The Engadget Interview: David Steel, Vice President of Marketing for Samsung Electronics' Digital Media Business

We recently sat down with David Steel, Vice President of Marketing for Samsung Electronics' Digital Media Business, and were able to rap with him for an hour about competing (and not competing) with Apple, the future of portable video, why Samsung might not introduce a dual-format Blu-ray/HD-DVD player, how much longer we'll have to wait to buy an OLED TV, and why they're so much more receptive to open standards than their arch-rival Sony.

One of the first questions I wanted to ask you about is related to MP3 players and digital audio. Samsung's semiconductor business is supplying flash modules to Apple for the iPod nano, reportedly at extremely discounted prices. How does this affect Samsung's MP3 player business? Is there a conflict between these two divisions of the company?

To start, obviously I can't talk about some of these commercial relationships between the semiconductor side and any of their costumers for flash memory. We certainly have a big interest in flash memory on the consumer electronics side of the business and have really seen the growth of flash memory. Previously some of these smaller MP3 players that were using hard disk drives we now want to move over to larger capacity flash memory. There certainly is a strategic goal there in really trying to hasten the growth of flash memory in players. That's really coming from the component side, rather than from the [consumer electronics] side.

All of this interest in flash is quite helpful to us because it boosts the industry in a place where we want to see it go. So I mean, don't think that all the time this is just a competition between Samsung and Apple. I think something that can grow the market, particularly in flash memory players, is good for everyone. I don't see this as a conflict - the semiconductor guys are growing their sales in flash memory products while we're also significantly growing sales in MP3 players.

But even if there's not a conflict, Samsung has stated that it intends to be the number one maker of MP3 players by 2007. How does giving Apple a deal on flash memory affect those plans? How does Samsung compete with the iPod nano, for instance, which is such an aggressively priced product? Apple has generated a lot of buzz in way that no other companies have been able to. How is Samsung going to counter Apple's recent moves?

So a couple of things there I think. The first one is again it shouldn't just be a Samsung versus Apple position. This market is huge. It's growing very fast. There's room in there for different companies so I don't think it's just like A versus B, particularly in the area of flash memory. But the other thing is if you look at our strategy we're focused much more on a wider range of products, so where you've seen Apple come out with one, two, three different products, we've been very much focused on a wide range, really leveraging our strengths in multimedia and cameras and even into some of the DMB [Digital Multimedia Broadcasting] products that we have now in Korea. That's sort of where we're really focused.

But I think when we look at the market we don't see this as a strong competition with Apple as I think a lot of journalists like to write about. To us it's sort of a "rising tide lifts all the ships", the bigger challenge for this market is for consumers to get used to these products, to get excited by them, and then to grow from being a niche product —which is what MP3 has been — to being a broad mass product. And to accomplish that I think that it's not just about the product, it's about the service as well.

But Samsung has previously stated that it intended to be the biggest player on the market, then to come back and say, "Well, it's not a competition," — even if those two things are not necessarily mutually exclusive, it was your stated goal to be number one.

Remember that we sort of let go of this MP3 market for several years. Several years ago we were really leading in this MP3 market, but we didn't see it taking off partly because there were no legal downloads at the time and partly because consumers were not yet ready for it and didn't know quite how to use these products. So we then took a step back, and kudos to Apple for putting the iTunes service together, that really established the whole ease of use and the whole ecosystem behind these products.

Now that we've refocused on this, yes, definitely our goal is to take a global leadership position. We think we've got the right pieces in the company to do that in terms of component technologies and all the building blocks of multimedia players.

What we haven't done so far is come up with something on the service side, and that's going to take longer for us to really push through our strategy there. But I mean still we're very committed to the market. We think there's a huge opportunity here.

In terms of services I know that you've had the partnership with Napster here in the U.S. before. Is your strategy focused on partnering with PlaysForSure-compatible services or is there a possibility of a Samsung-branded music store?

Country by country we might think about doing something ourselves, but in general the main thrust of our approach is through partnerships. We think that our brand is becoming strong in the device space, so that's where we want to focus on the positioning of the Samsung brand, and then rely on partners that have trusted brands in the content space or delivery space. In general we're not going to launch our own global download site, but we do want to look for strong partners.

