BUSINESS

From obscure company to electronics giant

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  • Published : Mar 30, 2010 - 13:14
  • Updated : Mar 30, 2010 - 13:14
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Samsung Electronics, which started as a small maker of black-and-white TVs in 1969, has become a global giant producing a wide range of electronics products and components.
Samsung is now the world`s top maker of TVs and the No. 2 handset vendor. It also is the top maker of memory chips and LCD panels.
Samsung, which turned 40 yesterday, said it would cement its market leadership in four major businesses and seek new growth engines, in a bid to quadruple its sales to $400 billion and become one of the world`s top 10 companies by 2020.
Currently, Samsung is the world`s 47th biggest company, according to U.S. magazine Forbes. In line with the vision announced on Friday ahead of the 40th anniversary, Samsung said it aimed to raise the portion of sales from printers, PCs, cameras, network equipment and home appliances from 20 percent to 30 percent of its total revenue by 2020. Samsung also looks to make biotechnology and solar cells new growth engines.
"Samsung should be a pioneer who creates new value for customers. ... Let`s lead industry change by building differentiated products and value chains," Samsung Electronics chief executive Lee Yoon-woo said in a ceremony on Friday.
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On the same day, Samsung announced its third-quarter earnings. Samsung posted its best-ever operating profit of 4.23 trillion won ($4.5 billion) during the July to September period and said it plans to increase its investments from this year`s 7 trillion won to 8.5 trillion won next year.
The company has successfully weathered out the global economic storm, while many of its rivals are reeling from the crisis. Nokia, the No. 1 handset maker. and Sony, the No. 3 TV maker, posted losses in the third quarter, while chipmakers in the United States and Taiwan reported third-quarter losses.

Semiconductor: turning point for Samsung

Started as a subsidiary of Samsung Group with 36 employees, Samsung Electronics has expanded into a company with 83,588 employees. Its annual sales also jumped from 40 million won in its first year to 121.29 trillion won in 2008.
Samsung`s semiconductor business was a turning point for the company, which was an insignificant electronics company.
Samsung ventured into the semiconductor business in 1974 with the acquisition of the Korea Semiconductor. But its new business has failed to produce tangible results until 1983 when Samsung founder Lee Byung-chull announced a massive investment plan under the so-called "Tokyo Declaration."
His investment plan met with skepticism even from Samsung executives who pointed to the lack of capital, technology and market needed for the semiconductor business. But Lee`s bet paid off, with the company successfully developing 64K DRAM that year.
Samsung has made aggressive investments during times of industrial downturn, while its rivals pulled back, yielding high profits as markets recovered.
Samsung grabbed the No. 1 spot in the memory chip market in 1993. Samsung now holds an 35.9 percent in the computer memory chip market, far ahead of second-ranked Hynix which has a 21.3 percent share.
Samsung`s investment strategy also worked for its LCD business, another capital-intensive industry. Samsung became the top maker of LCD panels in 2002.

Handsets, TVs

Despite its success in the components business, Samsung was perceived in the consumer electronics industry as a maker of low-quality and cheap products.
Lee Kun-hee, the successor to the late founder, pushed for aggressive reforms in 1993 to overhaul Samsung`s image.
The new chairman told employees to "change everything except your wife and kids," urging them to make quality, trend-setting products rather than me-too ones. His revamp has significantly contributed to Samsung`s transformation into a global electronics firm, observers say.
In the mid-1990s, Samsung launched the world`s first handset based on CDMA technology, which was adopted by Korea for the first time in the world.
"This step (Korea`s adoption of CDMA technology as opposed to mainstream GSM standard) temporarily protected Samsung`s domestic market and provided breathing room for Samsung to develop its technology. ... (Samsung) capitalized on Koreans` affinity for the latest technology by offering a variety of innovative phones and beating its competitors to the market in introducing phones with cameras, MP3 players, and color displays," Chang Sea-jin, a professor of National University of Singapore, said in his book "Sony Vs. Samsung."
"Currently, Samsung Electronics` mobile phones are its flagship product, enhancing its brand value, just as the Walkman turned Sony into a globally-renowned brand," Chang said.
Since its entry into the mobile phone market, Samsung quickly grew, overtaking Motorola, a once mighty firm, as the No.2 handset maker in 2007.
In the TV business, Samsung beat long-time market leader Sony to become the No. 1 TV maker in 2006, taking advantage of the transition from analogue to digital.

Challenges

A market leader, Samsung faces a fresh challenge of creating new demand to drive growth, observers said.
"So far, Samsung`s strategy has worked well when it was a follower. Unlike Sony, however, Samsung, now a market leader itself, lacks the ability to develop new technology and products when there is no clear trajectory or another firm for it to benchmark," Chang said.
Samsung should also address leadership concerns following the exit of former Samsung Group chairman Lee Kun-hee. In April last year Lee stepped down in the wake of a corruption scandal involving Samsung executives and transfer of wealth to his son. He received a suspended jail term for illegal bond transactions in August.
Lee, who led Samsung for nearly two decades, and his heir apparent Lee Jae-yong, now a senior executive vice president of Samsung Electronics, did not show up at Friday`s 40th anniversary celebrations, which drew the company`s present and former top executives.
(hjjin@heraldcorp.com)



By Jin Hyun-joo



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