How Samsung Is Winning Mobile VR Revolution

| About: Samsung Electronics (SSNLF)

Summary

Samsung is a pioneer in the mobile virtual reality market. Its consumer version of Gear VR is available for sale now just for $99.

Increased shipment of smartphones, strong brand recognition and the rise of the VR market are the main catalysts for company's growth.

Currently, Samsung is a major manufacturer of hardware virtual reality devices for mobile customers.

In November, Samsung (OTC:SSNLF) launched a new marketing campaign to promote its virtual reality device Samsung Gear VR. The campaign is a part of Samsung's global initiative called It's Not a Phone, It's a Galaxy.

The ad shows a wide variety of people that use Samsung Gear VR to watch a different kind of content that is available for the device. And the slogan is clear: Virtual reality just got real. And that's true. Last year, there were a number of VR devices announced to be released anytime soon and "hungry" developers already started to explore this relatively new technology for their own use. Samsung's Gear VR is one of the pioneers in this industry, with the consumer version available for sale now just for $99. This puts the company at the top of the smartphone VR spectrum in terms of quality and price. And considering the fact that Samsung has enormous resources and a properly-built ecosystem, it seems that its VR device will be there for a long time.

Catalysts for growth

If we look at the current virtual reality market, we would see that there are two different types of VR devices. The first ones are built for PC and consoles and offer a greater experience and a better graphics to the end user. However, they cost more and customers need a more powerful platform to use them. The examples are Facebook's (NASDAQ:FB) Oculus Rift and Sony's (NYSE:SNE) PlayStation VR. The second category of VR headsets is created for smartphones. They don't offer the same quality of graphics and physics as VR devices from the first category, but they're cheaper and more accessible for buyers.

Samsung Gear VR fits into the second category and is compatible with all of the Galaxy smartphones. All you need to do is slip your phone inside the headset and you experience the world of virtual reality. The first consumer versions of the device were released last November and became one of the best-selling products on the market. Engadget called it a no-brainer and CNET said that it offers the best VR mobile experience so far.

As I said before, Samsung Gear VR is designed for mobile platforms. And it's obvious that the company will benefit from the rising smartphone market. According to Statista, global smartphone shipments will rise in the next couple of years:

Click to enlarge

(Source: Statista)

And the fact that Gear VR is comparable only with Samsung devices is not a big deal because the company has the biggest share of the smartphone market in the world and it seems that it will only expand further and increase the number of its users.

(Source: Counterpoint Research)

As the virtual reality industry gains traction, more and more competitors will join the field. That's why for Samsung it's important to establish a presence in the industry as fast as possible. According to the data from research company TrendForce, the global value of the virtual reality market will grow consistently each year, from less than $10 billion in 2016 to around $70 billion in 2020:

And as we can see from the picture above, hardware will play a crucial role at the first stages of this fast-growing market. And the market is not that populated at the moment. Samsung's main competitors in this field are private companies like Freefly, Noon, Zeiss and others. However, most of them are selling only online and don't have the luxury to be available for sale at the major retail franchises. And Samsung's ecosystem offers far more greater experience than all of those companies. At the same time, the competitors' price is in the range of $70 to $120 and the quality of the product can be questioned.

The last factor that plays an important role in Gear VR success is Samsung's brand recognition. Long ago, the company established itself as a major player in the electronics market and people love to buy its products, thanks to the great quality and relatively low price.

Conclusion

The virtual reality industry is just gaining traction. A lot of companies are already developing their own devices and hope to take some chunk of this fast-growing market. And while big tech giants like Facebook, Sony and HTC are making their product for the powerful platforms like the PC and next-gen consoles, Samsung is taking the most out of mobile customers.

At this point in time, it's important for the company to establish itself as a major manufacturer of hardware virtual reality devices. And that's what Samsung is doing great at the moment. All of its headsets are already sold out and pre-orders are way off the cliff. With the strong presence in the industry, the company could afford to invite the best software developers to create content for the Gear VR. I believe that Samsung had a great launch for its VR device last November, and with the resources that they have and all of the catalysts that I described in this article, the company is poised for growth.

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I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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