Although there is competition between Samsung’s consumer electronics division and its parts-making divisions, which makes components such as chips for Apple products, there is a relatively clear division of labor and a common purpose, says Choong. “Sony was organised into independent divisions, and the management system created conflicts between those divisions,” he says. While charismatic co-founders Akio Morita and Masaru Ibuka were still alive, they managed to keep the problem in check. Their successors failed to control it, Choong notes.
Samsung’s looming issues
Although it appears to have the upper hand at the moment, Samsung does face challenges of its own. The company is heavily dependent on its smartphone business, which accounts for 70% of its profit. “It is a risky situation, and Samsung should worry about too much dependency on the smartphone and mobile phone business,” says Chang.
“For now, while other product lines like LCDs are weak and the DRAM business is suffering due to overcapacity, Samsung is also still doing well in flash memory,” he says. Samsung is also vulnerable to any change in its relationship with Apple, one of its biggest customers. It also would suffer if Apple were to shift its microchip sourcing to another location, like Taiwan.
Samsung faces heavy competition in chips for smart phones and tablets. Relations have also been strained by disputes over intellectual property that Apple alleges Samsung has stolen. “Apple is pulling away from Samsung as a chip supplier. The relationship has not been that great for couple of years,” says Cavender. Hence Samsung’s strong product offensive with the Galaxy. “The question is whether or not they can compete on features, not just on value,” he adds. While Samsung can manage slightly lower costs, supplying low-cost chips for its competitors is not a winning strategy. “I am not sure how well they are going to do two or three years from now.”
Samsung is well aware of these looming issues, having seen what happened to Nokia, which was the No. 1 mobile phone maker for years, until suddenly in the age of smart phones, it lost that distinction, Choong points out. “Samsung is very concerned about the next 10 years. They created a new division to develop new innovative electronics products totally different from existing products,” he says. “The top management is looking ahead to the next 10 or 20 years from now.”
Can Sony overtake Samsung? To a certain extent, it all boils down to speed, says Chang, who previously worked as a systems engineer at Fujitsu. “With these commodity products, if you come up with a new product earlier than your competitor, you make money. If you are late, you do not make money.”
Although Sony may recognise what needs to be done, it is hindered by the Japanese tendency to always seek consensus in decision-making. “Nobody wants to take responsibility, so there is no strong leadership,” says Chang. “There is no reason why a Japanese company cannot do well. The Japanese have great technology and everyone works very hard. How come they are doing so poorly?” he says.
For a start, Sony will have to decide which direction it plans to pursue. “Does Sony want to stay with its traditional electronics business, or does it want to go into the entertainment business like music and movies?” asks Choong. They have to decide, and soon, he says.
