Those were heady days. India had just woken up to a brand new world after the economy was liberalised. The Daewoo Cielo, a sedan, created quite a stir, while TVs from Akai, GoldStar, Aiwa, and Samsung could be bought in stores. Indians travelling from abroad didn’t have to carry fancy VCRs and cool electronic gadgets in their luggage anymore. The magic wand of liberalisation had indeed brought the world to India’s doorstep. Multinationals from around the world started setting up shop in the country—some of the min a big way—to tap into the massive demand that the booming Indian population, one of the largest in Asia,promised. There were others who decided to test the waters before making the plunge. Samsung, the South Korean behemoth, was one of them.

Samsung products are widely available and very popular in India today, but when the parent group, Samsung Electronics, set up Samsung India Electronics in 1995, it started small. It had just two employees and a small office in New Delhi’s Connaught Place. Dealing in televisions then, the company had a tie-up with Videocon.

Samsung’s first research and development (R&D) centre in the country was set up in Bengaluru in 1996. A year later, televisions assembled in India rolled off the company’s Noida factory in Uttar Pradesh. Samsung started making refrigerators in the country in 2003 and mobile phones in 2007. The same year, an R&D centre dedicated to the mobile division was setup in Noida.

Almost 23 years later, the conglomerate has more than 70,000 employees in the country, five R&D units, and is present in six product categories—including televisions, washing machines, and refrigerators—in consumer electronics; it also has four other business verticals, besides mobile phones. Today, Samsung’s R&D centres in India are responsible for conceptualising many products for the country, which are later used for global markets. It’s no surprise when Mohandeep Singh, senior vice president,mobile business, Samsung India, tells Fortune India, “India is an extremely critical market for Samsung globally.”

From being one of the top smartphone players in the country, to making the first projector-less theatre screen, to fitting smart air conditioning systems in modern apartment complexes, Samsung’s varied product portfolio and investments show India’s importance in its plans. Earlier this year, it invested ₹4,915 crore to expand its Noida factory, which it says will be the world’s largest mobile phone manufacturing facility. But competition has increased manifold with Chinese and some Indian firms offering similar products with comparable quality at much lower prices. So how is the multinational maintaining an edge in a competitive business environment? We met top Samsung officials at its India headquarters in Gurugram to find out. Most of them believe that the focus on innovation is what will keep Samsung going.

“Samsung has always been at the forefront of technology innovation,” says Asim Warsi, senior vice president, mobile business, Samsung India. “Our philosophy of keeping our ear to the ground and incorporating consumer feedback into our products has enabled us to remain at the top in the smartphone market.”

Samsung CTV plant in Noida, UP.
Samsung CTV plant in Noida, UP.
Image : Gettyimages

Let’s talk about smartphones first, the biggest contributor to the company’s revenue. Of Samsung India’s overall revenue of ₹55,512 crore in 2016-17—the latest available—the mobile business accounted for ₹34,300 crore. The company has a range of smartphones from ₹4,000 all the way to over ₹80,000, something that is not common practice among smartphone makers. While its Galaxy S and Note series are at the higher end, the A and the J series are for the low- to mid-level consumer. The strategy to introduce low-priced phones was also a reaction to competition from players such as Chinese brands Xiaomi, Huawei, Oppo, and Vivo taking over the segment.

According to IDC India’s quarterly mobile phone tracker, the smartphone market reached an all-time high of 42.6 million shipments in the third quarter of the year, registering 9.1% year-on-year growth. Xiaomi maintained its lead for the fifth consecutive quarter, growing 27% in Q3. The company’s Redmi 5A and Redmi Note 5 continued to be the fastest-selling smartphones in the country with a combined shipment of more than 5 million in two consecutive quarters, IDC says. The company owns almost half the online market. Samsung remained at No. 2, but continued to lose share compared to the previous quarters owing to rapid growth of the China-based players, according to IDC. Samsung’s mobile shipments registered annual growth of 4.8% during the quarter, mostly helped by its J series phones.

