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Imaging Resource Interviews: Samsung Electronics
(Wednesday, February 9, 2011 - 16:20 EST)

There have been some significant changes in the digital camera arena at Samsung Electronics in the last year, with the semiconductor and consumer electronics giant finally bringing more of its massive resources to bear on the digital camera market. From a #3 position in worldwide camera sales in 2009, Samsung announced that they intend to achieve the #1 position by the end of 2012.

Even for a company the size of Samsung, that's a pretty audacious goal. How do they think they'll get there, and what will this mean for Imaging Resource readers?

These questions were the focal point of conversations we've had with Samsung executives from both Korea and the U.S. in recent months; discussions that we think our readers will find as interesting as we did ourselves.

At last September's Photokina show in Cologne, Germany, Imaging Resource publisher David Etchells met with Mr. Jeong-Wook Kim, then Vice President, Sales marketing group, Strategic Marketing Team, Samsung Digital Imaging Co. Ltd. In the time since our meeting with him, Mr. Kim has been promoted to another position within Samsung, but his very cogent summary of Samsung's strategic position is worth a read.

More recently, we had the opportunity to interview Reid Sullivan, Senior Vice President of Mobile Entertainment Marketing, Samsung Electronics America, to discuss how the Samsung strategy outlined by Mr. Kim is playing out in the US market, and how that might affect the cameras we'll see here in the coming year.

Taking the two meetings in chronological order, we'll begin with a summary of our conversation with Mr. Kim. Our meeting with Mr. Kim was an hour long and quite wide-ranging, so we'll condense and paraphrase Mr. Kim's comments here, rather than present them in our normal interview format.

Interview with J.W. Kim, late September 2010
The central question we posed to Mr. Kim was this: How exactly does Samsung plan to accomplish their goal of becoming the #1 camera maker in the world by the end of 2012? Even for a semiconductor and consumer electronics powerhouse of Samsung's size and capabilities, this is an incredibly ambitious goal. We were very skeptical of Samsung's prospects for pulling this off, and quite honestly didn't expect that Mr. Kim could convince us otherwise.

Mr. Kim's response focused on three key areas: Technology, sales channels, and consumer awareness, as well as a critical corporate realignment of cameras relative to the rest of Samsung's consumer electronics operations.

Here's our condensed paraphrasing of Mr. Kim's reply:

On the technology front, Samsung has in the past operated primarily as an assembler of other companies' technologies, rather than driving our product line from our own technological base. This led to a tendency to simply focus on efficient manufacturing, competing on price. Samsung is an extremely capable manufacturer.

Now, we want to own the technology: The lens, the sensor, the processor. We've made heavy investments in technology so we can become vertically integrated, and have all the components available to make the best-quality cameras with our own components. This investment is now bearing fruit. We're ready now to begin rolling it out in new camera models.

The sales channel is also extremely important, and the realignment of camera operations under Samsung Electronics is very key here. Previously, Samsung cameras were sold through a network of distributors, who had little investment in the brand, and relied primarily on low prices to drive volume. Now, we are using Samsung Electronics' distribution network, so we're able to sell directly to dealers who care about the market and our products.

Finally, we need consumers to look for our products in the stores, for there to be pull for the products, rather than just "push" from us, through the sales channels. To accomplish this, we are ramping up our communications to consumers. Last year, we ran TV commercials for digital cameras for the first time, and plan on doing so this Spring as well.

We believe that all these factors will combine to take us to our goal of being the #1 camera maker by the end of 2012, and we're already showing very good progress towards that goal. In 2009, we were the #3 maker, with 11.6% of the worldwide market. For the first half of 2010, that number increased to 13.4%. We believe we'll need 18% market share to achieve the #1 position, and believe that we in fact will be able to achieve this, as our investments in technology and user communication and the benefits of the realignment of digital cameras under Samsung Electronics continue to pay off.

The above is a very condensed digest of a nearly hour-long conversation, so some of the force of Mr. Kim's exceptionally cogent presentation is lost in the translation. We can say, though, that we left with a very different impression of Samsung's prospects in the digital camera market than that with which we entered. It'll be interesting to see how this plays out in the camera market over the next two years, but it's clear that Samsung intends to give the longer-established camera makers a real run for their money.

