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Samsung’s Mobile Chief Stays Positive on China
Koh says smartphone business will begin to show signs of a rebound
By JONATHAN CHENG
Feb. 22, 2016 7:00 p.m. ET
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BARCELONA— Samsung Electronics Co. mobile chief D.J. Koh on Monday said the worst is likely over for the South Korean technology giant in China, a critical market where its smartphone market share has plunged to sixth place after years of dominance.
In his first interview since becoming Samsung’s mobile chief late last year, he said the company’s smartphone business had stabilized in China and would begin to show signs of a rebound in a competitive market where it has been overtaken by Apple Inc., Huawei Technologies Co., Xiaomi Corp., among others.
Mr. Koh, 54 years old, also pledged to change Samsung’s top-down workplace culture, which he said stifled a spirit of entrepreneurship at the company. Samsung employs roughly 320,000 people in 84 countries.
The mobile chief also said he was eager to push the technology giant to the forefront of the emerging field of virtual reality, expanding beyond its traditional niche in hardware to build ecosystems and services.
At a press event Sunday on the sidelines of the Mobile World Congress trade show here, Mr. Koh unveiled the latest edition of Samsung’s flagship smartphone, the Galaxy S7, and Facebook Inc. Chief Executive Mark Zuckerberg made a surprise appearance on stage to promote Samsung’s virtual-reality ambitions.
Facebook, which bought virtual-reality startup Oculus VR in 2014 for $2 billion, has teamed up with Samsung and released a string of virtual-reality headsets over the last two years.
In the interview Monday, Mr. Koh said that while Samsung had mainly approached virtual reality as a hardware maker, producing the display panels and processors that go into virtual-reality headsets, low-cost Chinese companies would likely be able to undercut the company within a year or two.
As a result, he said Samsung was looking for ways to build up an ecosystem where ordinary consumers could easily make their own content and use virtual reality to communicate with their friends.
Mr. Koh said he is trying to determine what’s “the best user experience we can deliver and, based on that, what kind of improvements and innovations are necessary.”
On the cutthroat Chinese smartphone market—where Samsung’s market share tumbled last year to 7.7% from a peak of about 20% in 2013, according to data from Counterpoint Technology Market Research—Mr. Koh expressed regret at the swift erosion in the company’s fortunes.
“In China, the competition was so harsh,” Mr. Koh said. “I must accept what I missed.”
While Samsung has seen its market share and profit margins shattered around the world by low-cost Chinese competitors like Huawei and Xiaomi, nowhere has the damage been as deep as in China itself, the world’s largest smartphone market and one that Samsung had dominated for years.
Mr. Koh called China “the most important market to me,” saying he had visited the country about 60 times in the past two years and was conducting an assessment of the market to correct the company’s missteps there, focusing in particular on Samsung’s relationships with Chinese carriers and distribution partners.
He said he believed the worst was over for the company in China, saying the company had already hit a “turning point,” and the numbers would show signs of a significant recovery in “a couple of months, six months.”
Last year, after sustained losses in market share, Samsung launched several midrange smartphones in China that pack in features from Samsung’s premium smartphones, at lower prices that allow Samsung to more closely compete with its rivals.
Within the company itself, Mr. Koh said his top priority was to shake up the company’s culture, which like many South Korean conglomerates is rooted in a rigid, hierarchical culture that Mr. Koh said stifles innovation and fresh thinking.
“In Samsung, in the meeting room, if a senior executive says something, nobody argues. I really, really hate it,” he said.
Mr. Koh said he told his top lieutenants to “please listen to your juniors” and encourage debate, which he said would help Samsung cultivate “a Silicon Valley spirit.”
On smartphone user privacy, Mr. Koh said that privacy was “the top of the top” as far as priorities go, but declined to comment directly on the dispute between Apple and the U.S. Justice Department, saying he didn’t know the details of the case well enough to weigh in.
He deferred comment to a company spokesman, who said that Samsung works with law enforcement where required to do so and within the law, but that any legally mandated “back door” could damage consumer trust.
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