Obviously PlaysForSure is more of a certification rather than a download service, but we think that it is a good thing. Anything that makes these products easier to use and that removes uncertainties about purchase, well, anything that really improves that has to be good.

Samsung has introduced several players recently that support video, but it seems like in general there hasn't been a big focus on portable video from Samsung and there's never been a followup to the Portable Media Center which Samsung introduced last year. I have two questions; one, have you given up on Portable Media Center as a platform; and two, how important is portable video to Samsung as a company?

This a good question, because you're right that we came out with the YH-999 last year. A couple of things about where we're at with video. Firstly, the download services are not there, so we're seeing the same thing that happened in the audio segment before iTunes opened up the legal download market. The second thing is that I don't think we've got the consumer acceptance yet of video on a very small form factor. Both of those things will take some time as we get the right kind of content. That's one reason why we're excited about DMB, because DMB is a way of getting live video content onto a device rather then storing clips of something on a portable media player. We see a big opportunity there in Korea, and we're in discussions in Europe to rollout DMB. So I think that's an important way of getting video.

When we think about these devices, the temptation as a manufacturer is to come out from the hardware perspective and I think what we've really learned over the last few years is that we have to come at it from the consumer perspective. Just saying you can put video clips on a player isn't appealing to people unless it's the right content. What content are they looking for? Often it's time sensitive content. They want to see the news. They want to catch up on yesterday's sports while they're traveling, something like that. And that's where, DMB with its real-time content, has some opportunity.

So we're looking close to the area but I think a lot of the objections that have been raised about portable video on small screens are quite valid. Customers are unlikely to want to watch movies on a 1.5-inch screen, so it's dependent on what type of content we have.

There's no DMB here in the U.S., so how does that factor into your plans for portable video?

In the U.S. video is likely to come first through the cellphone operators. Later we'll see who wants to put in the infrastructure for other types of devices, but when we look around the world really what we see is the same "chicken and the egg" problem. The infrastructure players say, "Well, why should we invest when there are no devices?" And device makers say, "Why should we make anything when there's no infrastructure?" So what we did three, four weeks ago now in IFA in Europe was show this whole range of DMB products, all the way from laptops through to portable media players and even camcorders, saying, "Okay, all the products are here. We're actually going to sell these soon in Korea." We wanted to set this as a signal to infrastructure players, "Come on, now if you invest we can actually put a business bottled together," but I think in the U.S., at least at the beginning, we'll see video mainly through the telecoms.

I wanted to ask about HD DVD versus Blu-ray. Samsung recently announced plans to introduce a dual-player that will play both HD DVD and Blu-ray disks. Up until this point it seemed like Samsung was 100% committed to Blu-ray, especially given that you have already introduced a Blu-ray disc recorder. Does this signal a shift in the company's commitment to Blu-ray or in your approach to this format war?

There's no big shift. All along our commitment has been to Blu-ray, but even a step back from that, our commitment has been to a single standard because that is the most important thing for the market. Our judgment has always been that Blu-ray is the best standard for market in terms of its technical performance. We were one of the founders of Blu-ray and we've been committed to that. We came out, as you mentioned, with our first player some months ago. The concern that we have is that if there are multiple standards out there, that's bad for everyone. It's not only confusing to the customer, but it also drives up the costs for the industry. So really we want to focus on Blu-ray and we think that's the best format, but we have to think about what scenarios might happen going forward. We think that multiple standards are not a good thing and that's certainly the pushback we get also from retail — they don't want to be selling multiple products.

Do you think that HD DVD will dropout or that there will be a unified format? Or are we past the point of no return?

Hopefully there will be one standard, now whether that is a unified format or one of one of the current standards, who knows at this moment. But like I said, our investments have all been on the Blu-ray side, and it looks like it has enough traction in the market. It certainly has the right technical specs and performance so we're still very hopeful for that.

How difficult is it to build a dual-format player? In the news reports from a few weeks ago Samsung said that it would take some time to develop, but how much of a technical challenge is it? And if, Samsung can do it, how hard will it be for your competitors, specifically those in China and Taiwan, to copy what you've done?

That's the really the challenge when you start mixing standards - it's going to drive up the complexity and the cost, because then you need different heads to be able to read each disc. You can talk technically or intellectually about yes, let's make universal players, but even in the DVD space, where we had DVD+RW, DVD-RW and DVD-RAM, it was technically possible to make universal players, but after a point it becomes cost prohibitive. We think that having a single standard is far better than trying to engineer for that sort of complexity and extra cost.