Analysts say the premium segment is not just Samsung and Apple territory anymore.“OnePlus climbed to the leadership position at the back of OnePlus 6, surpassing Samsung and Apple in 3Q18. With its dedicated community-building activities and high decibel promotional activities on social media platforms, the vendor [OnePlus] has been gradually scaling up in volumes,” says Upasana Joshi, associate research manager, channel research, IDC India. However, Joshi says that Xiaomi hasn’t exactly eaten into Samsung’s market share; instead, it has grown at the cost of other Chinese firms. According to Karn Chauhan, research analyst at market tracker Counterpoint Research, Indian users have “no loyalty for Xiaomi. If any other brand comes which has more features and better prices, they will go for the other brand”. Samsung, on the other hand, has brand loyalty, he adds.

On that count, Samsung hasn’t been complacent. Singh says Samsung’s understanding of the Indian consumer, that it has gained over 20 years, gives it a unique advantage. The company is known to take consumer feedback very seriously and act on it. It introduced the S-bike mode for people who ride motorbikes to keep them from getting distracted by calls while they are on the road. It also introduced an ultra-data saving mode—the company claims it helps people save up to 50% of their data.

“Samsung has always believed in customised innovation and through our ‘Make for India’philosophy, we have been endeavouring to solve India-specific problems, catering to the needs of our Indian consumers. These products are being developed by our local R&D teams,” says Warsi.

H.C. Hong, president & CEO, Samsung Southwest Asia, soon after taking over in 2015, conceptualised the company’s ‘Make for India’strategy. He was unavailable for this story.

The Indian consumer seems to be on top of everyone’s mind, at least in the smartphone segment. Pekka Rantala, chief marketing officer of HMD Global, makers of Nokia phones, tells For-tune India that the Indian market is the largest and fastest-growing, and “we really like having the young millennials on top of our minds”. This is something Samsung pays attention to as well, and the reason why it introduced a quad camera in the Galaxy A9 smartphone—primarily targeted at the young, selfie-crazy crowd.

Image : No Photo Credit
“India is our most important market... Everything that we do portfolio-wise,marketing-wise, how we plan the engagement with the consumers,we like having the young millennials on top of our minds.”
Pekka Rantala, Chief Marketing Officer, Hmd Global

Samsung is one of South Korea’s largest chaebols or family-run industrial conglomerates be-sides electronics major LG, auto giant Hyundai,SK Group, and chemicals-to-retail conglomerate Lotte Group. Founded by Lee Byung-chul in 1938 as a trading company, Samsung started its electronics division in 1969 making black-and-white televisions, and slowly progressed to other home appliances, semiconductors, memory chips, and even construction and shipbuilding.

Cut to the present, and Samsung has its finger firmly on the pulse of the consumer. As income levels rise and consumers stay increasingly abreast of tech trends, the behemoth is getting ready with the next big thing: connected devices. A recent report by CEAMA (Consumer Electronics and Appliances Manufacturers Association) and PwC India, Future of consumer durables and electronics in India: the changing landscape, says that per capita income in India has nearly quadrupled since the start of the century, rising from $452.4 in 2000 to $1,577.6 in 2016, putting more disposable cash in the hands of consumers, who are not shy about spending it.

And Samsung is prepared to cash in. Last year, the company launched its first Internet of Things (IoT)-enabled washer-dryer, FlexWash.In 2017, the company launched its SmartThings app, and this July its smart refrigerator,the IoT-enabled Family Hub, hit the market.

Raju Pullan, senior vice president, consumer electronics business, Samsung India, says the company is looking at MDE, or a multi-device experience, across its product categories—basically, using an app to connect and control all the appliances in your home. The company has started demonstrating the concept at retailpoints by connecting the Family Hub refrigerator and the FlexWash washing machine to air conditioners, microwaves, and TVs through the app. “Our strategy is to create compelling reasons for the consumer to move towards Samsung, across all categories,” says Pullan because “Indian consumers are evolving”. This is where Samsung the brand is a big help.“People don’t just relate Samsung with mobile phones; it is essentially a part of their home as well through televisions, refrigerators, washing machines, and all other lifestyle products,” says IDC’s Joshi.

