My great grandfather sold steel and metal supplies to Samsung when it first started building its factories in South Korea. Lee Byung-chul, the founder of Samsung, apparently did not even have the means to pay for the raw materials, and instead offered my great grandfather the option to become a major shareholder. But a visit to one of the factories was enough to convince him that Samsung’s future prospects were mediocre at best, and he allowed Lee to pay in annual installments of cash. It turns out his prediction was pretty off—Samsung is now the largest conglomerate in South Korea, and accounts for more than a fifth of the country’s exports and almost 20% of its total GDP. So what helped it get from rags to riches within one generation?
Of course, there are many answers to this question. One is diversification—while international consumers may only know Samsung for its electronic products, it has built an empire in South Korea by expanding into the processing, textiles, insurance, securities, retail, construction, and shipbuilding industries. Samsung even produces its own cars, and while they are not sold in the United States, they’re actually not too shabby.
Another is innovation. In 2016 for example, Samsung invested approximately $13 billion in R&D—that’s more than Intel, Google, and Microsoft, and almost twice the amount invested by Apple. Samsung’s commitment to innovation has made it the global leader in screen technology, batteries, and chip design—it even makes $110 for each iPhone X Apple sells, as they are the only company capable of supplying Apple with the OLED display, NAND flash, and DRAM chips in the necessary quantities.
But perhaps a vital aspect of Samsung’s success that is commonly overlooked is its ability to imitate its most successful competitors, tweak products, add improved features, and launch it quickly into the market. While Samsung is renowned for its innovative televisions and its leading position among Android smartphones today, it was a laggard, not an innovator, before it rose to its current position of domination. For example, when major U.S. TV networks were already broadcasting their programs in color in 1970, the company only first began to produce black-and-white televisions.
In fact, Samsung was far behind in television display in comparison to Japanese brands like Panasonic, Sharp, Sony and Toshiba until the early 2000s. From plasma to LCD to LED, the Japanese electronics companies were making all the groundbreaking strides in technology. Only every time they did, they saw Samsung adopt the technology, turn it around, and counter with a better product offering to the public. For the past 10 years, a combination of responsive imitation and R&D has allowed Samsung to dominate the global TV market, holding more than 20% market share.
A similar story can be told about the Samsung Galaxy’s success in the smartphone market. When Apple launched its first smartphone, Samsung had two options: develop a product from scratch with limited know-how and time, or get inspiration from the iPhone. Samsung chose the latter, and perhaps even took it too far—resulting in a court case in which Apple accused Samsung of copying its design and user interface. During the trial, and internal document of Samsung was brought in as evidence of the extent to which Samsung went to imitate the iPhone: a 132-page manual teaching Samsung engineers how to copy the iPhone. However, once again, it worked. Samsung now leads in the worldwide smartphone market share by unit shipments.
So is Samsung cheating? Does imitation make them less valuable of a company? I personally don’t believe so at all. While Samsung may initially have taken a few pages out of its competitors’ books to gain market share and become competitive, imitation is not the only play in their game plan. Their OLED television is arguably the most innovative in the market, and their smartphones boast many features Apple doesn’t offer—one notable example being that they are suitable for continuous immersion underwater compared to the iPhone, which can only withstand up to one minute of immersion.
Furthermore, the imitation game is perhaps a necessary game to be adept at playing in high-tech industries such as that of electronic devices. Customers cannot possibly expect one company to be making all the technological advancements and innovations on its own—it’s only natural for competitors to learn from each other’s breakthroughs and improve upon them, and that is precisely what they have been doing. The integrated audio system in Sony’s OLED Bravia TV uses technology identical to that created first by LG in their TVs. Huawei has copied the iPhone screw by screw (as shown in the picture below) in its path to achieving exponential growth in market share, and in turn the iPhone X has copied the Samsung Galaxy in a variety of ways this year.
So there’s no shame in re-branding or copying what is evidently very good technology. Yes, having the image of being the industry leading innovator is a plus, but at the end of the day, customers care about the value of the end product and the experience it provides. So kudos to Samsung and other companies that can work around the patents and skillfully play the imitation game—as a result, the customers are benefiting from a more competitive market and from the availability of far superior products.