- Samsung led the shift in the wearables market to be a smartwatch-focused one.
- Through the years, Samsung slowly lost its market share until it was finally out of the top five vendors in Q3 2015.
- Trying to push a new OS while remaining ecosystem agnostic did not benefit Samsung. The company will need to need to adopt an all-Android strategy to regain its leadership position.
Two years ago, Samsung Electronics (OTC:SSNLF) introduced its first wearable device, the Samsung Galaxy Gear that was a huge leap of innovation at the time and branded as an extension of the Galaxy smartphones and tablets product line. When Samsung launched its first smartwatch in 2013, Fitbit Inc (NYSE:FIT), Garmin (NASDAQ:GRMN), and Jawbone dominated the wearables market with their fitness trackers, and several technology companies were in the final stages of designing their smartwatch device or bringing it to the market. Back then, Samsung was leading the new wave of smartwatch developers, trying to shift the wearables market from being fitness tracker-focused to smartwatch-focused.
As shown in the chart below, for a long period Samsung was among the top five wearables vendors, maintaining an average 5% market share. When Xiaomi, Apple (NASDAQ:AAPL), Sony Corp (NYSE:SNE) and others launched their smartwatches, Samsung’s market share slowly eroded until Q3 2015, when the company was no longer among the top five worldwide smartwatch vendors.
Samsung’s first smartwatch generation was Android-based and competed with other smartwatches to gain market share from Android users. Samsung wanted to differentiate itself and develop its own, unique ecosystem independent from Android, so it launched its later smartwatch generations based on its proprietary Tizen OS, targeted to compete with Android, iOS, and Windows. Later, Samsung also launched the smart camera and smartphones with plans to release future tablets and PCs running on Tizen. The biggest problem with Tizen is that it enters a saturated market with three very strong OS ecosystems: Android, iOS and Windows. When one of the most prominent competitor, BlackBerry (NASDAQ:BBRY), chose to use Android on its latest smartphone, it demonstrated how intense the competition in this area is and how hard it is to develop a successful ecosystem.
Samsung’s decision to launch its smartwatch product line with a dedicated OS is reasonable, and others do that, as well; however, trying to develop a new ecosystem with smartwatches as its anchor is a terrible mistake. Google’s Android and Apple’s iOS started as smartphone operating systems, and the smartphone is still the anchor of both of these ecosystems. When a new smart TV, smartwatch, smart camera, smart glasses, etc., is launched, it’s using either the Android or iOS ecosystems to expand its capabilities and unlock its full potential by pairing it to a smartphone in the same ecosystem. Tizen devices, however, try to develop a new ecosystem while remaining ecosystem agnostic. This strategy might work with Pebble, Fitbit, or other pure-play wearable vendors, but the South Korean giant cannot use the same strategy. When a customer is buying a smartwatch, this customer wants to receive the highest added value and value-for-money he or she could receive from the purchase. Samsung optimized its smartwatches for either Galaxy devices or Tizen-based smartphones; however, when Samsung smartphones and tablets are Android-based, it would be simpler to use an Android-based watch that could optimally sync and work within the Android ecosystem.
If Samsung wants to drive its own OS, that’s a valid business decision that might have negative consequences in the short-term, but it could lead to a positive outcome in the long term when competing with Android, iOS and Windows. However, in the current situation where Samsung chose a ecosystem agnostic smartwatch solution, it brings no added value to its customers, and that is forcing the customers to choose either other leading ecosystem agnostic solutions or specific Android/iOS solutions. As long as the anchor device for Tizen is a secondary device like a smartwatch and not a primary device like a smartphone, Tizen OS will not rise. As long as Tizen smartphones are not globally available, Tizen OS cannot rise. If Samsung wants to take the wearables market seriously, it needs to drop the Tizen devices until it's ready to compete with the big three ecosystems. When this doesn’t happen, sticking with all Android devices could only benefit Samsung. In the long term, it's in Samsung’s shareholders' best interests that the company will lead every consumer electronic segment, and by sticking only with Android, it could do so without a doubt.