Innovator's Dilemma: Analyst predicts Samsung's exit from smartphone market

Swift growth in the smartphone market appears to give an adverse impact on many early innovators. Now, an analyst has predicted that Samsung, which is among those innovators, will formally exit the smartphone market.

Ben Bajarin, principal analyst at Creative Strategies, has predicted that Samsung will leave its smartphone business within five years. Bajarin says the Korean smartphone vendor "is suffering from 'The Innovator's Dilemma'" and there is "absolutely nothing" to fix its downfall from the high-end market.

Clayton Christensen in his work The Innovator's Dilemma says early innovators get disrupted by competitors who bring more affordable products with similar features. In the same way, Samsung is apparently facing tough competition from many recently emerged smartphone vendors. The list is huge but companies like Xiaomi, Lenovo and OnePlus are on top because their demand keeps growing in the global markets.

"Once the market embraces good enough products, the innovator can no longer push premium innovations as their value is diminished once a good enough mentality sets in. Android devices in the $200-$400 range are good enough for the masses leaving Samsung's $600 devices and above stranded on an island," Bajarin wrote in a detailed op-ed.

Although iPhone maker Apple could also face the Innovator's Dilemma, the analyst says that this "only applies to Android land" as hardware manufacturers use the same operating system. This was one of the reasons that Samsung opted for the Tizen OS for the low-end market and had even launched a couple of handsets with its presence in emerging markets like India. But the results are not in favour of the company that became highly popular for its Galaxy series Android devices.

"Many billions of people will be included in the benefits of the online economy and financial inclusion thanks to Android. Android devices will be extremely capable and with very good technology in the premium $300-$400 price range. But the innovator's dilemma will make it very tough to commercialise true premium innovation in Android at any scale," Bajarin added.

That being said, Samsung recently announced that its mobile division grew by about 8% year-over-year to 26.61bn KRN ($23m, 14.9m) in the third quarter. The result came from a total shipment of 84 million devices, of which only 40% were priced more than $301.

Things are not really looking good for Samsung, despite some growth in the smartphone market. A recent report claimed that the company is in plans to lay off up to 30% of employees from its finance, human resources and marketing teams to cut expenses.