How Samsung plans its phones

Samsung’s Galaxy S7 and S7 Edge aren’t just the company’s best-ever phones — they’re also the phones that have turned around the fortunes of its mobile division after two years of slipping profits. The S7 and S7 Edge’s strong sales were instrumental in shoring up the mobile unit, according to the second-quarter earnings released last week, and Samsung plans to keep up the momentum at the high end.

Tomorrow Samsung will announce the Galaxy Note 7, actually the sixth main entry in its popular series of gigantic, stylus-equipped phones. The Note line usually builds on the Galaxy S series, applying Samsung’s latest technologies to a larger canvas; with the S7 and S7 Edge setting an impressive precedent, expectations for this year’s model will be high.

How will Samsung match them? Kim Gae-youn might have an idea. He’s the man who heads up smartphone planning at Samsung, making the calls about what goes into each model and how they’re positioned in the market. I spoke with him at Samsung’s headquarters in Suwon, South Korea just after the release of the S7, and he had a lot to say about exactly how the company goes about making its decisions — from screen size, to software customization, to the amount of bloatware.

Conversation edited and condensed for clarity.

On the S7’s design

The S7 and S7 Edge have lots in common with the 6 from last year, whereas the S6 was a really big change from the 5. So first of all, could you tell me about why Samsung made such a big design change from the S5 to S6?

So up to 2013 the smartphone market was really fast-growing. According to our customer research, people thought smartphones were a functional product. And then time goes on and the trends change — by 2014 and 2015 people think it’s not only a functional product, it’s like a product that comes along with their life. They want to have a more premium design with better aesthetics. So we caught that trend and made a decision to make a big change. We invested heavily for the metal and glass structure.

How did you approach the S7 after the S6?

Actually, if you compare the S7 and S6 designs it’s a big change. The S6 Edge design has 3D [curved] glass on the front and 2D [flat] glass on the back, but the S7 Edge has 3D glass on both sides. And there’s a strong reason for that — the ergonomic design is much better in the S7. And we adopted waterproof IP68 protection even with the metal and glass blended design. It’s a quantum leap, actually. So the S7 looks very similar to the S6, but if you grab it it’s a totally different design and feeling.

Why was it not possible to include things like waterproofing and a microSD slot before — what can you do this year that you couldn’t do last year?

It takes time, right? So we at Samsung scrutinize what’s the real need for the consumer, so we understand the market and the consumer needs. And we have an end goal, but it takes time. So the S6 was our first time to apply the glass and metal materials for a smartphone design, and we tried to incorporate all that the customer needs, but there was a time limit so we prioritized which features went to the S6 and then we adopted other customer needs for the S7. So it’s a matured product.

How important do you think those features are, if you released the S6 without them?

So we prioritized, as I said. At the time there were technological and time limitations so we had to decide whether we were going to choose the better aesthetic design, or waterproofing and the SD card slot. We chose the better design at that time, but we understand the market needs for the higher memory size, right, so that’s why we expanded our memory SKUs to 32, 64, and 128. With the S7, now we have the SD card slot so we’re going to reduce the memory SKUs. 32GB and maybe 64GB in the future.

How about removable batteries — do you think that’ll ever be possible with this style of design?

Not impossible — everything’s possible. It’s just cost issues and tradeoffs. So if we applied a replaceable battery then the thickness of the device is higher, and it’s wider, and there’s a robustness issue for replaceable batteries, with the metal and glass design. We can solve that! But it costs a lot. And as you know, we increased the battery size up to 3600mAh for the S7 Edge, and we have a fast charging system, and we can detect the changes in customer behavior. A lot of people are carrying battery packs. If we give the customer a replaceable battery, they’re supposed to carry the battery itself and the pack charger, so it’s the same kind of clumsiness. If we provide an inner battery that can be used all day, with fast charging technology, and then wireless charging on the back, it’s a better solution than a replaceable battery. That’s our philosophy.

On screens

As a product planner, how much of your job is decided by what Samsung as a company is doing on a technical level? For example a certain type of screen technology or camera sensor — how’s it communicated to you what you have to work with?

