Of all the hardware vendors that embraced Google Android as a way to break into the increasingly lucrative smartphone market, it seems that Samsung benefitted the most: a new dataset by analyst Horace Dediu suggests that Samsung’s market-share among smartphone builders has increased considerably over the past few years, even as its Android rivals—including Motorola and HTC—have faced either stagnation or declines.
“It went from having almost no smartphone sales to selling over 50 million units per quarter in a matter of two years,” is how Dediu explained Samsung’s rise in a Nov. 14 blog posting. “It now accounts for nearly 40 percent of all industry profits.” The company’s decision to concentrate on building a wide variety of smartphones, he added, helped propel its growth in average selling prices and profit margins.
Even as Samsung benefits mightily from Android, however, Dediu raises the possibility that mobile “is causing a contraction in Google’s margins.” He then proceeds to ask:
“Is Samsung’s trajectory sustainable? Why aren’t there other vendors successful with Android? Why isn’t Google successful with Android? Why isn’t Google’s Motorola successful with Android? What would happen if Samsung soaks up so much profit from mobile that it’s in a position to acquire Google and control the trajectory of their enabling platform?”
Rather than follow Microsoft’s model and insist on a licensing fee for its mobile OS, Google decided in the early phase of Android development to give the software away for free to hardware manufacturers. That move paid off rather handsomely: according to research firm IDC, Android powered some 75 percent of the 181.1 million smartphone shipped in the third quarter of 2012, for an incredible year-over-year growth rate of 91.5 percent. By that metric, Google has been successful with Android. And in theory, more Android devices means more users exposed to Google’s mobile advertising, which in turn means ever-larger profits.
But if you accept Dediu’s dataset, Android is a bigger boon to Samsung than Google. That could potentially interfere with Google’s plans for Motorola, which it acquired in 2011. So far, Google’s been reluctant to push its hardware arm as a builder of flagship Android devices, possibly out of concern that such a move could offend the other hardware manufacturers in the Android ecosystem.
But if Google changes its mind on that front, and starts pouring tons of marketing and development effort behind Motorola as the best expression of Android, how will Samsung react? Will the two companies start fighting each other, even as both continue their long-running feuds with Apple?
Maybe that won’t happen. Maybe Google will sit back, content to watch Samsung swallow the majority of Android-related revenue. In any case, Samsung’s success could soon make things a little more complicated for every company in the space.