Samsung Hunts Next Hit With Internet Push as Phones Fade

Yoon C. Lee, a Samsung Electronics Co. (005930) executive, is giving a tour of his U.S. home in Oakland. He shows off his living room and foyer, then takes a look outside to check the garden. He considers turning on the sprinkler system before deciding the plants have enough water.

The thing is, hes not actually in California. Hes 8,000 miles away with a reporter in a Seoul conference room. Lee, a tall, 49-year-old, is at a huge table fiddling with a Galaxy S5 phone thats streaming live video from the U.S.

This is Samsungs next big bet as it works to build a future beyond mobile phones, where earnings are tumbling. Lee and his colleagues are trying to create another hit from whats known as the Internet of things, technology that stitches together phones, cameras, sprinklers and roads. If they succeed, the effort could propel sales of the companys electronics, appliances and chips for a generation; if they fail, the troubles will likely deepen.

Imagine if all the dumb things around you can be connected, said Lee. For Samsung, this is a big new opportunity, a huge paradigm shift. It will benefit us across all businesses.

Samsungs Internet push comes just as Apple Inc. (AAPL), Google Inc. and dozens of others are sizing up the same opportunity. Techs giants are all vying for leadership and collaborating where necessary. The market for the Internet of things is projected to hit $7.1 trillion by 2020, according to the research firm IDC.

An employee demonstrates using the air conditioner control function of the Samsung Smart Home system with a smartphone at the Samsung Innovation Museum, operated by Samsung Electronics Co., in Suwon, South Korea, on Nov. 5, 2014. Close

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An employee demonstrates using the air conditioner control function of the Samsung Smart Home system with a smartphone at the Samsung Innovation Museum, operated by Samsung Electronics Co., in Suwon, South Korea, on Nov. 5, 2014.

In a sign of how seriously Samsung is taking the effort, the company is transferring about 500 engineers from its mobile-phone division and allocating them largely to the Internet initiative, according to people familiar with the matter. The shift also reflects recognition that the Suwon, South Korea-based company needs another hit after smartphones, they said, asking not to be identified discussing internal matters.

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Samsung Hunts Next Hit With Internet Push as Phones Fade