Interview with Reid Sullivan, late January, 2011

As the Senior Vice President of Mobile Entertainment Marketing for Samsung Electronics America, Reid Sullivan was able to expand a bit on how Samsung's overarching strategy translates to the US market:

Dave Etchells: Back at Photokina, I spoke with Mr. Kim -- J.W. Kim of Samsung Korea -- and it was an interesting conversation. He really impressed me with the three-point plan that he laid out for achieving Samsung's goal of becoming number one in worldwide sales by 2012. Basically, his three points were that Samsung had made a huge investment in technology, so they have a lot of their own technology now; they've improved the sales channel; and they're also working to increase consumer awareness. How do you see those different points playing out in the U.S. market, and where would you say you're at in terms of developing them?

Reid Sullivan, Senior Vice President of Mobile Entertainment Marketing, Samsung Electronics America. Photo courtesy of Samsung Electronics America.Reid Sullivan: As far as progress goes, we continue to be one of the fastest-growing brands. We still have a ways to go yet, but we have been continually moving upstream and gaining marketshare. I think the three points that J.W. pointed out clearly benefit or hold true for the U.S. as well. I think the investment in R&D or technology is certainly foundational -- one of the biggest aspects -- and the fact that we're producing basically all of the elements of our cameras internally lets us make the best product possible. In each individual area, whether it's lenses, or batteries, or the body itself, or the image processors, it lets us make the best product and the best form factor possible to address the consumer's need. I think the last point that you mentioned that J.W. said, the consumer information and consumer insights, that's been a hallmark of Samsung DI for quite some time. [ed: DI is short for Digital Imaging.] We've spent a lot of time doing consumer research and trying to uncover unmet needs and consumer insights -- how they use the product, and how we can identify how they're using it, and how they want to use it -- to provide a better experience.

DE: The personal electronics space is changing really rapidly, and we're seeing traditional point-and-shoot cameras being squeezed on one side by cellphone cameras, and on the other side by models like the NX100 -- so the digicam is really getting squeezed from both directions. How do you see that point-and-shoot market evolving as those trends continue?

RS: It's funny -- we've got several slides that are laid out almost exactly as you described it, with point-and-shoot in the center and handheld phones on the left and DSLR/NX-type products on the right. We think it's an opportunity. While many may look at it as a threat, the fact is that consumers are communicating more and more by sharing pictures or images and videos. That's not going to go away; that consumer behavior is a fundamental shift and we think it fits right into our wheelhouse. We've got great strength in wireless, we've got great strength in user interface -- app-like user interfaces and touchscreens -- that give us, we think, a great leg up or an opportunity to specifically address consumers' changing needs. Then on the step-up side of the market, the DSLR/NX-type product -- investing heavily into the NX platform gives us a great opportunity to address the changing needs in that area as well, where clearly the consumer is looking for a better-performing camera than a regular point-and-shoot, but may be a bit intimidated by a traditional DSLR or looking for a smaller form factor -- something that's going to give great image quality as well as video, but in an easier to use package than perhaps a traditional DSLR.

DE: Samsung's in a somewhat unique position, being such a strong handset manufacturer and also a digital camera maker. Do you think we'll see some of the "smarts" from the phone space crossing over into digital cameras?

RS: It's happening already. There was a joint task force internally to improve the user interface for our wireless camera, so if you look at our SH100 that we showed at CES (that'll be coming out soon), it's got an app-style user interface that makes it very easy to use, very intuitive to access all of the enhanced capabilities of the camera. That clearly and directly came from our strengths on the wireless side to create that user interface and give the consumer a similar experience.

DE: So it's not so much a matter of the applications themselves, or the operating system of the phone, but the user interface and the learnings that you've had from the handset space are coming into the user interface on the cameras.