Is Samsung committed to putting out a dual format player if both Blu-ray and HD DVD make it to market?

No, no. I wouldn't say we're committed to doing that. I mean, we'll still have to see. It's not just a case of both standards emerging, it's how much content will be available for each one. We really have from the outset been hopeful that one standard, Blu-ray, will become the standard.

Samsung has been showing off a 40-inch OLED display. How long do you think until an OLED display of that size goes is commercially available?

It's going to be a while. In fact, we don't have any definite date in our product planning road maps for OLED introduction. The purpose of showing the 40-inch display was really as a technology statement, our focus for the next few years is very much on LCD monitors and TVs. OLED still has some very significant challenges in manufacturing. So even though you can make a big technology statement and show that a 40-inch OLED is technically feasible, there is a production problem to actually get a commercial device. It's unlike when we're showing a 102-inch plasma, 82-inch LCD, or 71-inch DLP, where we're saying these large sizes are possible commercially. Our 40-inch OLED is a long way from commercialized.

Like three to five years away?

At a minimum.

A lot of people are going to be disappointed to hear that.

I know when we're showing these large sizes that some people may think, "Oh, great this thing's coming," but I would separate the positioning of OLED from that of other technologies. With OLED the challenge is how do you get reliable lifetimes, and that means, yeah, it's going to be several years at least.

You've mentioned that Samsung is focusing on LCD, do you think you'll think still be making plasma displays five years from now?

Plasma still has a good future, but proportionally at larger sizes. The market that we've seen in plasma is such that the 42-inch size and under will come under greater and greater penetration from LCD. As our seventh generation production really comes online and we begin to get some cost improvements on this 40-inch class of LCD that will proportionally take more business from plasma. Plasma will still have business at 42-inch and above - I'm not saying that it's going away, just that LCD will start making inroads there. I don't think it's going to go away in the next few years, it's just going to be impacted by the growth of LCD.

When will we see a Samsung-branded laptop here in the U.S.?

The last time we saw a Samsung laptop here was when it was AST some years ago, and that business was a big problem for us. I can't say never, but the focus of our efforts is not on coming into the U.S. market. We've built a branded business in Western Europe and some parts of Asia, but the U.S. is an entirely different story. Building a business is much more than just having the right kind of technology and design. It's also about the channel coverage, it's about the service infrastructure. And in the U.S. market now there are several very successful players — in fact the most successful probably is Dell, which is a great partner of ours on the component side - so we don't really don't have any plans for the U.S. laptop business. It's a very tough market for someone new to come in and try and make money. I think the way we're set up now, where we have our own branded distribution of just high-end laptops in Western Europe and parts of Asia, that's working for us. North America is an entirely different story.

It seems like Sony's electronics business has seen two or three year in a row of sub-optimal performance. Why do you think they've been stumbling and how is Samsung going to take advantage of that? What does Samsung need to do to surpass Sony as the world's largest consumer electronics brand?

When we look at the changes in the industry over the last few years, the big opportunity we had was this change from analog to digital. In the IT industry it's been digital basically forever. PCs have basically been digital forever. In the consumer electronics space, this has been a much more recent development. It's only been in the last decade that we've really seen digital content coming in, and that's been the big opportunity for Samsung. It's been this huge breakpoint that's gone from tube televisions to flat panel televisions, just like the LP is a technology that's gone from record players, LPs to CDs, now to the portable audio flash-based or hard disk playing space. Companies that were successful during the analog era are not necessarily the companies that are going to be successful going forward, so that's been our chance to come in.

Where we see as the next big opportunity for us going forward is around convergence because we have such a huge array of building block technologies, whether it's the computing platform through our laptops or audio computer systems, portable audio, video - we're now the world's biggest TV business. All of these different pieces — wireless communications, digital multimedia broadcasting — all of these we can put together into convergence products because content in a digital format can be shared between devices, platforms, moved around the home, all of those things. What we see as our real future is leveraging all of our strengths and components, core technology products, to facilitate this era of convergence.

You've talked before about open standards and about Samsung being supportive of unified standards. Is there a temptation for Samsung to follow the Sony model and try to build a so-called "Samsung platform," or is the company committed to a more open system, even if that means consumers won't only be buying Samsung products? Does Samsung have a different philosophy than Sony?

