Fitch Ratings is a global rating agency dual-headquartered in New York and London which is dedicated to providing value beyond the rating through independent and prospective credit opinions, research, and data. In their new report published this morning about Samsung, their lead analyst stated that Samsung has yet to prove its "creative" innovation which was defined as creating a new product or market segment that hasn't existed before. Translation: Samsung's leadership is still based on copycatting other company's true innovation. The report also showed that some in the analyst community fear that Apple's entrance into emerging markets with a lower end iPhone could erode some of Samsung's market share.
Alvin Lim, director of corporate ratings at Fitch Ratings stated that Samsung Electronics is expected to solidify its leadership in the global technology industry by capitalizing on better profitability and more cash generation, according to a global credit ratings agency, Monday.
Yet there was consistent view point laced throughout Lim's report that was frank and unflattering towards Samsung. According to Lim's report, "Samsung has yet to prove its 'creative' innovation, which means the creation of a new product or a market segment that hasn't existed before."
Lim added that "despite prowess in manufacturing technology, Samsung's success story has been largely based on excellence in innovating to improve products already on the market."
The report added that "over-reliance on Google Android software, heavy reliance on its handset division and the inability to create a whole-new product category based on software" were cited as the main weaknesses that Samsung should improve on.
Stingingly the report went on to state that "Samsung does not enjoy the same level of competitiveness when it comes to software technology, or possess the ability to create a new product category, both of which have been core strengths of some of other leading companies such as Apple." Ouch.
Lim continued on this point by stating that their reliance on Google's Android software could become a weakness should Samsung Electronics lose its position in the market. He noted that Apple's possible launch of low-end iPhones, if it materializes, will erode some of Samsung's market position in emerging markets.
The report further added that "Samsung's over-reliance on the Android platform due to the lack of a competitive operating system of its own clearly reflects this relative weakness. This maybe a threat should competitors catch up in hardware technology or should industry hardware competence reach a common level and product differentiation is driven by competition in software offerings."
The report did mention that a recent study by InterBrand that ranked Samsung as one of the "global top 10" corporate brands. On that point Lim stated that "Samsung's brand recognition has significantly improved in the past couple of years in both developed and emerging markets due to a clear marketing message." That contradicted a report published by Kantar in late May that showed that Apple was the number one brand in the world with Samsung far behind at number 30 in global rankings. A far cry from being number ten.
Lastly, it should be noted that Samsung will be trying to ease their reliance on Google's Android to a certain extent with their upcoming Galaxy smartphone featuring the Tizen OS. This could be healthy for Samsung while helping to drive Android's market share down to make it a strong three way race in the smartphone arena between iOS, Tizen and Android.