We’re tightly engaged. I’m deeply involved with component innovation and new technologies, so it’s more like daily communication with Samsung Display and the component innovation staff.

One example is curved screens. Talk me through how they made their way into Samsung’s product line.

So that’s a long story. [laughs] I have a consumer market insight background, actually I was a researcher a long time ago, so I try to understand the customer more — that’s my job. And then I was a product planner for TVs, curved TVs, LED TVs, 3D TVs, that was kind of my baby. So when I was the TV planner, there was a big task force including all other divisions, like the mobile division. The topic was how to utilize flexible displays, five or six years ago. From that time I was thinking how we can utilize that technology to make our product differentiated, and we used that technology for the LCD curved TVs. And then I moved here to the mobile division, so I spent almost one year figuring out how to utilize the technology for mass commercialization. It’s not that easy, actually. It required huge investment.

When you plan the product are you thinking about how to use the screen, or is the focus more on showing people the new technology itself?

So the first curved flexible display smartphone we launched only in Korea, the Galaxy Round. It curves this way [gestures to show vertical curve in the middle of the screen]. It didn’t sell well. The next one was the Galaxy Note Edge, which has the extra pixels to display more information — you have more functionality there. We sold it globally, but it didn’t sell well either. So we wondered, why did that happen? At the time we were more focused on functionality and features for the Edge screen. Then we realized that, as I mentioned before, people changed. Function is important but aesthetic design is more important. So for the S6 we focused on not only the functionality but also the design. Our priority with the S6 flexible display was design; functionality was our second priority.

And now we have the S7 Edge, which feels like a more mature application of the technology.

Right, it’s a more streamlined design, and we think this is the best smartphone we’ve ever made.

So why continue with the non-Edge version?

That’s another thing we learned from the S6. So with aesthetic design, there is a preference between the person. With the S6 and S6 Edge we sold about 60 percent and 40 percent [respectively]. The S6 Edge was $100 more expensive with the same screen size. We did a market response survey based on the purchasers of the S6 and S6 Edge, and we realized that there’s a small preference for the curved screen, so we had to have the flat and curved version portfolio set at 5.1- and 5.5-inch.

Why is the Edge version bigger this time?

By using the 3D Edge screen, we can make it compact — even at 5.5 inches. The width of the Edge is 72.6mm, which is the same as competitors with 5-inch or 5.2-inch screens, so the 5.5-inch is still very compact. How can we do that? Because of 3D glass and the flexible display technology.

Could you have done that last year?

We could have done it last year, but at the time we had 5.1-inch and 5.1-inch models at 69mm, so we realized instead of doing the same size why not release a bigger Edge to capture a more diverse segment and sell more.

So who would choose the non-Edge version? It seems the Edge version has a big advantage this year.

Based on our ergonomic study, there’s a huge demand for the 67mm width. You know we have the Note portfolio, our second flagship. So we have two flagships for the S series on one hand, and the Note series on the other. At the end of the day we sell three at the same time, so how we manage the portfolio — that’s the question, right? So last year we have 5.1-inch flat, and 5.1-inch Edge, and 5.7-inch Note. So we thought that that was the optimized portfolio at the time. But we realized that some of the compact customers also wanted a bigger screen size at the same time. Some who used to use compact phones moved to a bigger screen but still they don’t want to accept the really big 5.7-inch screen, and also they want to have a compact size. So we found out what’s the optimum screen size and device width, and that’s the 72.x mm. We changed our portfolio a little bit — 5.1-inch, that’s a real compact size without 3D glass, and it’s a cheaper technology. So it’s a reasonable price, compact, and with all the fantastic S7 features. Then we have the 5.5-inch Edge, and then maybe in August or September we’re going to launch the next Note, so we’ll have a full portfolio.

What about an S7 Edge plus like last year’s S6 Edge plus, or is the Edge already big enough?