Our philosophy is very clearly in favor of open standards and interoperability, and it's also clear in our business strategy to focus on devices, which is why we haven't really gone into the content space anywhere other then in Korea where we have a few activities. We believe our strength is in our products and we should we rely on our partnerships and working with others for content delivery or content itself, hence our recent announcement to work with Discovery on HD and with Microsoft for HD Xbox 360 gaming. Let others that are good at the gaming experience and the content experience really focus on that. That's where they have their expertise in their brand, and let us focus on devices that we should be able to make better then anyone else.

That's really the philosophy. As a latecomer to the consumer electronics industry, one that was coming in in the analog era, we would often find new standards being used against us, that were being used to control an industry, or something like that, and in general we don't think that's healthy. Obviously a company needs to earn a return on its R&D investment, but interoperable standards, open standards, are by far the best for any industry or for consumer adoption, so we are very much committed to those, rather then trying to control things or take our own unique proprietary position. And that's across all that we do.

[Oliver @ Dec 19th 2005 12:20AM]

Wow.

[hkid @ Dec 19th 2005 12:20AM]

He clearly tried to weasle out of the MP3 player discussion.

You sell flash to Apple who is number 1 in flash and hard drive players.
You claim you want to be number 1 in the mp3 market but Apple is not your competition?

Either he is confused or Apple paid him a lot to shut up.

Peter, was this interview before Apple pulled out?

And I guess you wouldnt be allowed to ask that anyway.

[mike @ Dec 19th 2005 12:20AM]

Samsung�s semiconductor business is supplying flash modules to Apple for the iPod nano, reportedly at extremely discounted prices.

---

WOW.. and Apple owns 80% of the market.. I WONDER HOW THEY WARRANT A DISCOUNT! ENGADGET, YOU'RE AMAZING!

[Peter Rojas @ Dec 19th 2005 12:20AM]

The interview was conducted prior to the news this weekend about Apple pulling out of their joint-venture.

There were no limits on what I could or could ask about, but David runs their electronics business and so couldn't answer anything about their mobile phone or semiconductor businesses -- those are separate divisions.

[Kamil @ Dec 19th 2005 12:20AM]

This guy is an amazing bullshitter. Nothing of what he answered had any kind of relevance to the questions.

As for Samsung vs. Apple in terms of being #1 mp3 player, Samsung needs to cut off apple completely from getting cheap flash based memory if it intends to even becoming a competitor. Apples overglorified mp3 player (that doesnt last) needs to go like Michael Jacksons career. Samsung is capable of doing that.

However, apple already pulled out of any deals with samsung....i wonder WHY.

I also wonder how apple is going to manage to keep the ipod (nano) at its current price if apple gets flash memory elsewhere.

[10.25.2014 @ Dec 19th 2005 12:20AM]

Apple in talk with Hynix about the future iPod Nano

http://www.palm-dubai.net/001/2005/10/hynix_nand_flas.html

[mindlessly sober @ Dec 19th 2005 12:20AM]

All key executives at public companies are obliged to steer away from controversial questions, aren't they? Too bad.

I thought there was a lot of interesting stuff in his assessments of where the different technologies were going, the economics of a dual format player and in his detailing of Samsungs different strategies.

It would have been fun to hear more of an assessment of the future of legal downloads sans Apples iTMS, but then again I guess this site is called enGADGET..

[lx @ Dec 19th 2005 12:20AM]

I thought he answered every question very well and tried to give as much information as he could. samsung profits in flash and mp3, what's wrong with that? they want to be no.1 in 2007 but whether they make it or not nothing changes, everything's growing, prices stay low so good for samsung and apple, nobody else gets discount on the memory. like he's trying to emphasize with the music and video content and open standards, they just need to focus on what they are doing well and the more ppl they work with, the more successes they can expect.

[Cashmore @ Dec 19th 2005 12:20AM]

Good interview.

[James @ Dec 19th 2005 12:20AM]

mike, you're obviously an idiot apple sackrider.

[EugeneBata @ Dec 19th 2005 12:20AM]

Samsung's electronics and bussiness methods are horrible! Boo!

[spacequak @ Dec 19th 2005 12:20AM]

GO TO HELL YOU FUCKING SAMSUNG BULLSHITTER!!!!!!

