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Samsung braces for future uncertainties

Lee holds series of meetings as Korea’s top company faces challenges from global, industry-wide woes


Samsung Group appears to be struggling to weather the latest global economic uncertainties stemming from troubles in some of the world’s largest economies, coupled with industry-embedded problems such as declining memory prices.

Adding to the concerns is a highly-publicized patent dispute with Apple, which recently resulted in a court injunction ordering suppliers to pull Samsung’s tablet PCs off store shelves in Germany and the Netherlands. In one positive turn, the tablets are not to be banned across all of Europe on findings that Apple had submitted doctored evidence. 
Samsung Electronics chairman Lee Kun-hee and his son and company president Lee Jae-yong (Park Hae-mook/The Korea Herald)
Samsung Electronics chairman Lee Kun-hee and his son and company president Lee Jae-yong (Park Hae-mook/The Korea Herald)

Reflecting Samsung’s growing anxiety, owner Lee Kun-hee has been frequently meeting with company executives, getting reports on Samsung’s status quo and expected future problems.

Lee was recently briefed on the slumping semiconductor industry and the global economy in general during a meeting with chief executives at Samsung’s electronics and financial affiliates.

Dynamic random access memory prices have been tumbling and are now at about $0.61, which is a record-low.

Production costs are estimated at about $0.7, meaning that Samsung Electronics may soon be losing, and not making money by producing memory chips.

Samsung currently is the global leader in the DRAM market with an almost 42-percent market share.

The firm’s liquid crystal display business also faces persistent woes on weak demand that is pulling display prices down.

Samsung recently reshuffled its display arm as the business has been failing to post gains for two straight quarters.

Another issue of concern for both Samsung and the IT industry is Google’s move this week to acquire mobile phonemaker Motorola in aims to produce both platforms and phones.

A day after Google announced its takeover deal with Motorola Mobility, Samsung chairman Lee convened an emergency meeting of top company officials Wednesday and called for their efforts to develop the company’s software competitiveness.

Some believe Google’s presence will help Samsung keep Apple in check, while others said Samsung has now just earned itself a new rival.

“It’s going to be quite complicated from here, and companies will have to think very hard about their strategies given the constantly changing dynamics of this industry,” said one industry watcher, declining to be identified.

The challenges Samsung is facing, coupled with an overall crash in the stock markets triggered by global uncertainties, are already being factored into the company’s stock prices.

Samsung Electronics, which had soared to above 1 million won ($926) earlier this year, has tumbled to around 700,000 won to lose 20 percent of its value in just two weeks.

For the time being, Samsung seems poised to push through the crisis without diverging from its initial business plans.

Samsung is expected to continue developing advanced memory technology and pursue value-added chips such as mobile DRAM in order to pursue bigger profit margins.

Company officials said Samsung has ruled out reduction of production, which is an option being considered by smaller memory-chip makers.

Shortly after the U.S. and local stock markets tanked in the aftermath of an unprecedented rate cut on the U.S. by S&P, Samsung had said it would continue on as before.

By Kim Ji-hyun  (jemmie@heraldcorp.com)
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