By Yun Sang-ho

crow@ddaily.co.kr

[Digital Daily]

Samsung Electronics is attempting to build a new ecosystem of mobile phone accessories through its “Galaxy S6” phone. It wants to increase the number of partner companies and maximize profits by strengthening its authentication system and developing the market of authentic products, like Apple. It is worth watching whether the new strategy will work.

According to Samsung and other sources, Samsung Electronics has decided to manufacture authentication chips and mount them on the accessories for the Galaxy S6. It will also supply the chips to the companies that want to produce accessories for the phone. It is the first time for Samsung to produce authentication chips by itself and supply them to third parties.

A Samsung source said that “the decision to mount authentication chips to accessories aims to differentiate the functions of original products.” There were authentication chips for Samsung accessories in the past but they were not made by Samsung and only the accessories produced by Samsung had the chips, he noted.

The authentication chips were made by Samsung’s System LSI division. The chips will be used in phone cases like flip covers at first. They serve to show a variety of information in the phones in open windows and implement a certain function when opening and closing the cases. The chips for the “Galaxy S Edge” serve to utilize screens without opening or closing covers.

The chips will be also used in accessories that are connected to phones through NFC (near field communication). The Galaxy S6 and Galaxy S Edge adopt an all-in-one design and their batteries are not separable. Therefore, they exchange communication with the authentication chips through NFC. This implies that Samsung has established a basis for expanding wireless accessories.

Of course, anyone can produce accessories that work compatible with Samsung products without the authentication chips. But the chips would enable direct control of smartphones and tablets. The new chips will also bring incentives for consumer purchase. To the producers of accessories, strengthening of the market of authentic products will work both as a crisis and an opportunity. The chips will increase the cost for entering the market, which is an element of crisis. But they can contribute to the expansion of the market and therefore, a growth in revenues, which are elements of opportunities.

Meanwhile, authentication chips are expected to bring positive effects not only to the Wireless Business Division of Samsung Electronics but also to the entire company. The accessories only for Samsung Electronics can induce repurchase of its products. Also, authentication chips can be a means to develop the Samsung accessories ecosystem, which is not as strong as Apple’s. The increase in the profits and revenue from the sales of authentication chips can also offset the deteriorating profits from its mobile business.