RS: Correct. So in the case of the SH100, we call it Smart Touch 3.0, which again, is an app-like user interface, but it allows the consumer to access all the different functionality of the camera, which is greatly increased from prior models, and if you had to navigate just by a traditional menu system, it would perhaps be a bit intimidating and cumbersome. But with an app-style UI, which the consumer is very familiar with based on smartphones, it puts the enhanced capability of the camera right at their fingertips -- even including creative filters and creative techniques, or templates that the consumer can use to crop a picture instantly in the camera, and then send to either post on a social networking site, or e-mail to friends or family. It just makes it so much easier to access when you can quickly fly through the icon-like UI and then select the treatment or function that you want.

DE: I think that's really huge. There have been a lot of efforts for a number of years to build wi-fi connected cameras and that sort of thing, and they haven't really seemed to take off: I think that a lot of it has to do with the complexity of connecting to the network and making that interface.

RS: Yes. We're on our fourth generation now of the SH100, and the first model we introduced, the CL65 worked fine and was everything it was billed to be; but it was just not the most intuitive to use. Once you learned how to use it, it was no problem, but there were multiple steps to connect and it just took a little bit longer. So we've learned a lot along the way, and our third generation that's in the marketplace right now is actually doing very well, the CL80. It's got a nice, large touchscreen interface and the connectivity is a simple, single-step process in its most basic form, quite easy to use and very intuitive.

DE: You mentioned social networking; that's obviously a huge factor in the market right now. How do you see that changing Samsung's camera designs and the sorts of features that Samsung will bring to the market?

RS: I think first and foremost is the connectivity element, which is very important; and I think you hit the nail on the head when you mentioned it has to be easy and intuitive. We've been striving to achieve that, and I think we have to a large degree; certainly our SH100 takes that to another level. So connectivity, I think, is the most important part. I think by offering some capabilities within the camera, like the creative filters I mentioned, or what we call... One feature is called Magic Frame which really has a couple of different templates, so one is like a billboard on the side of a bus stop in the city, and you can quickly take a picture and drop it in, then post it to a site. It just gives additional creative tools to the user to enhance the photography experience, and make them feel like they're producing better results but is very, very easy to use. So I think a key is just socializing some of these enhanced capabilities, making them easier to share on social networking sites; it's conversational, it stimulates conversation. It's funny, even around the office when we had some of the working samples, we were showing people the Magic Frame function and how easy it is to use. If you imagine a big banner dangling off the side of a building; there's a template that you can just take a picture, drop it right into that template, and automatically the picture of the person you just took is on the side of a building. It's just a fun, creative thing, and that's in addition to treatments like vignetting or miniaturization and many of the other treatments we offer.

DE: GPS seems like it might have some tie-in to social networking. We saw GPS in Samsung's HZ35W model last year, and I could be wrong, but I don't think that's carried over into this year's line-up. Has there just not been a lot of interest in GPS from consumers? Where do you see that feature going?

RS: Actually, I think the GPS capability is a great capability, and certainly geotagging is growing and consumers tend to like that, especially consumers that travel. I think one of the cool aspects of our SH100 -- again, the wireless camera -- is that when you are able to connect to a smartphone through an available app, you can access the GPS of your smartphone. So without having the expense and complexity of GPS on this camera specifically, you can still get geotag capability because of that connection to the smartphone. Again, I think that comes from our strength in that side of the business, and we are listening carefully to the way consumers want to store and aggregate and share images, so it's kind of a unique way of accessing geotagging or GPS information.

DE: That's very interesting. It's interesting from the standpoint that it's a little bit different take on the cellphone versus camera: It's not cellphone versus camera, it's cellphone plus camera.

RS: Exactly. That's going back to the earlier comment: While many view handheld phones as being a big threat to point-and-shoot cameras, we look at it as a great opportunity, especially considering our strength in that area.

DE: You touched on this a little bit earlier, with the app-style interface, but one thing we've noted about Samsung is you're very innovative in user interface design, but there's also a lot of variation between models. It's kind of like you're trying out different designs and approaches. Do you see that innovation in user interface converging a little bit now, or will we see more different directions going forward?