Okay, that’s a delicate question. [laughs] As I mentioned before, the market is not in the phase of hyper growing. It’s a replacement market. So our goal is how we optimize our portfolio; at the same time, how that portfolio covers the entire customer segment. We think that the 7, 7 Edge, and Note, three flagships, might cover the entire market segments. But certain regions, like China or maybe India, they might have different needs, right? So based on those regional needs we might launch another flagship, but as far as I know, we’re going to do only the existing portfolio. That’s enough, I guess.

On competing at the high end

I think most people agree that Samsung is the leading premium Android hardware maker, but what are your thoughts on that segment as a whole? Lots of customers have gone to Apple at the high end, then there are companies that are doing better at lower price points — Samsung feels squeezed in the middle. Who’s the ideal Samsung customer?

It depends on the region. Actually, we have a full portfolio. If you look at the market data, the over-$600 flagship is like 25 percent but financially it’s almost 50 percent, so that market is really important. In that market there are only two players, Apple and Samsung. So the S7 and the Note brand play in that market. The philosophy of that market is innovation and to meet customer needs, so we play that market strongly. At the midrange and entry level, we compete against Chinese players. But China’s players are still in the Chinese market, and you know that market is maturing, so they try to sell more products overseas. So that’s the situation. So that area, the price-performance ratio is really important. We know what to do, so we’re doing preemptive action in that area.

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But a concern for Samsung is that $200 or $300 or $400 phones are getting pretty good — they run Android, and so do high-end Samsung phones. A Galaxy is better but might not be twice as good as something from Xiaomi, for example. How do you make your more expensive phones stand out, and what are you doing to compete in the mid-range segment?

So you know that our hardware is very nice. [For example] we apply two-photo-diode technology, which is only applied in the Canon 70D — it’s a high-end DSLR camera using that technology. So that camera has a real value to customers. It’s fast and under low light the picture quality is much better. At the same time we augment the service area [with things like] Samsung Pay. So the hardware and software and services are a key feature to differentiate our products from the midrange.

Just to go back to cameras for a second. I know megapixels aren’t everything, but I was surprised from a marketing point of view to see Samsung go from 16 megapixels in the S6 to 12 in the S7. Are you worried that some customers might think the camera is worse?

Right. [laughs] So when I pushed forward that 2PD technology for the S7, that was a very hard decision to make, actually. There were so many objections about going from 16 to 12. So it was a big discussion here, and I spent almost three months trying to persuade all the stakeholders, even very high-ranking executives here, and sales people all over the world and regional product managers were against the lower pixel number. So when I was persuading them of that issue, I looked at the consumer data — what our consumer really wants. Better picture quality and brighter pictures even under low light, and faster autofocus so that we can capture babies or children moving. And nobody actually utilized the 16 megapixels. People just view the pictures on a small screen or a TV monitor — that’s it. So why do we need a bigger resolution? As time goes by, the customer is going to realize that the S7 camera is better. I strongly believe that.

On software

Let’s talk about software. Samsung has had a reputation for being too heavy with…

TouchWiz, right?

Yeah. Have you tried to cut down on that?

So the early versions of Android, right, TouchWiz was like a complement. But as the Android versions go up, Android has adopted all the features and customization and functionality, so that we believe the streamlined and light TouchWiz to customize and differentiate our smartphones is the way to go. So we try to make very simple but effective and differentiated TouchWiz. that’s our philosophy.

Is the focus on adding functionality to Android or is it more of a visual thing?

Both, actually.

What are you trying to do on a visual level? Is it meant to complement the S7 hardware?

Actually, I’m not the right person to ask those deeper questions, we have a UX team and UX executives. But this is my opinion: we change the exterior a lot from S5, to S6, to S7, so we change the entire design philosophy, the CMF [color, materials, finish], and the form factor. So how do we innovate with the interior design — that’s the UX, right? It’s like building a house. We’re building the exterior like, say, Spanish colonial design. But if the interior is Japanese jazz-style, is it a good house? [laughs] So we innovate the exterior design a lot and try to match the GUI to that concept.

A few years ago Samsung sold the Galaxy S4 Google Play edition, running a stock version of Android. Is there no market for a product like that today?

