/ REUTERSSamsung’s meteoric rise – in the first quarter of 2011 it shipped fewer smartphones than Apple, Nokia or Research in Motion, but is now market leader – has handed it a dilemma.
Does it risk becoming a commodity manufacturer of hardware, squeezed like the Computer makers of old between narrowing margins and those who control the software that makes their devices run, or does it try to break into other parts of the business – the so called mobile ecosystem.
"Do they really want to be one of the power players or are they happy enabling someone else’s ecosystem.
Later on Thursday, it will launch the Galaxy S3, the latest addition to its flagship range of smartphones.
Juniper Research expects Samsung to remain the No.1 smartphone manufacturer this quarter.
"Android has done wonders for them," says India based Gartner analyst Anshul Gupta.
They worry that Samsung has yet to address the central contradiction of it making devices that use someone else’s operating system.
With an increasing number of devices offering it and its inclusion in variants of the Samsung Galaxy S2 and the Samsung Galaxy Nexus, NFC is should also feature in some capacity.
By licensing the free Android OS from Google, Samsung saves itself millions of dollars in software development costs and license fees, but leaves itself dependent on Google.
Horace Dediu, a former analyst for Nokia who now works as a consultant and runs an influential blog at , said a similar debate went on at Nokia in the early years of the smartphone.
The conclusion, he said, was obvious: Microsoft had shown that whoever owned the operating system could relegate every hardware manufacturer to be a commodity player.
"So it’s a puzzle to us now, years and years on," he said, "to see companies like Samsung continuing to operate within the operating system and ecosystem that other vendors control.
Nokia itself has abandoned its own operating system, Symbian, in favour of Microsoft’s Windows Phone.
But the consequences for Samsung and other Android manufacturers are visible: While each has customized the Android interface, these are "veneers", in the words of Dediu, which "dissolve as soon as you jump into an application of the core platform.
Android is a mobile operating system developed by Google and the Open Handset Alliance, and has seen a number of updates to its base operating system since its original release.
This slows down the update process and means many users are stuck with earlier versions of Android.
The pre release versions of Android were dubbed Astro and Bender, but these names could not ultimately be used for trademark reasons.
Nearly two thirds of Android devices, for example, run Gingerbread, a version of the operating system that was released in late 2010.
However as 2011 progressed the Galaxy name rolled out to a host of mid range Android devices in Samsungs lineup.
Analysts say Google’s efforts to reduce fragmentation by limiting what can be altered in more recent versions of Android compounds such problems.
Also, smartphones look increasingly similar as they shift from keyboards to touchscreens.
While Samsung says it has welcomed Google’s purchase of Motorola , a handset maker, because of the US firm’s commitment to supporting Android and its partners, it has also taken steps towards some degree of independence.
For example it last year introduced its own Android software store, Samsung Apps, which has about 40,000 apps – a handful compared to Apple’s 500,000 for the iPhone and 450,000 for Android.
Google Play is a digital multimedia content service from Google which includes an online store for music, movies, books, and Android apps and games, as well as a cloud media player.
And last month it announced its own mobile advertising service, AdHub Market, apparently competing with Google’s own ad distribution network – its main source of revenue.
And while all but a fraction of Samsung’s smartphones are currently Android devices, the South Korean group has said it is committed to creating devices for different operating systems – what it calls a multi platform strategy.
The Korean publication notes that the SoC shortage may have negative effects on LG’s earnings this quarter, as the company plans to introduce new Android LTE smartphones soon, including the rumored D1L (which can only use a Qualcomm chip, since Nvidia won’t have LTE friendly chips before 2013).
It has an operating system called bada, for example, which was on fewer than 3 percent of the world’s smartphones last year, according to Canalys, putting it ahead of Microsoft’s Windows Phone.
But that’s nothing compared to Android, which was on nearly half of all smartphones shipped.
"They’ve tried to beat the drum for bada, but it hasn’t had much traction," said Jake Saunders, a Singapore based analyst for ABI Research.
Samsung says it plans to introduce more models, but has also said it may roll bada into another operating system called Tizen, and is in any case building an ecosystem that would improve compatibility between the two systems.
It was keen to stress, however, that while Android was an important part of its strategy, phones running Windows and bada operating systems were equally important.
Given that bada and Windows phones account for less than 5 percent of Samsung’s total phone shipments, it suggests Samsung will give greater weight to Windows and bada phones in the months ahead.
Samsung, said Ovum’s Cripps, is keenly aware of the need to shape a broader strategy.
"Embracing ecosystemIf it wants to avoid merely competing at the bottom end of the market with ZTE and Huawei, analysts agreed it must develop an ecosystem that embraces software, content, other devices and all the players that help make that happen.
All have different business models, said Cripps, but the same goal: to "own every element of the consumer’s online and mobile experience.
"Samsung is not just a phone maker like HTC so it does have the potential to create platforms which deliver content and web services to TVs, PCs, phones and media players, and connect them," said Caroline Gabriel, research director at Rethink Technology Research.
This is Samsung’s competitive advantage, said Gabriel, as the world shifts more to web based technologies like HTML5, which reduce the relevance of individual operating systems and platforms like Apple’s iOS and Android.
Samsung can draw on its extensive supply chain, manufacturing capability and research and development facilities to make this happen, Gabriel noted, but its challenge is to overcome silo like systems within the company and to learn how to develop relationships with the outside world.
"Samsung has no track record of building a developer ecosystem and even in the web that’s going to be a challenge," she said.
"Making it app enIt also requires deeper changes, said Ovum’s Cripps – not only to be the first Japanese or Korean company to break into a world dominated by US players, but to succeed where once- dominant players like Nokia, RIM and Microsoft have stumbled.
"Samsung has made some tentative steps, for example into wedding its Smart TV business into partnerships with content providers.
And developers like Singapore based Jon Petersen say the company has put out feelers to outsiders to help work on software applications – in apparent recognition of its own weaknesses.
Such weaknesses were visible even with the app it published ahead of Thursday’s S3 launch: nearly a third of reviewers gave it the lowest rating, complaining it didn’t work properly.
The officially supported integrated development environment is Eclipse using the Android Development Tools Plugin, though developers may use any text editor to edit Java and XML files then use command line tools to create, build and debug Android applications as well as control attached Android devices (e.g.
Danielle Northrop is a business journalist based in Sydney, Australia. Danielle has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Danielle spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.