RS: There have been a couple of cases where a camera might have been targeted to a very different user group, and we looked at the interface most appropriate for that user group. Certainly, the consumer who is using an NX11 or NX10 or NX100 product has a higher level of expectation, and perhaps some familiarity with a DSLR-like navigation system, so we want to provide that; but also move it more toward an easier to use user interface. Based on lots of consumer research, lots of shopper insights and consumer insights, I think you'll see us move toward a more consistent UI based on all the knowledge that we've gained. There still will be some level of making sure we address the needs of specific user groups; we don't want to go with a very simple UI on a top of the line NX product; the same as might be used on a $129 point-and-shoot camera.

DE: Obviously, Samsung's got a big challenge ahead of it. What do you see as the single biggest challenge in expanding your camera business? How do you go about attacking the more established players in the market like Nikon, Canon, Sony?

RS: I look at it in maybe a more positive view, but just looking at the consumer's behavior: It's really changing very fast ; very, very rapidly, and I think we all know that very well. It's maybe overstated, but just sharing the pictures and communicating by pictures and stimulating conversations by pictures and videos is a huge trend. I think that one of our biggest opportunities to compete -- it's quite easy, honestly -- is by relying on the strengths of our company, which are high-definition video, which consumers certainly now expect in point-and-shoot cameras or NX-like type cameras; certainly longer zooms that we make internally, in-house, that's now one of our strengths, and the wireless capability is certainly a unique capability, as well as efficient processors that we make in-house. I think it's really looking at how the consumer space is changing, and providing solutions to their unmet needs: We think that is the most effective way to compete.

DE: The Samsung brand is extremely strong in the U.S. market for televisions, cell phones and other electronics, but there's not been as much awareness of Samsung as a camera maker. How do you plan to raise the market awareness for your camera products?

RS: That awareness is growing; it may not be at the same level as TV, but it is definitely growing. By introducing unique solutions -- in the Fall of 2009, we introduced DualView, that had huge success and increased the awareness for Samsung DI substantially, and was a huge market success as you may know. I think that was a unique solution based on, again, unmet consumer needs. I think the wireless product, the SH100, will also help raise awareness. We also believe that the NX platform will take advantage of the growth in consumers looking for higher performing cameras, but in an easier to use package. So really, the general plan is to focus on differentiated products that we can excel in.

DE: In the U.S. market, the influencers, the photo enthusiasts, the IR-type reader -- they’re a key factor in shifting people’s purchasing intents and habits. What can you do to further capture their attention? This is a little bit like the previous question, but the influencers, the enthusiasts are a bit different segment. How do you think you can talk to them?

RS: I think our NX platform and the accessories that we’re rapidly expanding to support the NX platform; I think they really do address those consumers’ needs, and I think as we move forward, you’ll see some really exciting things coming for NX. The NX100 is off to a very strong start. I can’t share all those future roadmap things, but honestly, it’s really exciting; where it’s going. We think we can truly offer a unique product and address the needs of the consumer.

DE: So, turning to the NX series, do you think we’ll see more digital SLRs from Samsung, or the mirrorless models like the NX100 really the future?

RS: At this moment, our priority and our focus is creating success with the NX platform. We think it does address the changing need of the consumer and can offer that high quality, DSLR-like experience in a way that’s much easier for the consumer to get the most out of the camera. It’s not that intimidating, and the capability has greatly improved.

DE: Who do you see as the primary purchaser for models like the NX100 -- and I’m talking in the U.S. now -- and how will that drive development of the line as it matures?

RS: You know, a lot of research is done in Korea as well as the U.S.. and while we thought it was going to be dramatically different in the two markets, there are some similarities. In the U.S., a lot of consumers are point-and-shoot customers who are looking to step up, but I’ve been surprised at how high a percentage of people who already have DSLRs are also now buying NX cameras. It really is a broad range of consumers. I would say it leans more toward the point-and-shoot customer that’s stepping up, who know they want a higher-performing camera, but who may be a bit intimidated by a DSLR. So, they like the lighter, smaller form factor but still have the ability to get great images and great high-definition video.

DE: This next question touches a little bit on who that customer is: Interchangeable lenses are obviously a key feature of a compact system camera like the NX100, but we’re also aware of the fact that many consumers never go beyond the kit lens on their CSCs or their SLRs. How important do you think that offering a range of lenses is for the NX series?

