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Samsung makes $100m bet to lure developers to offset smartphone dip

Samsung will invest more than $100m this year to encourage companies to develop services that will make the home more connected as it looks to offset its wavering smartphone business.

The technology firm’s Keynote speech at this year’s CES heralded the arrival of an age where everything is connected through sensors, blurring the boundaries between the home, the car and the office. Despite the potential to add value to peoples’ lives, Samsung bemoaned the industry’s efforts to date in reassuring consumers of the potential security and privacy risks connected devices pose.

To realise its vision, the company is to plough hundreds of millions into the start-up community over the next 12 months spanning accelerator schemes and events. It aims to strike a balance between deeper customer data and building more useful experiences for users, leveraging the performance insights from a person’s Jawbone bracelet for example to instruct their Samsung phone to play a certain playlist that makes them jog faster.

The company’s tie-up with BMW will also exploit the trend with the car maker integrating Samsung’s tablets into its connected car investments. Samsung products will be able to help open and close doors while also sending directions to the car marque’s vehicles.

Speaking at the Keynote session, Samsung chief executive Boo-Keun-Yoon, said all the company’s devices would be open to developers in the future. Mobile is the biggest business driver for Samsung but following a 60 per cent drop in profit in its latest quarter the need to widen its revenue streams has become more apparent.

The 'internet of things’ market is set to be worth $7.1trn by 2020, according to researchers the International Data Corporation. Samsung wants a slice of those revenues and is prepared to bet big in order to outmuscle Apple and Google's Nest service.

Samsung’s call for outside assistance to transform its business will be channelled in part through smart home SamrtThings division. The business acquired the connected device specialist last year and plans to revamp its domestic hub to support more devices such as TV and fitness trackers as well as host a new subscription service that monitors and alerts people to accidents in their homes.

Yoon said that by 2017 around 90 per cent of Samsung’s products will be internet of things devices. He hopes it rises to 100 per cent over the next five years to harness the “infinite possibilities” technology can add value to peoples’ lives.

“We have to show consumers what’s in for them,” he added. We have to make it clear that the internet of things can achieve much more. It has the potential to transform our economy, our society and how we live our lives.

“The internet of things is not about things it's about people. Each of us will be at the centre of our very own technology universe.”

Frank Gillett, analyst at Forrester Research, Samsung will need to channel much more of its budget into expanding its service offering.

“To fulfil the ambition of the swelling emotional close to the keynote, Samsung will need to dramatically grow the developer platform and ecosystem of SmartThings combined with a much more robust set of online services,” he added.

“It will be very difficult for Samsung to succeed in shifting from a hardware-centric product company to a software and services company."

The scale of Samsung’s ambitions in the connected arena reflects the pressure the business is under to be less reliant on its mobile business. Falling market share amid greater pressure from cheaper Chinese rivals has forced the business to reappraise its priorities in the market, shifting its smartphone marketing around mid-to-low end devices where competition is not as intense as in the premium and lower ends of the category.

Mobile sales slumped to 23.52trn won (£13.9bn) from 35trn won (20.7bn) the previous year due to the increased competition. Profit for the division plummeted 73.0 per cent to 1.75 won (£206bn) in the period, its worst performance since the second quarter of 2011.

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