As evidence that the smartphone
business is slowing down, Samsung now says it’s putting new attention on different areas.
Its Samsung Electronics unit will boost investments that “will drive its future growth” by spending over $22 billion over the next three years in the areas of artificial intelligence (AI), 5G technology and automotive electronics components. Separate Samsung units will delve into biopharmaceuticals.
In total, for all of its businesses which run a wide gamut of industries, Samsung said it will commit to $161 billion over the same time period, most of it spent at Korean facilities.
It also said it will open its venture incubation program to both external and internal start-up projects aimed at “building and energizing the ecosystem of innovative businesses for the digital economy.”
Samsung Electronics is a worldwide leader in cellphones, TV sets and semiconductors, so taking a step back to diversify would be a major announcement even if the dollar figures were not so enormous.
The company is not afraid to spend money. S&P Global Market Intelligence earlier estimated that Samsung Electronics spent $44 billion on capital expenditures in 2017, more than any other publicly traded company by a very wide measure.
But clearly, it recognizes the smartphone market is just about tapped out.
The International Data Corporation reported last week that, worldwide, smartphone makers shipped 342 million units in the second quarter, a 1.8% decline over the same period a year ago.
That was also the third consecutive quarter of year-over-year declines, which includes the first-ever decline in sales in a fourth fiscal quarter, which usually is buoyed by holiday purchases.
Last October, Kwon Oh-hyun, the CEO of Samsung Electronics, said he planned to resign and admitted in a statement, “We are hard-pressed to find new growth areas right now from reading the future trends.”
The timing of the announcement that Samsung will be turning its attention elsewhere comes at an awkward moment. Samsung is still the world’s leading smartphone producer and is hoping to hit a home run with its new Samsung Galaxy Note 9, which debuts on Thursday, to much publicity and a big marketing push.
But its new phones — the Galaxy S9 and S9 Plus — have disappointed critics and consumers, and its Galaxy 7 was a public relations nightmare because of its exploding batteries.
Cnet reported that in the second quarter, Samsung had its worst performance since 2013 and lost more smartphone market share than any other major manufacturer. And while Apple, now the third-largest smartphone manufacturer, has been able to improve sales of its priciest phones while the market is cooling, Samsung has had problems.
In the second quarter, Samsung mobile phone revenue was down 20% from a year ago, to $21 billion.
Now the South Korean giant says it hopes its artificial intelligence innovation will drive its transformation, along with “next-generation 5G telecommunications technology” that will create new businesses around autonomous driving, robots and the the Internet of Things, or IoT. It said it will hire 1,000 more researchers in the AI space.