According to the industry on October 22, Samsung Electronics recently distributed the authenticity recognition chip to its accessory business division and suppliers, and made it mandatory to install the chip.
Samsung assigns a unique ID to the chip in the case, wireless charging pad, etc. This chip detects the authenticity of the smartphone accessory, and if it is not authentic, related functions cannot be used. Apple changed the charging cable for iPhone and iPad from 30 pins to 8 pins last year, and embedded the recognition chip in the cable to induce users to buy authentic products.
Samsung Electronics established this authenticity policy apparently for the sake of reliability. If various functions are added to accessories, the company may be plagued by controversies over malfunction. However, the real intention is to capitalize on its control over the smartphone market to take the initiative in the high-value-added accessory business. It is an attempt to support the accessory business division Samsung created earlier this year, and reinforce its closedness and induce loyal customers to buy more Samsung products.
With the global smartphone market saturated recently, it is possible to make up for the falling profitability with accessories. Sharing the premium market with Apple, Samsung secured many loyal customers. Samsung Electronics is known to be considering a number of alternatives, e.g. reducing the number of batteries offered by default from 2 to 1 and removing the earphone from the bundle package in order to sell its accessories.
In particular, Samsung will be able to lower production costs and induce technological competition among companies wanting to become a supplier by making its own accessories and giving all the volume to a small number of suppliers. Samsung will be able to expect distribution margins by opening an online shopping mall and offline stores, and managing them directly.
As this strategy surfaced above water, small and medium-sized accessory makers, which have been selling cases and chargers, are feeling the pressure. If they fail to become a supplier, they will not be able to manufacture accessories at all. The prices of accessories are expected to rise as well. Samsung Electronics’ authentic accessories are about 1.5~2 times as expensive as general products. CEO of a small and medium-sized accessory maker criticized “Samsung’s authenticity recognition chip will deal a direct blow to the accessory market, the territory inhabited by SMEs.”
According to the KT Economic Research Institute, the size of the smartphone accessory market has grown to about KRW1,677.6 billion this year in Korea alone. If the wireless charging market is opened too, the market volume is expected to explosively expand as it includes pads, cases and batteries.
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