As Samsung's Phone Empire Wanes, It Leans More Heavily On Chips

 

 

Samsung is still one of the major smartphone makers in the world today, but the growth of its handset business is slowing and margins are shrinking.

To counter those headwinds, Samsung is leaning ever more heavily on its chip business, which remains a rare bright spot — and an increasingly profitable one — at the company.

Samsung’s latest initiative is an effort to get its chips into as many new devices as possible in the emerging Internet of Things industry — tech’s moniker for the growing list devices connected to the internet.

At a conference in San Francisco on Tuesday, Samsung president and chief strategy officer Young Sohn announced a new technology platform called Artik for the next generation of wearables, smart TVs, and drones. Artik consists of a processor chip that comes packaged with memory, sensors and various wireless chips.

The Atrik modules come in three different sizes to fit different types of devices and will cost between $10 and $100. The chips are designed to help device manufacturers speed up development of new Internet of Things gadgets.

Samsung’s smallest module is the Artik 1, which is about the size of a ladybug. It contains 250MGz dual core processor, 4MB of flash memory, Bluetooth radio and a nine-axis sensor. It’s designed for tiny, low-power devices like fitness trackers.

The larger Artik 5 has a 1Ghz dual core processor, a 514 DRAM, 4GB flash memory, a video processor as well as WiFi, Bluetooth and ZigBee, a technology that allows small devices to communicate. With video decoding and encoding technology, it would be ideal for something like an internet-connected camera.
The highest end module is the Artik 10, which is built around Samsung’s Exynos chip, the processor that powers the new Galaxy S6 smartphone. It has an eight core processor, a 2GB DRAM, 16GB flash memory, a high-definition video processor, and all the same radio chips as the Artik 5. With the addition of a modem, it could used for making phones, but Samsung is advertising it to be used for applications like home servers and industrial equipment.
The new chips are intended to power hardware made by other manufacturers as well as some of Samsung’s own devices. The company said it is planning to put the Artik chip into its refrigerators, TVs and ovens as part of Samsung’s plan it outlined at the 2015 Consumer Electronics Show to connect all of its products up to the internet by 2020.

Yoon Lee, vice president of smart home and digital appliances at Samsung, said that his division still hasn’t decided exactly how many of Samsung’s devices will use Artik. And even though Samsung chip business is under the same company as its appliance business, the division will evaluate other vendors’ chips. “We will adopt Artik if it’s good for consumers and good for business,” Lee said.

With these new chips, Samsung’s competition with rivals like Intel INTC +0.08% and Qualcomm QCOM +0.79% is certain to increase. Both companies have are also pushing into the Internet of Things. Intel’s Edison is a development system designed for connected gadgets like wearables. Qualcomm is expected to make its efforts known in this area with an announcement taking place this Thursday at an event in San Francisco.

Some analysts said Samsung will face challenges in persuading third party manufacturers, many of whom compete with the company, to adopt its chips. (Samsung makes a million products a day and ships 660 million devices a year across a wide swath of the consumer electronics market.)

“When you’ve got other parts of your company using the silicon, it’s hard to get anybody else to buy it,” said Jim McGregor of Tirias Research. “Why would a company use a Samsung chip if they’re competing with Samsung?”

In an effort to overcome those obstacles, Samsung is trumpeting the openess of its technology. On Tuesday the company also launched SmartThings Open Cloud, which is built by SmartThings, the cloud-based smart home system startup that Samsung acquired for a reported $200 million last August. The Artik chips will connect to Samsung’s new cloud service and allow outside cloud applications to connect with devices powered by Artik chips.

“This is a commitment to openness,” said SmartThings CEO and cofounder Alex Hawkinson in a discussion following the Samsung’s presentation at the conference. “There’s lots of efforts out there that claim they’re open, but really they’re walled gardens. We’re trying to combat that.”

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