SAMSUNG SUCKS!

FUCK YOU SAMSUNG!

[chickencrumb @ Dec 19th 2005 12:20AM]

SAMSUNG FUCKING SUCKS!
YAY!

[Samsung D600 @ Dec 19th 2005 12:20AM]

Samsung needs to prove a lot in terms of seeing the market from the customer's perspective as mentioned by David above. What I really think they should hone in on is their mobile phone market (http://www.samsunglink.com) where they can make BIG money. Small conductors and anything is possible.

[Andongsuki @ Dec 19th 2005 12:20AM]

Hey Spacequak, where are you coming from, would you like to elaborate a little more on maybe WHY Samsung sucks so much? Because last time I checked they were the fastest growing and one of the most successful electronics companies in the world... How are they the "fuckin worst Korean company" when they are the largest and most successful firm from that country?? Spacequak your a retard... stop wasting my scroll space with your bs loser...

On another note, its amazing how fast this company has grown in the last 25 years... I remember when they used to be such a non player in the industry selling cheap TV's and stereos like KOSS or AVEX does now... TOday they are comparing Samsung to Apple and Sony? they have come a loooong way... how do they "fuckin suck" ?? i'm still confused about that one...

[spacequak @ Dec 19th 2005 12:20AM]

Let's see how many lawsuits there are against SAMSUNG, hmmm... wow that many! I'm soooo suprised!

1. WARF sues Samsung over computer chip technology license agreement
2. Matsushita sues Samsung over DRAM patents
3. US Slaps $300 Million Penalty on Samsung Electronics
4.Rambus sues Samsung
5.Korean Consumers Sue Samsung Over Phone
6.Samsung Being Sued By Japanese Inventor
7.Fujitsu sues Samsung over plasma screens

Is that enough for you?

And i once visited the SAMSUNG store in New York City.... it was horrible. The staff was so rude. I'll never buy/consider a samsung again...

[Sun @ Dec 19th 2005 12:20AM]

to Mr. spacequak
that is not enough,
that's only 7
i need more please,,

and i think you will buy samsung product anyway. kk

[Roger Demers C.E.O. Sequential Electronics Corp. @ Dec 19th 2005 12:20AM]

Well to all that may witness this comment,including the top officers of the Samsung company. Resently our company was terminated as a warranty authorized service center for Samsung. This is no suprize to us as we had been waiting for them to respond after 3 months on every product we had serviced for Best Buys in New Hampshire. The practice of E-mails that never get answered, missed calls, fantacy web sites, failed policys when dealing with parts and warranty claims that take a secretary over a month to process costing our company a substantial amount of labor cost was to the point of absurdity. We as a company deticated to the consumer for over 20 years have had the pleasure of hearing every lie that Samsung and the big box stores have ever told. And by the way our company had been in sales and service before they were. To put it bluntly we were glad to recieve our termination letter ( witch by the way was the only deticated responce that Samsung had the good sence to serve by registered mail)Even at this time they were looking for reinbersment for a claim on a product under warranty with them. This customer with a DLP requiring a lamp after 21 days in the customers home, had contacted us to handle. We promptly called Samsung and had this item drop-shipped to the customer. Through the endless of people who are employed or rather not employed by Samsung we had been advised that this component was added to our company account. Witch brings me to the idea as well that as a warranty company we had paid so much money back to Samsung on a parts account that we never eared a pay check for providing the service in the first place. Our accounting clearly showed for nine months we were supporting Samsung's company off of Sequential's labor force, a practice that Sequential may still file a complaint against and finacial restitution for damage to our company for the loss of future bussiness. To finish up this is not the way to do things,and you people have damaged good service companys and consumers across the nation. Korean or not makes no differance but the idea of the way the electronics industry has sold the legacy of service and small chain stores down the tubes is economic suicide. As it is good for a few on top remember (when you do not shop at my store I do not shop at yours)Thank you Samsung for being the worst company in the history of consumer electronic relations and When customers call us for product infomation on your products and service we at Sequential will continue to exspress our gratitude in the interest of the public good. Sincearly Roger Demers C.E.O. Sequential Electronics Corp.

