Can hardware manufacturers survive the platform economy?

Yesterday, Samsung announced its new flagship phones with a flock of new partnerships. This might seem business as usual for the Korean manufacturer that is struggling to live in the shadow of Apple’s overwhelming ecosystem. But something is happening. Maybe? Let me explain…

Since 2019, Apple has been putting quite a lot of pressure on Samsung by confirming they are not even competing together. With TV+ and Apple Arcade, the Cupertino company is taking other platforms, such as Netflix and Amazon, head-on. Not a mere hardware manufacturer. In this battle, Apple’s phones and tablets are not expensive products, they are access to a premium ecosystem, including payment, cloud, music and (as heavily marketed since 2016) digital security!

And this is working quite well for Apple, thank you.

For 2020, Samsung has no way up through just hardware. They know it, and more importantly, investors know it. Cue in their last years of embarrassing struggles at wooing the market with break-through features that ranged from gimmicky to plain dangerous. (Let’s not even address when they try to do content… Samsung Milk music service, anyone?)

But yesterday, if Samsung did what Samsung does (new hardware and features solving no clear problem at all), they also unveiled a new strategy. If they can’t be a platform and beat Apple at its own game, they may have privileged access to a platform of partners.

People who are really serious about software should make their hardware.Alan KAY, 1982

To misquote this famous Silicon Valley mantra: « People who are serious about their hardware should make their platform. » Or if you can’t make it, aggregate it around you? What was key yesterday for Samsung was trying to shift away from pure hardware with the new Galaxy S20 devices and offer deep integration with Netflix, Spotify, and Xbox Game Studios, among others.

On paper, this is brilliant.

In practice? I’d see a few problems looming:

• We know that assembling a partnership of more or less powerful actors doesn’t create an overnight champion (quite the contrary).
• We also have to see just how committed these companies are to huddle up together and push back against Apple in the consumer market.
• Then there is the elephant in the room: Huawei and their leadership on possible future 5G services.
• Lastly, Samsung has a history of brilliant strategic moves they don’t follow, though, because their core DNA is « just » hardware, not thinking as a platform.

We should also remember that Apple is a platform for sure, but a platform built on premium hardware. The biggest irony in this hardware manufacturers vs. platforms war is that Apple still leads in creating new hardware categories out of the blue…