D-Day is approaching for Android OEMs as hardware costs plummet and Google tightens control
Samsung is currently riding high after what should have been a pretty terrible year – profits and sales are up after the disastrous mess that was the Note 7, brand recognition and support has recovered and all three of its 2017 releases (the Samsung S8, 8+ and Note 8) sold in record numbers. LG had one of its best years yet, nipping closely at Samsung’s heels after a strong year of solid releases. But all is not well for OEMs - Google has gradually begun to assert its dominance over Android after years of leaving its fate in the hands of other OEMs.
THE GOOGLE CARE-FACTOR
For most of Android’s life, Google was happy to sit back and enjoy the ad revenue that was pouring in in lieu of any sort of license payments from manufacturers. Even as they winced at the awful manipulation, skinning and forking of their operating system by those same “partners”, Google quietly continued development, ceding much of the design work while it concentrated on the fundamentals and core features.
But as time wore on, Google started taking much of the blame for poor user experience – a lack of updates, bloated skins and useless apps that all contributed to poor performance. Many users were being turned off due to a lack of overall design direction and concerns over things like security, fragmentation and concerns with consistency between various handset makers. Before long, Google put in a base requirement of operation in regards how the base operating core of Android could be modified (but not skinned) in return for access to the prestigious Google Play store, Google Apps and Google services – considered essential for the grand majority of Android users.
As Google began to increase soft pressure on manufacturers and carriers – asking them to ease back on bloat, to expedite system and security updates – many selectively ignored them, knowing that unless they deviated from the base OS too heavily, Google would still play ball with their side of the bargain. As a result, Google began to increase its control with each iteration – heavily consolidating much of its core operation within Google Play Services, now one of the most powerful parts of the OS, by locking in essential APIs required by most applications for them to run at all – especially if they want to have access to auto update functionality.
A CLEAN SKIN WIN
They eventually took the next step with Nexus and, eventually, Pixel, by competition with their license holders to present the cleanest, purest form of the OS – one that was fast, smooth, updated and secure. The pressure of these factors is clear – almost every OEM has dramatically scaled back their skins (See: Samsung, LG, and HTC), or reverted to an almost stock version of Android (Sony, Motorola, Nokia, One Plus). These restrictions have also prevented large scale feature changes from allowing wide differentiation, making most competition focused around cost and hardware specifications.
In addition, Google is also working on the next generation of mobile interfaces – code named Fuchsia OS – which is built from a brand-new microkernel system that has been developed from the ground up inside Google. Its early development triggers – including the addition of a full UI, cross-platform support with iOS and Android applications as well as strong support inside the company – has many wondering if it is the logical next step for Google to finally pull full control back to itself. Even though Fuchsia is currently Open Source, I cannot see Google allowing the same level of differentiation with any new platform – Google Play will almost certainly be the exclusive domain of its parent in any new iteration.
NEW MARKET LEADERS
The future of Smartphones and mobile devices in general is in software – not hardware – as both Google and Apple are now more than capable of producing great devices with strong proprietary software chops. Samsung, along with HTC, Sony, LG and other Android flagships, are increasingly at odds with a company that is rapidly outpacing them on the points that matter. Wholesale costs for hardware are dropping at alarming rates, allowing increasingly savvy companies like Xiaomi, BKK (Oppo/Vivo) and One Plus to grab the low hanging fruit of low to mid-range customers. HTC’s shares have fallen like a stone for the last 3 years and are almost dead in the US.
Samsung’s market share, which peaked at 32.5% in Q3 2013, is now below 20% at 18.4%. Its competitors are making cheaper devices of comparable quality, especially in booming regions like China and India, while Apple and Google keep chipping away, buoyed by massive cash reserves that they pour into R&D, building vertically so they rely less on parts from Samsung (such as chips and screens). The issue for OEMs that sit at the upper range is that they are increasingly running out of reasons to exist.
Hardware innovation is becoming harder – where Samsung or LG were once one or two generations ahead of the game, other companies are now able to offer similar if not better products for less. It and other companies’ attempts to break away from Google by offering alternatives – such as Bixby, modular addons or “superior” sound – all flopped when introduced into the wider marketplace. Equally, and most importantly, are viable alternatives sources of revenue. Thanks to Google Play, Google suck every recurring revenue stream right under the noses of OEMs – from search to music, apps to films – every OEM’s efforts to overwrite Google has failed miserably.
It goes without saying, largely, that you probably don’t even use any OEM applications on your device. You probably don’t sign up for that Samsung account. The launcher is probably changed out soon too. The benefit of your purchase is that hardware. But what happens once this becomes purely a volume game? A race to the price bottom? Samsung doesn’t have anything to differentiate itself outside of its hardware, and it surely won’t be long until one of the Chinese brands breaks out with something gorgeous, cheap and very well marketed inside a Verizon or Telstra shop.
Samsung does have its own mobile operating system – Tizen – which is uses in its watches and some of its low end phones. LG has webOS, which is runs in its TVs. Both systems are not bad, but neither are Android. They have almost zero developer support outside some of the bigger players and would take a decade to catch up to the Play or iOS stores – think Windows Mobile and you’re on the right track. Both know that branching out with their own OS is the only key to long term survival, but it’s far too late for that now. It’s likely both will keep on keeping on as Google pushes down from the top and the rest up from the bottom.