The battle between Samsung Electronics and Apple to dominate the world’s smartphone markets has mostly been waged from their respective sides of the Pacific.
Now the South Korean tech giant is storming rival Apple’s backyard, launching an aggressive expansion into California’s Silicon Valley.
Samsung has opened an innovation center in Menlo Park. A research and development lab is planned for San Jose. A startup incubator is cooking in Palo Alto. And then there is its most audacious undertaking: erecting a massive new semiconductor campus with a distinctive design destined to compete with Apple’s proposed spaceshiplike campus for the title of Silicon Valley’s most distinctive architectural landmark.
The move by Samsung to broaden its footprint in Silicon Valley signals an escalation of its rivalry with Apple, as the two companies compete more directly for the same employees, investments and innovations.
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Beyond getting in a rival’s face, Samsung thinks its Silicon Valley expansions are needed to inject more entrepreneurial DNA into the bloodstream of a company known more as an innovation follower than leader.
“This is the epicenter of disruptive forces,” said Young Sohn, Samsung’s chief strategy officer, who is now based in Silicon Valley. “And I want to make sure we’re part of those disruptions.”
The relationship between Samsung and Apple is complex, to put it mildly. Samsung has long been one of Apple’s main suppliers of components. Samsung has maintained a modest outpost in Silicon Valley for years that included its U.S. semiconductor headquarters, a small R&D lab and a venture-capital office.
But in recent years, that partnership became strained as Samsung launched a line of new smartphones, led by the Galaxy, that run on Google’s Android operating system. Those phones have made Samsung the world’s leading seller of smartphones, though Apple remains No. 1 in the U.S.
For all its success, the company still lags behind Apple in the perception of which is the more innovative company. Samsung is trying to shed its reputation for being a company that succeeds through a strategy of what Tim Bajarin of Creative Strategies calls “fast following.” That is, watching others pioneer new technologies and markets, and then rushing in behind.
“The reason they’re doing what they are doing now is that Samsung is in a position of market strength,” Bajarin said. “They now are beginning to do the R&D, which will allow them to control their destiny instead of relying on other people to make breakthroughs. But to get the kind of growth they’d like, they have to make the transition from being an innovation follower to an innovation leader.”
To make that shift, Samsung wants to shed an insular culture that has focused on developing most technologies and products internally.
In other words, it wants to do the things that are the lifeblood of Silicon Valley’s biggest companies.
“Much of our innovation in the past was done in Korea,” Sohn said. “We have to reach out to global hot spots. How we tap into global-innovation efforts will dictate our success.”
Sohn hopes the company’s larger presence in Silicon Valley will breed familiarity and help demystify it.
The scope of Samsung’s expansion plans, while massive, hasn’t received tremendous buzz, in part because they have dribbled out in bits and pieces. But as Samsung has released more details in recent weeks, the ambition of its intentions has come into sharper focus. The expansion plans include:
• A startup incubator in downtown Palo Alto, just a couple of miles from the Stanford University campus.
• A major expansion of its R&D center, known as Samsung Information Systems America, into two six-story buildings under construction in San Jose.
• The opening of the Samsung Strategy and Innovation Center on the valley’s famed Sand Hill Road, the heart of the region’s venture-capital industry.
• Increased venture-capital investment through Samsung Ventures, which has offices in San Jose and is already one of the largest corporate-venture funds in the world, with $1 billion in assets.
• A new $300 million campus for its U.S. semiconductor headquarters boasting a remarkable, open-air design that promises to rival Apple’s new campus and Facebook’s Frank Gehry-designed expansion for the region’s most eye-catching high-tech building.