“People don’t just relate Samsung with mobile phones; it is essentially a part of their home as well through televisions, refrigerators, washing machines, and all other lifestyle products.”
Upasana Joshi, Associate research manager, Channel research, IDC India

Herein lies Samsung’s strength. As it develops advanced, smarter products in more categories,it can offer a complete suite with the smartphone at the centre of it all. “Players in smart home products can expect a rise in annual growth rate [CAGR 2018-22] of 61.4% with volume of$5,901 million,” the CEAMA and PwC report says. It further says that “5G and LoRa WAN (along range, low power wireless platform) will transform the Internet topology and consumer behaviour.” Pullan agrees: “It will be a game changer for the industry.” As of now, the Internet penetration and speed remain a major issue in India.

Be it mobile phones or connected devices, Samsung relies heavily on its R&D arm. Globally, the company spends over $14 billion annually on R&D, with about 30 centres around the world.

Samsung’s R&D centre in Bengaluru is, in fact,the company’s largest in the world for software outside of South Korea. In an earlier conversation, Dipesh Shah, managing director, Sam-sung Research Institute (SRI)-Bangalore, had explained that the centre is working on software related to 5G protocol, camera-related image processing, and artificial intelligence related to English language and IoT.

“Whichever R&D centre is closest to the market, their insights are valuable. For instance,someone from China would do unique solutions for the Chinese market, and someone from the U.S. would do unique solutions for the U.S. market,” he had said. Thus, the software platform for the J8 phone, which was launched by Samsung a few months ago, was built in Bengaluru. “Consumers in India were using third-party photo editors on their phone, which is a lot of work—take a picture and then go to another app to modify it and then share it with their friends. What we did was put all of that inside the camera,” Shah said.

 Puneet Sethi, Vice President, Consumer Electronics Enterprise Business, Samsung India
Puneet Sethi, Vice President, Consumer Electronics Enterprise Business, Samsung India
Image : Sanjay Rawat
“Samsung was coming out with new things on the LED side, that’show the concept(of Onyx) was created... and...because of the acquisition of Harman [Inter-national] now we have a total solution.”
Puneet Sethi, Vice President, Consumer Electronics Enterprise, Samsung

Apart from innovation, Samsung believes the extent of its distribution network is an advantage. While companies like Xiaomi have a strong online play, a large chunk of Samsung’s sales still come from brick and mortar. Proliferating the distribution network will be essential for the company. As of now, Samsung has a strong physical distribution network. Its products are available across 180,000 retail outlets across India. It is looking to increase the number to 200,000 by the end of the year. Its consumer electronics are available in 30,000 retail stores.“As of now, on the smartphone side, demand will be equally divided between the physical stores as well as online”, says Rituparno Mukhopadhyay, partner, technology consulting, PwC.

This is not all. Samsung is moving fast into offices as it is into homes. “We started focussing on the enterprise business four-five years back...the vision came from Korea that we should look at driving the enterprise business to become as large as 10% or more of the overall business,”says Sukesh Jain, senior vice president, Samsung India, who looks after the enterprise business. Displays and air conditioning—the two things large offices can’t do without—are also on Samsung’s menu. “A huge number of Indian companies are becoming global and most of the global Fortune 1000 companies have significant presence here and growing,” says G.B. Kumar, vice president for Asia-Pacific at Prysm, which makes collaborative displays for the enterprise.

An interesting innovation Samsung brought to India this year has been the Onyx screen, an LED theatre display, which it says can eventually replace traditional theatre screens and projectors. The company has already signed up with PVR and opened the first Onyx screen in Delhi and plans to open 10 more in the coming months. “Samsung was coming out with new things on the LED side, that’s how the concept [of Onyx] was created,” says Puneet Sethi, vice president, consumer electronics enterprise business, Samsung India. After acquiring U.S.-based audio specialist Harman International in 2016,the company now has a “total solution”, he adds.

Another segment Samsung has been present in for a long time is LED televisions. But competition is cut-throat. “There is intense competition in the market today, as there are many valuation-based brands coming with huge discounts,” says Avneet Singh Marwah, director and CEO of Super Plastronics, a Kodak and Thomson brand licensee. And it’s going to get tougher as more brands are expected to enter the market next year, he says.

With its wide portfolio, Samsung is poised to offer ‘total solutions’ to digital India. But until the digital infrastructure is mature enough, it will have to fight fierce competition from newer firms that are slowly increasing their product offerings and vying for Samsung’s place.

(This story was originally published in the December 2018 issue of the magazine.)

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