We understand what the market needs, and we try to deliver streamlined, optimized software and apps in our flagships. And there are several strategies to get there. That’s all I can say. Our customer is the end user, so we’re always aware of that. But the carrier is also our customer — they’re the first customer and the end user is our second customer. So we’re struggling in the middle of a conflict of interest with both parties. At the end of the day, we try to deliver the best product for the end user. That’s our final goal. And there are several strategies we’re formulating right now to get there. But that’s the situation.

So that was going to be my next question — if you buy an S7 on a carrier like Verizon in the US there’s a lot of preloaded

Bloatware.

Right. I think the feeling is that it makes the phone seem less premium — if you’re selling this expensive phone with nice hardware and there’s all this Verizon advertising on it, basically, it compromises the experience. Why not at least sell an unlocked version of the phone in the US?

That’s what we’re trying to do right now. [Note: Samsung recently ended up doing exactly this.] We understand the issue, and if you compare the S6 and S7, the S7 is much more streamlined and cleaner. But we know that we have some way to go. So we’re working on it right now. And one tool is an open-market special edition version, but we’re formulating strategies.

Is it a matter of getting more marketing assistance from the carrier, or the carrier paying more?

It’s not only a product issue. It’s about channel strategy, and retail strategy is related, so it’s a big strategic issue. So we’re scrutinizing which is the best way as the market is moving right now.

As for things that are more within Samsung’s control, what about Samsung’s own software? These phones come with Google’s apps, so why do you need two email clients, or two browsers, for example? What’s Samsung bringing to the table by developing so many itself?

Actually, we’ve been discussing that issue over more than a year with Google. And if you look at the S7, there’s no Samsung music player there — we eliminated it because it’s redundant. And that discussion is still going on — which email client, which browser, which messaging app — so it’s an ongoing process right now. So what we’re doing is two companies working on it to deliver the best benefit to customers.

I can’t really imagine how that conversation goes. Is it just Google saying “don’t do this” and you saying “yes?” How does that work?

[laughs] It’s like augmentation. We bring all the numbers, and the future plans, and the ingredients of decision making are on the table and we just discuss that, and so that’s why it takes time. So there are strategic reasons for both Google and us.

I think in general if Samsung could make better apps than Google, people would be happy, right? Like there’s a recent example where you can use adblocking software in Samsung’s browser, but you still can’t easily in the Android version of Chrome.

So think about it, as of today certain Google apps are better than certain Samsung apps and vice versa, right? That’s the situation. But some companies have a very strategic roadmap to announce their apps or services, and that’s another issue.

How important is software to Samsung overall?

It’s very, very, very, very, very, very, very important.

That’s a lot of verys. Well, how important can it be, should I say, when the core operating system is not developed by Samsung? To a large extent the power lies with Google. So what can Samsung offer?

Samsung Pay. And Knox security. Those are our strong services. Even though the OS is Android, we can differentiate our product with services and at the app level. Recently last year we changed our organization — there used to be one development organization, but now we have two. One team is for hardware and one is for software, so we think software is equal to hardware. It’s very important.

How does Tizen fit into all of this? Looking at watches (like the Gear S2) and so on, it gives Samsung more control over software — is that something you think we’ll ever see in flagship phones?

I’m not the right person to ask about the Tizen strategy, but as far as I know we’re just working on Tizen for IoT and convergence devices, like wearables and TVs and refrigerators.

But you plan flagship phones, right, so you don’t see a future where you’ll want to use Tizen there as well?

Not that I know of. The Z1 and Z3 smartphones are very special smartphones. India has phones available for under $50. The user is often a first-time smartphone user who used to use feature phones. They just buy local models that aren’t that durable, very clumsy devices, so we try to deliver very low-end products that capture the user who’s using smartphones for the first time in their life so that they can make a bridge from the feature phone to the real smartphone. So that’s our strategy for the Z1 product. It’s doing well right now.

But if you had a Tizen Galaxy you wouldn’t have to argue with Google about having two browsers.

[laughs] Yeeeah… I can think about that issue.

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