[kinda g reeda @ Dec 19th 2005 12:20AM]

Keep dem 4 letta woids off heer, or da guy on
da white horse (the correct answer to what color was George#1's horse) will make you
type the 4 letter word
READ
and the other 2 4 letter words,
MAKE NICE
over and over, while installing a "WOIM"
to disable your CUT-and-Paste privilj's

[Samsung MBA @ Dec 24th 2005 1:25AM]

Wow - there are some pissed off people on this board.



Well I have worked for Samsung in and outside of Korea. I was recruited upon graduation from a top tier MBA school. I was sent to Korea and underwent training along with a bunch of other foreigners with MBAs or PHDs.



I spent 2 years working in Korea and 6 months in the US. I must say that it was not a good experience. Samsung is a horrible place to work - especially as a foreigner. The corporate culture is an amplification of all of Korean workers' worst qualities.



I am not alone in my opinion. Nearly every foreigner hired at the same time as me has left Samsung. Most leaving abruptly.



Samsung employees, and Koreans in general, have a huge complex about doing things for themselves - even if they haven't a clue.



Example: Korean Samsung employees in our office made some marketing materials - brochures, print ads, etc. - in English. The English was absolutely horrible - incompressible. They were two desks away from me. I talked with them everyday. I expected that I would be asked to help them by proofreading something before sending it to the printer. Nope. They just sent it off and made 10,000 copies for the next trade show.



I know they are native speakers and they can't write English well - but I certainly am. And I am a fellow Samsung employee two desks away.



Later I commented that "the grammar and punctuation may not be quite right."



They said their manager (a Korean female) has an MBA and she said it was perfect. I worked with this employee on a few projects. She can communicate in English but is not even near a native speaker. She is maybe at a US 6th grade level. In fact, I checked the last presentation she made and there wasn't one correct sentence in the entire presentation. Every sentence was missing an article or subject-verb agreement...



Anyway, they took the materials to the trade show in Europe. I was there to meet some major buyers. I was too embarrassed to show any potential buyers the materials. I asked the European staff what they thought about the materials. Well, the response was something similar to the prolific four letter poet above.



As soon as the Samsung manager left, the European employees dumped all of the materials in a dumpster out back. The next day the manager returned and asked what happened to all of the materials. The European employees said they gave them all out already.



The manager was so happy that her materials were so popular and commented "next year I print much more". You should have seen the look on the European employees' faces.



Well, I encouraged the European employees to write to the big chief and give him clear, constructive feedback. This is the David Steel's current boss I believe.



I guess they did. I was called in a month after the show and asked to give my opinion of the materials. I said it would take some time as I wanted to give correct feedback. So I went at it with a red pen. When I was done it was completely red and full of "post-it" notes.



I was then called into a meeting with the manager in charge of producing it and a senior director. Well, I have never been so insulted in my life. They spent 3 hours trying to convince me that Koreans know grammar better than native English speakers and that the grammar and writing is acceptable. The manager said she received a top score on the TOEFL test.



We are not talking the fine points of grammar here - we are talking basic sentence structures.



This is just the tip of the iceberg. We were releasing products we knew didn't work. From cell phones to Plasma TVs - we sold products that were not usable. We sent our plasma TVs even though the sound output was delayed by a fraction of a second so speech and lips didn't sink. The TVs are just not usable and can't be fixed.



Why? Because the division manager wanted wanted to launch the product so he could get promoted. Later, he blamed the engineers. The engineers were reassigned to another division.



I also was "reassigned" because I stood up about a product that didn't work. My next assignment was even worse. I discovered my coworkers had stolen "stuff" from our competitors (how I don't know). So I moved to the USA and worked for Samsung for 6 more months. I finally quit in disgust.



Samsung is an absolutely horrible place for decent people to work. If you are an insecure worm who likes to manipulate, lie, cheat, and steal, then Samsung is the place for you.



I still keep in contact with some of my Korean colleagues from Samsung. I asked one who now works in HR about David Steel. He said David is paid extremely well as he gets the "Samsung executive bonuses". Which may be why he can stand it as long as he has.



Last year I went to the CES show and visited the Samsung booth. Some of the marketing materials were just as bad as when I was there. The booth was complete chaos. Typical Samsung.



I now work for a big Chinese electronics firm. I have a staff of 80 Chinese and 10 non-Chinese under me. They work just as hard as the Koreans - but they know how to use their resources more effectively.



Look out Koreans!