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WHEN DIPESH Amritlal Shah, an electronics engineer, walked into Samsung’s R&D lab in Bangalore as its first employee in 1996, few would have envisaged that the consumer electronics behemoth’s largest research operations outside South Korea would one day be in India. The country was just emerging as a hotspot for IT services and other than GE and Texas Instruments, few had bet on Indian labs supporting global businesses.

Shah, then 27, and the engineers he had hired at Samsung India Software Operations (SISO), started out developing wireless telecom applications for the nascent local market, but were soon tinkering with products meant for other emerging economies in South Asia and then Africa. Fifteen years later, Samsung’s India research has spread across three institutes. There’s SISO, which focusses on wireless and telecom (‘Shah’s kingdom’, as it’s referred to within), though it also does work in digital printing, memory, and semiconductor solutions. Then there’s Samsung India Software Centre (SISC), which develops software for TVs, Blu-ray players, and the like, sold globally. Finally, there’s Samsung Advanced Institute of Technology (SAIT), the most secretive unit, which dabbles in Samsung’s next big bet. “From supporting products out of India, the R&D centres have grown to take complete responsibility of product engineering today,” says Shah.

In its previous avatar, the $136 billion (Rs 6.9 lakh crore) Samsung may have been a TV maker competing on price. But over the last decade, it’s been reborn as a tech powerhouse that competes against a Sony at one end in TVs, an Apple at the other (tablets, phones), and everybody else in between (think Hitachi, Panasonic, Bosch, LG, Carrier and the like). It’s visible in the ramp up of research within the chaebol, which has driven Samsung’s 28% annual revenue growth over the last 10 years.

According to the United States Patent and Trademark Office, of the world’s top 10 companies by patents filed in 2010, Samsung ranks second (4,518) only to IBM (5,866), but way ahead of Sony, Apple, or Microsoft (see table). That’s up from the 423 patents Samsung filed in 1995, when it was ranked 21st. Sony that year had filed 754 patents and was 11th. Among the top 10 patent filers, Samsung is the highest spender in R&D ($7.9 billion in 2010) after Microsoft ($9.04 billion).

Samsung executives hesitate to reveal how much of the money flows into its three setups here. “The Indian R&D centres are closely integrated with our global R&D network, and since they work on global projects, we do not make a distinction in funding,” says Jung Soo Shin, president and CEO, Samsung India Electronics. But in a field where the number of scientists is an approximation, India ranks high—there are 5,600 engineers employed here. That’s higher than the sales force of 1,100 that all of Samsung’s businesses deploy here. Globally, Samsung employs more than 50,000 people in research.

According to the Indian patent office, Samsung India has been granted 840 patents, and 1,905 published applications since 1997. Researchers in India say this is the highest among private companies here: Of these, 162 patents were also filed by it outside the country, mostly in the U.S. and Korea, between 2008 and 2010, and their numbers are doubling every year. While the India figures don’t look big when compared to Samsung’s global patent numbers, that isn’t a reflection of what’s happening here. Sometimes Samsung chooses not to file patents that might hamper growth in certain areas, explains a consultant working closely with the Koreans. This approach ultimately benefits the industry. The most striking example in recent times is the Android operating system that Google never patented so that others could develop software on it.

While lower wages for high quality talent have played a part in the India R&D story, that’s not the only reason. After all, the salary differential, particularly in research, has narrowed across all MNC labs. As Shin explains, it’s more to do with India’s technology prowess. “As we move towards enhancing our software competence, the Indian R&D is increasingly playing a strategic role. The immense intellectual power that India possesses makes it a perfect destination for carrying out research activities,” he says.

