SEOUL, KOREA – The sales of not more than 10 trillion won at a time when Kun-hee Lee became a new head of Samsung Group in 1982 have now soared to 384 trillion won (USD 384 billion). Market capitalization of the group subsidiaries has also surged from 1 trillion won to 303 trillion won (USD 303 billion). On top of this, Samsung’s brand value jumped to 9th in the world this year to be in the global top ten for the first time. It wasn’t only the size that has grown. Its export volume has increased 25 times for the past 25 years. Its exports accounted for around 13% of the total national export in 1987 and now it has risen to 28%. Samsung’s share of the total GDP is now as much as 33%.
“Heightened Sense of Crisis”
The factors behind this rapid growth lie on Lee’s unique management philosophy: putting the emphasis on a “heightened sense of crisis”. Semiconductors and mobile phones are Samsung’s flagship brands today, but they went through a lot of difficulties in the beginning. Lee heavily invested in the mobile phone business following the declaration of new management initiative at Frankfurt in 1993. However, as the business didn’t show any good sign of success, he ordered to incinerate defective mobile phones worth USD15 billion. After one year, the domestic market share jumped to 19% and it has continuously grown to be the global top seller today.
As for semiconductors, despite opposition from board of directors in the early days, he decided on a heavy investment at his own expense, with confidence that it is a necessary step for Samsung to advance into the high-tech industry. Since then, Samsung developed the first 64-mega DRAM in the world in 1992 and never gave up its top position in the global semiconductor market.
Lee continuously emphasized finding new growth engines, saying “Samsung’s flagship products will have disappeared in ten years”. In 2010, Samsung Electronics set solar cell, batteries for vehicles, LED, bio pharmaceuticals, and medical device as new five businesses. As the market competition of its core businesses including semiconductors and smartphones become tougher, there was a need to invest in new businesses for the future. Samsung created a roadmap of the five new businesses in which it plans to invest 23.2 trillion won in by 2020 and to earn additional 50 trillion won in sales. The businesses are expected to create 45,000 new employments, of which solar cell in particular is predicted to reach 10 trillion won in sales and create over 10,000 jobs with an investment of 6 trillion won by 2020. Samsung plans to endeavor to develop graphene, known as the next semiconductor material, along with batteries for vehicles, solar cells and materials for OLED at the Electronic Material Research Complex, due to be completed at the end of next year.
As recently as earlier this month, Samsung restructured its organization. The major change was the promotion of Jae-Yong Lee, a former COO, to vice chairman of Samsung Electronics. It has taken 21 years to be promoted to vice chairman since he entered Samsung Electronics in 1991. Samsung has great expectations of him, as he has shown impressive management performance amid the global economic recession with outstanding business coordination and communication skills. He is expected to oversee Samsung Electronics business at large, and to expand the global network. Some say that it is a signal that Samsung’s management succession has kicked into high gear.
In the process of Samsung Electronics’ restructuring, Digital Media & Communications (DMC) has been abolished. Consumer Electronics (CE) and IT & Mobile communications (IM) were promoted to be included as the three structuring systems, together with Device Solutions (DS).
Samsung Electronics held a ‘Global Strategy Meeting’ with overseas branches and some 550 key executives from December 17th to 18th at Samsung Digital City. This was the first meeting where all the key worldwide members gathered since Jae-Yong Lee was promoted to vice chairman of Samsung Electronics. At the meeting, they shared strategies to maintain the top global position next year by overcoming challenges including the European financial crisis, the U.S. fiscal cliff, and China’s economic recession.
Oh-Hyun Kwon, the vice chairman of Samsung Electronics, emphasized continuous innovation saying that “Samsung should maintain its top position with challenges and innovation even in this difficult environment of the slowdown of global economic recovery”. At the meeting, he shared the strategies and vision of the Device Solution sector, and requested to secure technical leadership and differentiated products through continuous R&D and the improvement of solution competitiveness. He also said that Samsung Electronics should actively respond to the global market changes, giving examples of next year’s sluggish PC market, the rapid rise of the mobile market, and the shift of the rivalry structure of the semiconductor industry. Besides, he emphasized ‘Innovation’ rather than mere ‘Improvement’ by entirely eliminating unnecessary work and maximizing efficiency.
Financial industries analysis has forecast that business profit of Samsung Electronics in the fourth quarter would hit 9 trillion won. Woori Investment & Securities predicted that Samsung Electronics’ business profits will surpass 37 trillion won in 2013, and raised the target stock to 1.9 million won.
Samsung’s delayed mass production of large-screen OLED to next year is allegedly due to Samsung Display’s technical difficulties with OLED panels. Samsung Electronics will continue to strengthen OLED TVs and 85-inch ultra HDTV. Next year, Smart TV is expected to account for a greater portion of TV sales, with around 60%. Samsung Electronics set TV sales targets of 55 million won for next year. This year, sales are expected to be around 50 million won.
As for the phone market, the company sold around 400 million units this year and plans to reach 500 million next year. Among them, 200 million were smart phones and this is expected to increase to 350 million. The sales target of Smart Pad is set to increase from 15 million this year to 40 million next year. Samsung believes it is possible to sell 50 million if it includes Galaxy Tab, Galaxy Note10.1, and Nexus 10.
The Device Solutions division of Samsung Electronics plans to respond to the market situation rather than confirming the scale of capital investment in advance. Industry predictions were that this amount would not exceed half of this year’s investment, around USD14 billion. Following the Micro-Elpida merger, the decade-long game of chicken for memory semiconductors came to an end, and thus Samsung Electronics has no reason to reduce memory semiconductors by increasing capital investment.