 countries to generate hype for the upcoming sports event. To strengthen the brand presence, Samsung made David Beckham the ambassador for the Galaxy Note during the Olympics.
In the US alone, Samsung Electronics spent over $15 billion in advertising from 2014 up to 2020.
In 2018, Samsung perhaps launched the most ambitious Out of Home smartphone campaign, through a projection on the Burj Khalifa, promoting its new Galaxy line-up, the S9-series. According to the company, the bold campaign embodies its so called brand manifesto, ‘Do What You Can’t’, a catch phrase which has to embody stepping out of your comfort zone and pushing the limits. A year later, Samsung announced its collaboration with multi billion dollar franchise Star Wars for the upcoming Holidays. The campaign aired alongside the upcoming release of Star Wars: The Rise of Skywalker.
In 2021, Samsung launched its mobile first marketing campaign aimed at the Tokyo Olympics. The company will distribute its Galaxy S21 5G Tokyo 2020 Athlete Phone amongst 17,000 Olympic and Paralympic athletes. Additionally the company partnered up with athlete ambassadors who serve as partners of the brand. For Samsung, the exclusive 5G phones are a proof of concept, displaying its technical capabilities, being able to foster reliable communications at one of the busiest sporting venues in the world.
Samsung’s competitors back out
A key factor which has consolidated the market towards key players, pushing consumers to remaining brands, is established manufacturers backing out of the market. HTC, once one of the hottest smartphone brands, ran into financial problems as sales started to decrease. At its peak, HTC had a global market share of 2.7% in the third quarter of 2011, but started to fall rapidly. Just a few months later, it fell to 1.8% in the first quarter of 2012. In its home country its market share started to fall as well, coming from 10.21% in December 2017 down to 7.19% in July 2018. In response, HTC announced it would lay-off 1,500 employees in Taiwan, a quarter of its total workforce. The job cuts come as a response to the decreased performance of the once famed smartphone manufacturer. HTC said that it would help streamline its manufacturing operations, to make it more flexible.
In 2016, Microsoft sold Nokia, marking its departure as a hardware manufacturer. The mobile division was acquired by HMD Global. Microsoft underwent a reorganization, one in which smartphone manufacturing didn’t take part. Three years later, the company told users to switch to Android or iOs. The software company said it would stop support for its operating system Windows Mobile.
Another large player has also been struggling to keep up with demand, LG. The Korean manufacturer had a peak market share of 5.2% in the third quarter of 2015, dropping to just 2% in the last quarter of 2020. In April 2021, LG announced that it would seize its smartphone manufacturing operations in the highly competitive mobile phone market. LG said that it would shift its focus towards more promising endeavors such as electric vehicle components, connected devices, smart home appliances and more. The fact that Samsung’s largest competitor backed out, meant not only a massive growth opportunity at home, but also worldwide.
With the departure of two major players and the discontinuation of a competing operating system, the smartphone market was wide open with potential buyers now looking for an alternative. Samsung, who had been pushing a strong market message for years, got the brand on top of mind and could now capitalize on buyers looking for an alternative.
Samsung entered a panicking smartphone market
Seeing the growth potential of Google’s Android operating system, Samsung wanted to expand into the mobile vertical. The timing for the Korean conglomerate was perfect, as the smartphone market was experiencing rapid change with the introduction of the iPhone, which had created a vacuum as established companies such as Blackberry, HTC, LG and Sony couldn’t keep up with the cutting edge product launched by Apple. They were also caught in the perfect storm with the economic crisis, leaving them scrambling as to which division to save first.
Samsung meanwhile began expanding its product portfolio to capture as many customers as possible and expanding its manufacturing output which had to keep up with the growing demand created by the multi-billion dollar marketing machine. It acquired strategic technologies such as LoopPay’s mobile payments solution, which helped Samsung to stay relevant in the quickly evolving contactless payments market, meeting a growing consumer demand. Whether Samsung could’ve grown as rapidly without its marketing warchest is up for debate, but it’s uncanny ability to time its entry into the smartphone market, is commendable to say the least.