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For the past two years, Samsung has been working on its own smartphone operating system, called "Tizen."
Tizen is very similar to Android. It's open source, meaning any smartphone maker can use it for free.
It's also a way for Samsung to wean itself off Android and use its own software instead. The theory goes that Samsung is ceding a lot of potential revenue to Google because it has to offer customers Google's app store and other services if it wants to keep using Android.
Samsung is the biggest Android phone maker in the world, but it's still giving a ton of control over its future to Google.
Yet, it sounds like Tizen is faltering. Samsung's chief architect of Tizen, Taesoon Jun, told CNET's Shara Tibken recently that the company is shifting its plans for the operating system. Instead of loading Tizen on high-end phones with specs similar to the Galaxy S5 or Galaxy Note 4, Samsung will put it on cheap phones to compete at the low-end of the smartphone market.
That's a troubling sign for Samsung, which has been struggling all year to combat dwindling smartphone sales and profits. Profits were down nearly 50% in the third quarter, and Samsung blamed increased competition from other smartphone makers.
For example, the Chinese startup Xiaomi makes phones with high-end specs similar to what you'd find in Samsung's best phones, but sells them for about half the price. Xiaomi is now the third largest smartphone maker in the world in terms of unit sales.
Still, Tizen isn't just for phones. Samsung also uses the operating system on several of its smartwatches, which is seen as the next major product category for mobile device makers. On the other hand, Samsung's watches have been poorly reviewed and there aren't any indications that they've been selling very well.
Samsung is still very profitable, but its next challenge is to find a way to differentiate its phones from the competition in order to stop its drastic decline in profits. The best way to do that would be to innovate on the software level, and Tizen was a big opportunity for Samsung. But it seems like it's just another Android clone that will be used in cheap phones.
Read more: http://www.businessinsider.com/samsung-tizen-2014-11#ixzz3JfKfRDQi
The company's head of investor relations says the move is designed to make Samsung's smartphone business more efficient. Samsung will stop producing so many models of smartphones and focus on a core set of devices in the new year, the company said Tuesday. Speaking to investors in New York, Samsung's head of investor relations, Robert Yi, said his company plans to cut the number of smartphone models it produces in 2015 by 25 percent to 30 percent, The Wall Street Journal reported. Though Samsung is still a juggernaut in the mobile business, the company has watched its smartphone business start to falter in key markets, such as China. In China specifically, chief competitor Xiaomi has been able to increase smartphone shipments and get consumers excited about its products by delivering higher-end devices at budget-conscious prices.
Meanwhile, Apple, with its new iPhone 6 and iPhone 6 Plus, has moved to offer smartphones with larger screens, which had been a key point of distinction for Samsung. The South Korean company's latest quarterly returns put the situation in stark relief. At the end of October, Samsung said that third-quarter income in its mobile business tumbled 74 percent from the previous year and that its operating profits were the lowest they'd been since the middle of 2011. It also warned that smartphone competition would be fierce toward the end of the year. Samsung is also dealing with increasingly strained margins as its marketing costs have risen considerably. In the third quarter, the company generated just 7 percent margins on smartphones, down from 15 percent in previous years, the Journal reported. Prompted by the shifts, Samsung had already said that it plans to "fundamentally reform" its product lineup. Here's how overwhelming Samsung's array of products has become: In just its flagship Galaxy S line, Samsung offers five models beyond the namesake Galaxy S5: the knockaboutGalaxy S5 Active and Galaxy S5 Sport; the more modestGalaxy S5 Mini; the Galaxy K Zoom with a higher-end camera; and the Galaxy S5 LTE-Advanced for higher Internet speeds. There's also the Note phablet line, the new, metal-clad Galaxy Alpha devices and a long list of other Android and Windows Phones devices.
The idea behind streamlining its offerings is simple: the company will be able to cut its overall costs and find ways to improve efficiency in production. Marketing dollars will also be spread across fewer products. Samsung is also planning to use the same components in multiple products to help cut costs. Yi didn't say how many smartphones the company will ship next year. The company did not respond to a request for comment.
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