Q&A With Samsung’s Mobile Chief

Samsung executive J.K. Shin unveils the new Galaxy S4 phone.

Korean Giant Unveils Galaxy Phone; Mobile Chief Isn’t Satisfied With U.S. Share


SUWON, South Korea—Samsung Electronics Co. 005930.SE -2.63% is coming off its strongest year ever, reporting record earnings and leapfrogging Apple Inc.AAPL +0.97% to become the world’s biggest smartphone maker.

Now, the main challenge for J.K. Shin, Samsung’s 57-year-old mobile chief, is to keep that momentum as competition heats up and prices for smartphones start to erode.

Mr. Shin is betting big on Samsung’s newest smartphone, the Galaxy S 4, which he unveiled Thursday onstage at New York’s Radio City Music Hall. Backed by a sizable marketing campaign, the new phone showcases the company’s yearlong effort to improve key software and applications that will help it compete better with Apple.

In an interview with The Wall Street Journal, Mr. Shin addressed some of the major headwinds facing the company, including slowing economies in China and Europe—two of Samsung’s biggest markets—and constant legal battles over patents with Apple. He also discussed Samsung’s preference for Google Inc.’s GOOG -0.46% Android operating system over Microsoft Corp.’s MSFT +0.79% software, and its plans to launch a new smartphone this year using software co-developed with Intel Corp. INTC -0.02%

WSJ: Why did you select New York as the venue to unveil the Galaxy S 4? Last year, you released the Galaxy S III model in Europe.

Mr. Shin: We’re now a global player in the smartphone market and a global company, and the U.S. is an important market for us. This is the first time we’re holding our “unpacked” event in New York… Innovation is what will get consumers to buy new devices. I don’t dwell on market share numbers, but I’m not satisfied with our market share in the U.S.

WSJ: Samsung is embroiled in a number of patent lawsuits with Apple. Has that changed how you design products?

Mr. Shin: The Galaxy S 4 has features unique to Samsung like [Air Gesture] that detects hand gestures. In the process of developing and making the Galaxy S 4, we have filed around 120 patents related to user interface and software. We’ve also hired a number of software engineers from India, Russia, China and Europe to develop unique features internally.

WSJ: Samsung has been stepping up investments in other companies recently, including a 3% stake in Japanese display maker Sharp Corp. 6753.TO +2.61% Will you continue to look at investments and acquisitions?

Mr. Shin: If there are opportunities, we will look. Acquisitions and stake investments have been part of Samsung’s strategy for several years and we’re always open to working with companies that want to work with us.

WSJ: Which areas are most attractive for Samsung when it comes to acquisitions or investments?

Mr. Shin: We’re interested in intellectual property, advanced technology, components and areas that will enable us to offer better applications on smartphones. Wacom [a pen-display maker that sold a stake to Samsung in January] was previously a component supplier and now they’ve become a partner. If there are opportunities in the U.S., we will take a look at those as well but I cannot comment about talks or any deals in the works.

WSJ: How committed is Samsung to the low-end smartphone market, especially since margins are thinner there?

Mr. Shin: We’re quite active in the low-end smartphone market and we will continue to compete in this area. In the U.S. for example, our main focus is selling the Galaxy line of high-end smartphones.

But we’ve also been selling phones as cheap as $19 through a contract with Verizon Wireless. AT&T T +0.71% and T-Mobile also offer smartphones for $50 to $100 in the U.S. market.

We’re also pushing out new models in India, the Middle East, Africa, Eastern Europe, Russia and Central America. We will continue to develop new models for the low-end market.

WSJ: Samsung has become a dominant maker of Android-based phones. Has your relationship with Google changed?

Mr. Shin: We like Android and we plan to continue our good relations with Google. I don’t think it’s correct to say that there’s friction.

WSJ: What about your relationship with Microsoft? Has it changed after NokiaNOK1V.HE +0.15% began to work more closely with Microsoft on Windows devices?

Mr. Shin: Smartphones and tablets based on Microsoft’s Windows operating system aren’t selling very well. There is a preference in the market for Android. In Europe, we’re also seeing lackluster demand for Windows-based products.

WSJ: Will you continue to invest in your own operating system called Bada?

Mr. Shin: We are in the process of merging Bada with Tizen [an open-source operating system being developed by Samsung and Intel Corp.]. You will likely see the first smartphone using Tizen from Samsung in the third quarter of this year.

WSJ: Why are you developing a Tizen phone when you have Android?

Mr. Shin: Our strategy has always been to work with multiple operating software companies. There are different needs from our customers and the market for third-party OS [operating system].

WSJ: How is Samsung’s expansion into the enterprise market coming along?

Mr. Shin: We can’t talk about specific corporate clients, but it’s true we are pushing into the [business to business] market. At the Mobile World Congress in Barcelona, we introduced a new containerized security system called Knox. This allows users to keep their personal and work data separately. There is plenty of room to grow in this market and we’ll be rolling it out globally.

WSJ: What is the outlook for the smartphone market?

Mr. Shin: Market competition is intense but it has always been like that even three to five years ago. With economies in China and Europe slowing down, we don’t expect market conditions to recover in the first half of this year and even the second half of the year is a bit uncertain.

But we aim to grow faster than the overall smartphone market this year and expect shipments to be higher than 400 million units this year. We’ve already sold 50 million units of the Galaxy S III since its launch last year.

WSJ: When are we likely to see a smartphone using flexible displays?

Mr. Shin: That’s still far off. We know that many people are interested in this technology but it’ll take some time and I cannot disclose the timing.

Courtesy: The Wall Street Journal