How Samsung Got To Be the Biggest Tech Company in the World

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Jan. 10 2013 5:44 PM

The Genius of Samsung

How the biggest tech company in the world got that way.

Samsung's booth is seen at the 2013 International CES at the Las Vegas Convention Center.
Samsung is having a moment

Photograph by David Becker/Getty Images.

Consider the phablet. Back in 2011, when Samsung first unveiled the Galaxy Note—a 5.3-inch smartphone that was big enough to be a minitablet, hence the ugly portmanteau—the world’s tech pundits couldn’t stifle their giggles. Was it a phone? Was it a tablet? Was it a joke? Smartphone industry blog Boy Genius Report called the Note “the most useless phone I’ve ever used,” adding: “You will look stupid talking on it, people will laugh at you, and you’ll be unhappy if you buy it.” Gizmodo argued that the Note “isn't just designed poorly—it's hardly even designed for humans.” I couldn’t resist joining the chorus. With the Note, I wrote, Samsung was hoping to stoke a certain kind of envy in young men all over the world. The firm was banking on the fact that “when you whip a phone as big as the Galaxy Note out of your pants, some dudes will think you’re a god.”

But the joke’s on me and my smart-ass tech journo colleagues. Confounding our predictions, Samsung sold 10 million Notes in 2012, making it one of the most successful smartphone launches in history. Then, in the fall, Samsung launched the Galaxy Note II, an upgraded version with an even larger screen—and it promptly sold 5 million of them, and is on track to sell 20 million over the course of the year. The Note’s success has spawned a spate of copycats, with phablets becoming the hottest new smartphone category. Over at Quartz, Christopher Mims smartly argues that as ridiculous as it looks, the phablet is becoming the computing device of choice in the developing world. “If your budget is limited, why deal with two different upgrade cycles and two different devices, when you can put all of your money into a single device?” he argues. Mims believes that the Note’s success may even force Apple to build a rival phablet.

I’m not so sure, but I wouldn’t be shocked at this point. Samsung is having a moment, and every one of its rivals would be wise to visit its enormous booth at CES this week to keep an eye on the Korean tech juggernaut. Last week, Techcrunch’s MG Siegler crowned Samsung the “fifth horseman”—the only worthy rival to Apple, Amazon, Facebook, and Google, the foursome that dominates the world’s tech markets. Samsung earns that spot in part because of its fearsome stats: It is the world’s largest tech company by revenue, and in 2012 it became the world’s leading smartphone maker. According to the market research firm Canalys, Samsung’s smartphone market share in the third quarter last year beat that of Apple, Sony, HTC, and Research in Motion combined. It still lags behind Apple in profit—Apple sells fewer iPhones but earns more money doing so—but Samsung’s smartphone proceeds have doubled in the past year, so it may well one day catch its rival.

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But there’s something else besides sheer size that makes Samsung so successful, a brilliance exemplified by the way the company stumbled into success with the Galaxy Note: Samsung is willing to try anything. Actually, it’s willing to try everything. By building dozens of models across a range of product categories—it makes everything from phones to tablets to refrigerators to washing machines—Samsung can offer a device for every conceivable market niche. As long as its devices meet a minimum level of quality—and in general, its products are very good—and it manages to kill the failures and push the successes with great marketing, Samsung is sure to keep its place at the top of a roiling tech business.

This flood-the-market strategy isn’t elegant. It can be confusing for customers, a pain for Samsung’s carrier partners, and very difficult for the firm’s engineers and designers to keep up with. It also doesn’t have history on its side. Other firms that have tried the build-everything approach—see Apple in the early 1990s, or Hewlett-Packard over the last decade—eventually begin to lumber under their own complexity.

Yet Samsung’s strategy is extremely well suited to our current tech era. We live in a time of profound transition, when the future of everything is up in the air. The world’s tech-addled masses are switching from desktop devices to mobile ones, from bulky programs to sleek apps, from limited local storage to acres of space in the clouds. When everything is in flux, predicting what will be hot a year from now—“skating to where the puck is going to be,” to quote Steve Jobs quoting Wayne Gretzky—becomes all but impossible. Samsung’s strategy is to put a man at every spot on the ice. Be in enough places and you’re bound to catch something no one was predicting—like, for instance, the world’s bizarre love affair with phablets.

Samsung’s current dominance stems from its wise response to the iPhone. When Apple’s smartphone began to shoot up the sales charts in 2007, Nokia and RIM, then the world’s biggest smartphone companies, more or less ignored it. Samsung saw the iPhone as an opportunity—it showed what consumers wanted, so why shouldn’t Samsung give it to them, too? Some of the firm’s early touchscreen phones were slavish copies of the iPhone—see the 2010 era Galaxy S—but Samsung’s devices worked well, and they were priced just right. That was true, too, of the tablets Samsung put out in response to the iPad. At one point during the heated patent-infringement trial Apple launched against Samsung last year, the judge held up Samsung’s tablet alongside Apple’s and asked, "Can any of Samsung's lawyers tell me which one is Samsung and which one is Apple?" One of the firm’s lawyers replied, “Not at this distance, your honor.” Samsung lost a $1 billion judgment in that case, but that was a relative pittance. By giving people what they wanted—even if it meant copying Apple—Samsung had become a global gadget powerhouse.

Since 2010, Samsung has deepened its technical prowess. Its design and workmanship have improved, and now its devices work just as well as Apple’s and no longer look like clones of Cupertino’s best stuff. Most importantly, as Business Insider has noted, Samsung has become a master of marketing. Its commercials portraying Apple’s customers as mindless sheep were brazen—especially considering Samsung’s mimicry of Apple’s devices—but they were ubiquitous and beloved by Apple haters. They announced Samsung as a friendly, reasonable alternative to a cultish global brand.

And, indeed, there is something charmingly humble about Samsung’s see-what-sticks strategy. Other tech giants operate according to lofty philosophies. Apple prizes aesthetics and usability, Google cherishes the free flow of information, and Facebook wants to connect us all to one another. Samsung has no such philosophy. All it wants to do is make stuff that we’ll buy. This strategy is an admission that customers, not companies, know best. If pleasing customers means making phones that look exactly like your rivals’ devices, or making phones that are foolishly large, or making devices that run every conceivable operating system, or creating a fridge with a built-in baby monitor and an Evernote app (unveiled at CES this week)—well, then that’s what Samsung will do.

Sure, most of those devices will fail. But failure is cheap; when devices don’t sell, Samsung knows how to dump them quickly. (Samsung bet big on 3-D TVs, but it’s all but forgotten about them now.) But when one of its bets hits, Samsung knows how to push all of its resources into making it the next big thing. That’s what it did with phablets, and I suspect Samsung will keep surprising us. The future is unknowable, so there’s no shame in guessing.

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