Take what happens behind SAIT’s closed doors in Bangalore. From what can be pieced together, some of Samsung’s next big bets are taking shape at SAIT India. Along with green, energy-saving devices, such as solar panels, light-emitting diodes (LEDs) for lighting, and electric-vehicle batteries, medical devices and biotech drugs are a few of Samsung’s innovations for the future. Within Samsung, SAIT holds a venerated position “cultivating competencies for basic and advanced technologies”, while bearing “the heavy responsibility of ensuring Samsung’s future”, according to its stated agenda. That explains why the 80 engineers working in Bangalore are doctorates and post-doctorates. Insiders say the folks at SAIT have unlimited access to Samsung’s research corpus. SAIT alone has a budget of $20 billion plus over the next decade.

India’s ascendency within Samsung’s research universe may not have been easy. The research head of a U.S. technology company, based out of Bangalore, says that MNCs are always picky when it comes to using remote locations to do key R&D work. “You need to be good on parameters such as cost, schedule, quality, and an understanding of new markets, products, and future technology. The proximity to a market like India has also worked for Samsung,” he says.

MOST MULTINATIONALS use their India teams to adapt products or applications for local or emerging markets, or tweak existing products. Samsung has a different approach. It sometimes does end-to-end R&D for the stuff it launches here such as the Solar Guru phones. Char­ging mobile phones is a problem here given the erratic power supply. The Indian R&D team added a small solar panel in the phones so that the battery could be recharged without electricity. Solar Guru was then introduced in Africa and other emerging markets where power is a problem.

Equally, the Samsung team builds apps for developed markets which may be of no use to India for now. There’s a group at SISO that’s working on devices that will operate at 4G/long term evolution (LTE) and 5G. While India revels in speeds of 7.2 MBps, these teams talk about 1 GBps, a thousand times more than an MBps.

Chagnur Mahesh, a senior development manager, who is working on next generation wireless technologies, is confident that what he creates will get discussed at agencies, such as the International Telecommunication Union, or the Institute of Electrical and Electronics Engineers, when the standardisation process begins. “We are trying to achieve practical data speeds of over 1 GBps,” says Mahesh, showing the testing network and results on monitors. They look like ECG monitors, but instead of heartbeats, they capture the speeds at which data is being transmitted between the device and the network.

SISO is now 3,300-strong, adding 800 engineers every year, for the last three years. Housed across eight floors in a building in Bangalore, a few minutes away from SAIT’s facilities, its R&D labs look like any other Samsung office, with the company’s trademark blue prominent in the decor. There’s just one difference here—there are no corner rooms. So, as vice president of the mobile communications division, Shah sits amid his “kingdom” of 2,200 engineers, with nothing to distinguish him from the others, except a slightly larger cubicle.

“The India team works closely with telecom services operators in the U.S. and Europe, offering bundled Samsung handsets. This involves discussions at several stages,” says Shah from Dallas. He travels six months a year, often working closely with AT&T, Vodafone, and Verizon, bundling the applications they want, and customising the look and feel of the software. It’s all in line with how Samsung is delegating work concerning global customers, especially English-speaking ones, to Shah. Voice over LTE was implemented by SISO for Verizon and is currently under trial in the U.S. It will soon feature in all Samsung LTE smartphones.

AS DEVICES GET SMARTER, Shah’s team is increasingly contributing to the software apps for Samsung’s products. In smartphones, the software is a critical component. Already, it has had plenty of exposure working on its proprietary Bada platform as well as Android. Though the base architecture of Bada was done in Korea, the web, GPS, and multimedia components were all done here. The gaming, music, reader, and social networking apps, available in Samsung smartphones and tablets, were developed by the India team. There are also India-specific apps such as mobile tracker, religious apps, J2ME app store, and T9 Hinglish prediction.

Or take the latest Galaxy Note, with which Samsung has carried the battle with Apple in the smartphones and tablets segments to the next level. When it was launched, Girish Kulkarni, 37, head of the multimedia solutions group at SISO, could barely conceal his excitement. The Note had a movie-making app created by his team, among many other multimedia apps for Samsung, which allowed users to drag and drop audio and video clips, photos, and predesigned wallpapers to create a movie. Kulkarni’s team also created the Dolphin browser, which has been included in 30 million handsets and rated the fastest on top 100 sites by Alexa.com, a provider of global web metrics.

