Business Consulting Center (BCC) Korea - Samsung Electronics AI Strategy

Business Consulting Center (BCC) Korea

Samsung Electronics AI Strategy

May 04, 2018

Sung-Bin Yoon & Art Choi

Record-high operating profit in Q1, 2018 Samsung Electronics recorded a 15.6 Trillion Won Operating Profit in the first quarter which is a record high for any three-month period

Samsung Electronics Quarterly Operating Profit 14.07

9.22

14.53

Unit : Trillion Won

15.15

15.6

9.9

8.14 6.14

6.68 5.2

Q4 2015

Q1 2016

Q2

Q3

Q4

Q1 2017

Q2

Q3

Q4

Q1 2018

Source) Samsung Electronics 2

However, highly dependent on semiconductor segment Device solution segment contributes 74% of total operating profit.

Especially, chip business saw its operating profit reach 11.55 trillion won (about 73%)

Samsung Electronics Sales & Operating profit by segments (2018. Q1) Unit : Trillion Won 30

28.45

28.35

Sales Operating profit

25 20 15

11.76 9.74

10 5

3.77 0.28

0

Device Solution (semiconductor)

IT & Mobile

Consumer Electronics

Source) Samsung Electronics 3

How long chip’s super-cycle will last?

Semiconductor’s super-cycle is expected to last until 2018 or the first half of 2019

Semiconductor market is boom in Super-Cycle

D RAM

NAND Flash

Limits to Growth

market size

 Vulnerable to business cycle  Demand growth may fall after 2019  Major players’ capacity investments  China production expansion

Source) WSTS(World Semiconductor Trade Statistics), Bank of Korea

4

What’s next? – Samsung is pushing for ‘AI first’ strategy AI(Artificial Intelligence) First Strategy “AI will be adopted into Samsung’s all the products and services by 2020”

Semiconductor

Consumer Electronics

IT Mobile

Automotive Electronics

5

Samsung’s AI Strategy – R&D While integrating AI R&D functions into newly established ‘AI Center’, Samsung is expanding oversea networks in all over the world Samsung Research America

 Subsidiaries in Silicon Valley  AI talent recruitment, R&D on AI technology

AI Center (Seoul)

Montreal University AI Research Institute Joint research with Prof. Yoshu Benjio's team

Head of ‘AI First’ Strategy Integrated Management of AI labs worldwide

Bengaluru R&D Center  Development of customized AI services for emerging markets such as India

Paris AI Research Institute (expected)  Additional research institutes expected in UK, Russia, Canada 6

Samsung AI strategy – M&A, Investments Samsung has been aggressive in investment on AI startups;

Since 2017, it recorded about 17 cases of M&A or investments Samsung’s AI startup M&A and Investment Company name

Country

Area of technology and service

Fluenty

Korea

Interactive AI chatbot creation platform

VIV Labs Inc.

USA

Viv is an AI platform that enables developers to create an intelligent, conversational interface to anything

Innotics

Greece

Automatically convert text to speech

Kngine

Egypt

AI based search service

Mapillary

Sweden

AI-based image and map production (for autonomous driving)

Alllegro

Israel

Deep Learning

AImotive

Hungary

Autonomous Driving

AudioBurst

Israel

AI speech recognition platform.

Unbabel

USA

AI based language translation 7

Samsung AI strategy - Convergence service innovation

Convergence service innovation process

Service product innovation New service concept

Convergence technology

Business model innovation New revenue model

Enabler of service innovation

Service process innovation New service process

Source) Sung-Bin Yoon (2017), Convergence Service Innovation: Smart car, Smart healthcare, Smart home service, IWELL Contents .

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AI Convergence Case study (1) – Smart phone Composition of AI Convergence Service Innovation

Process

Key features

Convergence technology

 AI: Bixby voice command and Deep learning capability (telecommunication + information + camera + Translation + Smart Search)  IoT integration with all compatible devices

Service product innovation

 Smart AI Integrated solutions for phone customer; 1) Safety and health 2) Information, Scan Function 3) Entertainment, travel 4) Communication, Camera

Service process innovation

 AI complex cooperation, deep learning process (Learns users daily routine, smart speech and Voice Command: Bixby, Connectivity to SmartThings app for all compatible devices to be integrated for easy IoT use)

Samsung Galaxy 9, 9+ Business model innovation

 Revenue model - integrated into phone, purchase per phone - Samsung Account Login 9

