Sony and Samsung’s zero-sum rivalry may be recast in the metaverse

In every great historical rivalry — from military commanders and sporting legends to fizzy drinks and R&B divas — the desire for the rival’s destruction usually conceals a terrible throb of awe.

And so, for many hotly-contested years, it was with Sony and Samsung — two of the world’s greatest tech companies, bruisingly and brilliantly entwined in their war for dominance. Since then, their strategies and skills (one currently has its eye on Indian Premier League cricket, the other on a $17bn Texan chip plant) have diverged. But the pair, say investors, also look destined to meet again — in the metaverse.

The transformation of Samsung, South Korea’s most valuable company, from manufacturer of humdrum products in the early 1990s to a peerless consumer electronics titan in memory chips, batteries, mobile phones and TVs a decade later was a determined emulation of the rise of its Japanese nemesis.

When the value of Samsung’s brand (as calculated by Interbrand) overtook Sony’s in 2005, the symbolism could hardly have been more seismic. Even Sony’s top executives later acknowledged in private that a crucial TV panel joint venture between the two had provided the stage on which it had been expertly outmanoeuvred.

But, as it turned out, that humiliation was also the moment that the rivalry began to lose its meaning — not just because the rest of the tech universe was rapidly moving beyond that type of one-on-one rivalry, but because the two companies themselves were in flux.

Samsung, whose experiments with content and software had never really worked, was realising that its future lay in producing the hardware that would both underpin and host successive generations of the consumer tech revolution. Sony, after some exceptionally painful years as a corporate abattoir for sacred cows, began to see that its co-founder Akio Morita’s vision of convergence and control of content was now more attainable than ever in its history.

In recent weeks and months, the strategic gulf between Samsung and Sony has been even more crisply defined — even if the execution in both cases has left some puzzled about what might happen next. Last week, when Samsung announced the US city of Taylor as the location for its most advanced semiconductor facility, the investment (Samsung’s largest ever in the US) represented another decisive bet by the company on tech hardware and a product for which the world’s appetite seems insatiable. The news followed the company’s announcement of a $206bn, three-year investment plan.

Yet, vast though that commitment is, Samsung remains a company with a great deal more to spend and, as yet, little indication of what it has in mind. Its third generation heir, Lee Jae-yong, is freshly emerged from prison, and expected to unleash some of the M&A hunger that grew during his absence. The most likely target, say analysts, will be in non-memory chips and further commitment to hardware.

Sony, meanwhile, has since 2018 embarked on what Jefferies analyst Atul Goyal describes as an “eyebrow-raising” global splurge of 40 acquisitions, partnerships and stakebuilding exercises. These have collectively expanded its portfolio of video game studios, streaming companies, film, animation, TV and music producers — and, on the hardware side, in specialist sensors. Over the past week, it has made progress on its planned merger with India’s biggest listed entertainment group, Zee.

Where some investors have chosen to grumble that this spree is haphazard and a return to the bad old Sony days of dismal capital allocation, said Goyal, it should in fact be seen as a coherent, transformational decision to go on the offence. Sony, which has long owned a Hollywood studio, a significant music business and the massive PlayStation games empire, is clearly bidding for more dominant leadership.

While the strategies of the two Asian tech groups now look totally different, they have something potentially important in common. To the extent that anyone knows what the metaverse means, and irrespective of the form or delivery mechanism it takes, investors are already looking to place their bets on who might dominate it.

Sony and Samsung, for now, look like solid winners. For all the vagueness around visions of virtual worlds, augmented reality workplaces and everything else that has been crammed into the fledgling metaverse narrative, two elements seem dependable. One is relentless incremental hardware demand for more memory, more non-memory chips, more sensors and more displays. The other is ever-greater convergence of entertainment. If the metaverse does nothing else, it may recast an embittered zero-sum rivalry as an epic pincer movement.

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