RS: We think it’s very important. Actually, our attach rate for an additional lens outside of the kit lens is really high -- it’s around 50%, and that’s on top of a kit lens. So, there’s a lot of interest for consumers to explore what’s possible with an additional lens. We offer five lenses for the NX platform right now, and five more coming, so in the very near future we’ll have a total of ten lenses for the NX platform.

DE: So you actually do have five that are in the market currently? Are they announced but not shipping? What’s the status on the current lenses?

RS: There are five out there now, and five more -- it’s not 100% clear which month, but they’ll be coming very soon. We do have the 18-55mm, we have the 50-200mm, a 30mm pancake, a 20mm i-Function that’s here, and a 20-50mm i-Function, so five right now, and then additional i-Function lenses coming in 2011.

DE: That’s very interesting. It's interesting you're seeing such a high attach rate. That’s atypical, either for the compact system camera or the DSLR market.

RS: It’s been a real nice surprise, and that’s primarily on a step-up lens going from the kit lens which is an 18-55mm on the NX10, jumping to a telephoto, telezoom. It’s been a very nice surprise. We’ve also seen a very high attach rate of flashes: We do have promotions to strongly encourage the consumer to get a flash with the NX100 since there’s not a built-in one, but that also -- as you might imagine -- is a very high attach rate.

DE: Moving away from the NX series a little bit, and talking about technology in the point-and-shoot space more; we’re starting to see a lot more cameras with improved low-light sensitivity using back-illuminated sensors. They’re becoming an increasing factor in the market. Can we expect to see that sort of technology occurring in Samsung’s cameras at some point?

RS: Sure. A model we currently have in the marketplace, our TL350, uses high-speed CMOS and has great low-light capability in addition to very, very fast shooting capability. Our TL500 -- internationally, the EX1 -- also takes advantage of great low-light capability with a very, very fast F1.8 lens built in, and a very large sensor. Certainly, we see the importance of that and you’ll see more of that in Samsung cameras in the future.

DE: You mentioned, too, the DualView dual LCD cameras. They were a huge hit, obviously, and it’s clear it’s continuing into this year’s line-up with the ST700 and the PL160 and 110 models: They were pretty prominent in your CES announcements; and it looks, too, like a number of the older models are continuing in the market. How big a part of the overall business is that DualView category for you guys?

RS: I don’t want to share exact percentages, but I can tell you that it’s a significant portion of our overall business. In 2011, we strengthened it again, and in the case of the ST700, we added some key features and technologies, including that Smart Touch 3.0 UI with the three inch touchscreen, 16 megapixels, 5x zoom, and it also has that larger LCD in the front, the 1.8-inch front panel. It's similar to our step-up DualView from the Fall of 2010, but in a much smaller form factor, and with much more enhanced capability within that camera.

DE: Let's close with a crystal ball question. Everyone’s wondering what’s going to happen with the economy. What do you see for the consumer economy in 2011 -- is it strong growth, some growth, contraction? What do you see?

RS: Overall, I would say cautiously optimistic, we’re seeing signs of -- I hate to be so cliché and use the "green shoots" statement -- we are seeing signs of improvement in the economy, the stock market’s up significantly, jobs are starting to improve, although that is usually a lagging indicator; housing starts certainly are not exciting yet, but most seem to think that it’s at the bottom with no place to go except up. Overall, I think the economy will show signs of growth. I think in the case of point-and-shoot cameras, we’re looking at a single-digit decline, but in SLR and NX-type product, I think significant growth; continuing growth. Certainly, in the NX-type product, we’re looking at exponential growth -- from a relatively small base, but very, very strong growth in that category. So overall, I'd say cautiously optimistic, looking forward to a good year. I can tell you our plans are to show significant growth year-over-year for 2011.

DE: Great! I'll hope that your cautious optimism is justified; I'm feeling the same way. I guess we'll see this time next year how right we were. I think that wraps it up for us: I really appreciate you taking your time, and wish you the best of luck in 2011!

RS: Thanks very much. I appreciate you giving us the time, as well.

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