AI Convergence Case study (2) – Smart TV Composition of AI Convergence Service Innovation Process

Samsung 8k QLED TV

Key features

Convergence technology

 AI Technology Deep learning  QLED (Quantum Dots Display)  Bixby Voice Command  IoT platform with compatible devices (automatically upscales low-resolution images into 8k picture quality, sound and settings changed by users content)

Service product innovation

 Integrated solutions for Television viewers; 1) Auto 8k resolution for all images 2) Information and detail viewership contents 3) Entertainment 4) Communication through Bixby and learns through users content

Service process innovation

 Complex Deep Learning process with Bixby voice command and Smart Resolution upgrade to any sound and picture quality  Extended interface compatibility with TV owners with Samsung IoT products

Business model innovation

 New revenue models - Integrated within the TV on purchase - Samsung Account Login 10

AI Convergence Case study (3) – Smart Speaker Composition of AI Convergence Service Innovation

Samsung AI speaker

Process

Key features

Convergence technology

 Bixby voice command (AI assistant that will be applied to all appliances)  Media Casting Support  SmartView App compatible

Service product innovation

 Integrated solutions for Samsung customer; 1) User command support 2) Information 3) Entertainment, Media 4) Communication: Bixby

Service process innovation

 Complex Deep Learning and voice command process (Bixby integrated, user command friendly, actions by users request, built in compatibility with other compatible devices, IoT Platform)  Extended interface with speaker owners

Business model innovation

 Revenue model - Integration with purchase of Speaker - Samsung account login 11

AI Convergence Case study (4) – Smart Air Conditioner Composition of AI Convergence Service Innovation Process

Convergence technology

Service product innovation

Samsung Wind-Free Air Conditioner

Service process innovation

Business model innovation

Key features  Deep Learning AI Process (capable of learning users preferable temperature, controls itself to climate changes)  Bixby voice command  IoT platform with compatible devices  Integrated solutions for Air Conditioner customers; 1) Safety, climate control 2) Information 3) Communication, Bixby operated

 Deep Learning process (Bixby voice command, learns and analyzes users preferences, autonomous)  Extended interface with Air Conditioner owners (connectivity to compatible IoT platform devices)

 Revenue models - Pay on Purchase of Air Conditioner - Samsung account login 12

Key success factors are consumer adoption Convergence Adoption Model

Perceived Ease of use

Compatibility

Perceived Usefulness

Task-Technology Fit

Intention to use

Design

Design Perceived Enjoyment

Design Source) Yoon, S. B., & Cho, E. (2016). Convergence adoption model (CAM) in the context of a smart car service. Computers in Human Behavior, 60, 500-507.

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Consumer adoption factors Factor

Role and impact on user perception • A user is more likely to adopt a new technology when he/she believes that using a particular

Perceived Usefulness,

Ease of Use, Enjoyment

technology would enhance the user's job performance (Perceived Usefulness: PU) and also

when using it would be free of effort (Perceived Ease of Use: PEU) • Perceived enjoyment(PE) is another factor for hedonic aspect of user evaluation of technology • The compatibility of user experience with existing technologies is indeed a critical factor

Compatibility

affecting consumer evaluations of a convergence service • There exists a spill-over effect from past experiences to compatible technologies not only in terms of cognitive (i.e., fit evaluation of needs and values) but also emotional experiences • Task-technology fit (TTF) is defined as "the degree to which a technology assists an individual

Task-Technology Fit

in performing his or her portfolio of tasks” • TTF can directly influences the adoption intention and can be also a significant factor mediating the effect of perceived usefulness and enjoyment on the adoption intention • Visual attractiveness of the interface design can positively influences the evaluation of the

Design

key factors such as user's perception of compatibility, perceived enjoyment, and directly adoption intention

Source) Yoon, S. B., & Cho, E. (2016). Convergence adoption model (CAM) in the context of a smart car service. Computers in Human Behavior, 60, 500-507.

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Contact Business Consulting Center at QYR U.S.A. Office Mark Liu Tel:+1-6262952442 E-mail: liujunjie@qyresearch.com China Office Simon Lee(Zhang Dong) Tel : +86-1082945717 E-mail : zhangdong@qyresearch.com South Korea Office Sung-Bin Yoon, Ph. D Tel : +82-10-7551-1278 E-mail : yoon@innoresearch.co.kr/yoon@qyresearch.com Japan office Tang Xin Tel:+81-9038009273 E-mail: tangxin@qyresearch.com 15