Why Samsung Is Betting Big On The Internet Of Things

Consumer electronics giant Samsung (PINK:SSNLF) is making a big bet on the Internet of things (IoT) space. At a keynote speech at this year’s Consumer Electronics Show (CES), CEO BK Yoon said that the company intends to play a key role in this market, with the intention to equip 90% of all its devices with IoT capabilities by 2017, while making its entire product line IoT capable within five years. Samsung’s commitment to the nascent yet promising space is noteworthy, given that its large-scale and wide portfolio of consumer electronics products provide a strong foundation to build IoT-based solutions. In this note, we take a look at the IoT space and where Samsung’s initiative could be headed.

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Everyday Products And Devices Connected To The Internet

The term Internet of things refers to the idea that everyday products such as home appliances and industrial equipment are connected to the Internet and are able to communicate with one another, while potentially being controlled through a hub. While the benefits of IoT can vary based on the device or equipment involved, it broadly serves to improve efficiency and convenience. While the term has been a hot buzzword in the tech industry over the last few years, it has gradually been gaining traction. The core building blocks of the IoT era are in place given that the issues of cost and technology have been largely addressed. Components such as low-voltage processors, sensors and wireless networking equipment have become affordable enough to add networked intelligence to most devices. However, there are still some challenges. Companies are still figuring out practical use cases for connected devices, and the details of how the devices need to work together. For example, the IoT space still lacks a common set of standards that allow devices to be compatible with each other. Security is also proving a concern in the IoT market, since connected devices could give hackers opportunities to break into devices that have so far been isolated from the internet.

Why The IoT Market Is Important

According to research firm IDC, the global market for Internet of things-capable devices and services could cross $7 trillion by the year 2020. ^[1] While we wouldn’t read into the number too much, given that IoT is more of a feature or capability of a device rather than a new product category altogether, the potential size of the market does underscore its importance and highlights the need for technology companies and appliance manufacturers to get a strong strategy in place. Almost all technology companies – ranging from device manufacturers, processor manufacturers, networking equipment providers and software developers – have jumped on the bandwagon. For instance, in the consumer space, Apple (NASDAQ:AAPL) is offering its HomeKit SDK which allows users to control locks, lights, thermostats video cameras and switches with their Apple products. Meanwhile, Google (NASDAQ:GOOG) is also bolstering its presence in the connected home with its purchase of Nest, a maker of smart connected thermostats last year.

Samsung’s IoT Strategy Is Open and Collaborative

While IoT will not be an entirely new product category or market for Samsung, it will serve as an enhancement to the company’s existing devices and appliances, allowing for greater product differentiation. On the surface, Samsung appears to be the ideal company to drive the adoption of IoT. The company manufactures everything from home appliances, smartphones and tablets (which can be used as control hubs for IoT) as well as the semiconductors including processors and sensors which are required to acquire and process data. However, software and services represent a crucial part of the IoT puzzle, and Samsung has a mixed history of delivering robust software and services. Most of the company’s product lines are hardware-driven, and the company remains reliant on Google’s Android to drive its smartphone business. That said, Samsung has been making acquisitions and working towards a more collaborative approach in developing its connected device strategy. Last August, Samsung purchased a U.S.-based startup called SmartThings that specializes in home-device controllers that are compatible with a number of different smart home standards, enabling various devices to work together. The company has also noted that its IoT components and devices will be open, allowing its devices to work without a proprietary standard. Last year, the company helped to start an alliance known as the Open Interconnect Consortium  in order to to promote an open-source standard that allows devices from different companies communicate with each other. ^[2]

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1. At the International Consumer Electronics Show, The Internet of Things Hits Home, New York Times, January 2015 [↩]
2. Samsung Preaches Harmony in ‘Internet of Things’ Push, WSJ, January 2015 [↩]