Samsung Electronics is spending more on marketing than R&D for the
first time in at least three years, prompting some pundits to warn that
the IT giant is sacrificing innovation at a time when the market is
teeming with ever smarter gadgets.
The South Korean firm, which warned
on Friday it will not post record quarterly earnings for the first time
since 2011, looks set to spend big bucks on marketing upcoming mobile
devices, including the Galaxy S4 smartphone, to convert more iPhone and
iPad users loyal to arch rival Apple Inc.
While the new Galaxy
smartphone, unveiled to much fanfare in New York last month, will boast a
motion-detecting technology that stops and starts videos depending on
whether someone is looking at the screen, and flip between songs and
photos at the wave of a hand, industry watchers say the device would not
overturn an industry that lives and dies by innovation.
lagged behind in creating a new category. Apple created a new category
with tablets. We are waiting to see something like that happen from
Samsung," said Rachel Lashford, an analyst at research firm Canalys in
Samsung spent a record 13 trillion won on marketing
last year. That was $1.3 billion more than what it poured into research
The firm does not provide marketing and R&D
spending forecasts. Some analysts said they expect Samsung to continue
spending more on its marketing campaigns than on R&D this year as it
fights the next wave of products from Apple.
are increasingly just tweaking existing specifications such as
increasing screen sizes. Every gadget launch by a major global tech
giant has so far underwhelmed, lacking the 'wow' factor of old and
subsequently pushing their share prices lower, some analysts said.
Apple has tumbled nearly 40 percent since the stock soared to more than $700 in September.
of Samsung hit a record in early January but have since fallen nearly 3
percent. A lack of product lineup in the longer term is also capping
their upside, analysts said.
"There is not that much visibility on
products next year, but we expect Galaxy Note 3 later this year," said
Mark Newman, a senior analyst at Stanford Bernstein in Hong Kong,
referring to the phablet that is closer in size to a tablet than a
The smartphone-tablet hybrid, a surprise hit in 2012,
appeals to users who prefer larger screens to better access visual
Samsung estimated its January-March overall operating
profit rose 53 percent to $7.7 billion as mid-tier smartphones and sales
in emerging markets helped it tide over the off-peak season.
That marks the end of five straight quarters of record profits for the world's biggest technology firm by revenue.
keep boosting our R&D spending, while marketing will be executed
flexibly according to market conditions," a Samsung spokesman said on
Ahead of Apple
Apple ramped up its R&D
expenditure to $3.38 billion in the year to September 2012, from just
$712 million in 2006. Yet that is still far less than what Samsung
"Samsung keeps investing in R&D. They've boosted their
smartphone R&D workforce to 25,000 or so from less than 20,000, and
I think they have an exciting product lineup ready, probably in the
second half, to upend the market," said Lee Do-hoon, an analyst at RBS.
is a significant departure for a company which used to tear apart a
Sony television in 1970s to reverse engineer rivals' products.
finally overtook Sony to become the world's top TV maker in 2006,
largely aided by slim designs and super-thin displays produced as a
result of aggressive capital investment.
By contrast, Samsung's mobile devices business now generates 70 percent of its total revenue.
Note 3, which I expect to be available in the fourth quarter, will be
quite innovative. It'll have a bended display and the screen size will
be bigger without having a bigger phone," said RBS's Lee.
"I think it'll be pretty cool."
© Thomson Reuters 2013