“It is not surprising that when others failed to catch up with Apple, Samsung was able to give them tough competition. It’s mainly because it could harness the dynamic talent pool in India,” says Pari Natarajan, chief executive officer, Zinnov Management Consulting, a firm that tracks the Indian R&D scene.

S. Sudarshan, head of the computer sciences department, Indian Institute of Technology (IIT), Bombay, who has been advising Samsung for the past four years, says, “Other companies, especially in the U.S. or Europe, may not be getting huge chunks of work done here, but Samsung has pushed its agenda to become No. 1 in technology globally, through India.” Having got the mandate to develop futuristic wireless communication, the India team lost no time in setting to work on a complete software stack for LTE products, he says. It is, for instance, working on apps such as putting voice over data-centric LTE or WiMax networks.

SISO’s collaboration with premier institutes is part of Samsung’s strategy to understand the market from the grassroots. A team of 50 from the National Institute of Design, Ahmedabad, and IIT Bombay was commissioned in 2009 to study the requirements of emerging markets. While the outcome of this study is hush-hush, Samsung executives say much of it will affect next year’s wireless devices.

While Shah’s mobile division employs nearly two-thirds of SISO, the project that cuts across all of Samsung’s products (TVs, refrigerators, handsets, tabs, cameras, etc.) is the System LSI and memory division. As part of semiconductor R&D, this team integrates different types of processors, memory, and other components on to a single chip, depending on what the end requirement will be. Thus, a chip destined for an airconditioner may be tweaked to read ambient humidity levels, while the one that gets fitted into a washing machine will read salinity levels of water. Once developed, some of these chips (like those for wireless handsets and computers) may also be sold to Samsung’s competitors such as HP, Lenovo, or even Apple, reckon analysts.

The chip division is five years old, has 400 engineers, and is led by Rajesh Krishnan, general manager, memory solutions group. Though the hardware is designed in Korea, the embedded software powering these chips is developed in Bangalore. “There is a limit to what hardware design can do, so it is increasingly software that is defining speed and capacity of the chips,” says Krishnan.

However, now, there are products for which even the hardware design will be done by Krishnan’s team. They include the next generation of micro SD cards, with capacities as high as 32 GB, which are being built in Bangalore, and will be on the shelves globally by next year.

IF SISO LOOKS LIKE a cubicle farm, the SISC facility in Noida near Delhi, resembles a massive TV repair workshop. Every type of display device lies around with its innards exposed. Some of Samsung’s most cutting-edge work, especially in TVs—part of the digital media business which accounts for nearly 37% of its global revenues—is done here.

“We contribute 90% of the software in global display products. We are also designing some of the hardware now,” says Sanjay Bansal, vice president, SISC. The graphics and the browser that enables Internet surfing on Samsung Smart TV was done at SISC. Optimising the TV processors and memory for data services isn’t as simple as it sounds. “The high definition and 3D add to the complexity of software that runs these TVs. The India team is actively involved in influencing the display technology road map for the company,” says Bansal.

His team is now working on the next generation of 3D smart TVs. This includes finding a software solution that will make 3D spectacles superfluous. The jargon Bansal uses to explain this act: auto stereoscopic 3D.

SISC also innovates for the hospitality sector (TVs in hotel rooms, often controlled by one server, have a programme menu that’s different from normal TVs), and the interactive whiteboards used in schools and colleges. There are products such as thin client servers (servers to which desktops are connected, precluding the need for individual CPUs), used by BPOs and financial service companies for security reasons. Though Samsung does not sell thin client servers here, SISC develops its various applications and supports this business globally.

Bansal, who joined SISC in August from mobile chip venture ST-Ericsson, and still sees Samsung through the eyes of a newcomer, believes India’s role will get bigger. “I suspect, because of all the research efforts, India will increasingly influence Samsung’s tech road map.” If it hasn’t begun doing so already, that is.