Samsung Electronics Co., Ltd.

250-2 ga, Taepyung-ro Chung-gu
Seoul 100-742
South Korea
Telephone: (82) 2 727-7114
Fax: (82) 2 727-7985
Web site: http://www.samsungelectronics.com

Wholly Owned Subsidiary of Samsung Group (South Korea)
Founded: 1969
Employees: 55,000
Sales: $26 billion (2000)
Stock Exchanges: Seoul
Ticker Symbol: SEC
NAIC: 333295 Semiconductor Machinery Manufacturing; 333911 Pumps and Pumping Equipment Manufacturing; 334111 Electronic Computer Manufacturing; 334119 Other Computer Peripheral Equipment Manufacturing; 333313 Office Machinery Manufacturing; 334419 Other Electronic Component Manufacturing; 333415 Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing; 333996 Fluid Power Pump and Motor Manufacturing; 333999 Other Miscellaneous General Purpose Machinery Manufacturing

Samsung Electronics Co., Ltd. is the chief subsidiary of South Korea’s giant Samsung Group and the largest electronics producer in Asia. Samsung Electronics operates four main divisions including Digital Media, Semiconductors, Information & Communications, and Home Appliances. The company sells televisions, video, and audio equipment; computers and related products; phones, cellular phones, and fax machines; home appliances; semiconductors; network-related products; factory automation products; fiberoptics products; closed circuit security products; motors and compressors; and solar energy systems. In 2000, Samsung Electronics held the leading market position in the code division multiple access (CDMA)Handset, DRAM, SRAM, and color monitor markets.

Early History of Samsung Group

Samsung Electronics was created in 1969 as a division of the mammoth Korean chaebol Samsung Group. The unit was established as a means of getting Samsung into the burgeoning television and consumer electronics industry. The division’s first product was a small and simple black-and-white television that it began selling in the early 1970s. From that product, Samsung Electronics gradually developed a diverse line of consumer electronics that it first sold domestically, and later began exporting. The company also began branching out into color televisions, and later into a variety of consumer electronics and appliances. By the 1980s, Samsung was manufacturing, shipping, and selling a wide range of appliances and electronic products throughout the world.

Although the rapid growth of Samsung Electronics during the 1970s and early 1980s was impressive, it did not surprise observers who were familiar with the Samsung Group, which was founded in 1938 by Byung-Chull Lee, a celebrated Korean entrepreneur. Lee started a small trading company with a $2,000 nest egg and 40 employees. He called it Samsung, which means “three stars” in Korean. The company enjoyed moderate growth before the Communist invasion in 1950 forced Lee to abandon his operations in Seoul. Looting soldiers and politicians on both sides of the conflict diminished his inventories to almost nothing. With savings contributed by one of his managers, Lee started over in 1951 and within one year had grown his company’s assets 20-fold.

Lee established a sugar refinery in 1953, a move that was criticized at the time because sugar could be easily obtained through American aid. But for Lee, the act was important because it was the first manufacturing facility built in South Korea after the Korean War. From sugar, wool, and other commodity businesses, Lee moved into heavier manufacturing. The company prospered under Lee’s philosophy of making Samsung the leader in each industry he entered.

From manufacturing, Samsung moved into various service businesses during the 1960s, including insurance, broadcasting, securities, and even a department store. Lee experienced several major setbacks during the period. For example, in the late 1960s, shortly before Samsung Electronics was created, Lee was charged with an illegal sale of about $50,000 worth of goods. The charges turned out to be the fabrication of a disgruntled government official to whom Lee had refused to pay a bribe. Nevertheless, one of Lee’s sons was arrested and Lee was forced to donate a fertilizer plant to the government to win his release. Despite that and other problems, Samsung continued to flourish. Indeed, by the end of the 1960s the conglomerate was generating more than $100 million in annual revenues.

Shortly after Lee’s son was arrested, Lee decided to break into the mass communication industry by launching a radio and television station, as well as by manufacturing televisions and electronic components through the Samsung Electronics division. The industry was dominated at the time by several U.S. and European manufacturers, and some Japanese companies were beginning to enter the industry. Nevertheless, Lee was confident that Samsung could stake its claim on the local market and eventually become a global contender. During the early 1970s, the company invested heavily, borrowed and coaxed technology from foreign competitors, and drew on its business and political connections to begin carving out a niche in the consumer electronics industry. In addition to televisions, Samsung branched out into other consumer electronics products and appliances.

Government Involvement During the 1970s

Samsung Electronics’ gains during the 1970s were achieved with the assistance of the national government. During the 1950s and 1960s, Samsung and other Korean conglomerates struggled as the Rhee Sungman administration increasingly resorted to favoritism and corruption to maintain power. Student revolts in the 1960s finally forced Rhee into exile. The ruling party that emerged from the ensuing political fray was headed by military leader Park Chung-Hee. His regime during the 1960s and 1970s was characterized by increasing centralization of power, both political and industrial, as his government was obsessed with economic growth and development. So, while Park was widely criticized for his authoritarian style, his government is credited with laying the foundation for South Korea’s economic renaissance.

To develop the economy rapidly, Park identified key industries and large, profitable companies within them. The government worked with the companies, providing protection from competition and financial assistance as part of a series of five-year national economic growth plans. By concentrating power in the hands of a few giant companies (the chaebols), Park reasoned, roadblocks would be minimized and efficiencies would result. Between 1960 and 1980, South Korea’s annual exports surged from $33 million to more than $17 billion.

Samsung Electronics and the entire Samsung chaebol were beneficiaries of Rhee’s policies. Several countries, including Japan, were barred from selling consumer electronics in South Korea, eliminating significant competition for Samsung. Furthermore, although Samsung Electronics was free to invest in overseas companies, foreign investors were forbidden to buy into Samsung. As a result, Samsung was able to quickly develop a thriving television and electronics division that controlled niches of the domestic market and even had an edge in some export arenas.

During the 1970s and 1980s, Samsung Group created a number of electronics-related divisions, several of which were later grouped into a single entity known as Samsung Electronics Co., Ltd. Samsung Electron Devices Co. manufactured picture tubes, display monitors, and related parts. Samsung Electro-Mechanics Co. made VHF and UHF tuners, condensers, speakers, and other gear. Samsung Corning Co. produced television glass bulbs, computer displays, and other components. Finally, Samsung Semiconductor & Telecommunications Co. represented Samsung in the high-tech microchip industry. Rapid growth in those industries, combined with savvy management, allowed the combined Samsung Electronics Co., Ltd., to become Samsung Group’s chief subsidiary by the end of the 1980s.

Entering the Semiconductor Market: Late 1970s to Early 1980s

Samsung’s entry into the semiconductor business was pivotal for the company. Lee had determined in the mid-1970s that high-tech electronics was the growth industry of the future, and that Samsung was to be a major player. To that end, he formed Samsung Semiconductor and Telecommunications Co. in 1978. To make up for a lack of technological expertise in South Korea, the South Korean government effectively required foreign telecommunications equipment manufacturers to hand over advanced semiconductor technology in return for access to the Korean market. This proved crucial for Samsung, which obtained proprietary technology from Micron of the United States and Sharp of Japan in 1983. Utilizing its newly acquired knowledge, Samsung became the first Korean manufacturer of low-cost, relatively low-tech, 64-kilobit dynamic random access memory (DRAM) chips.

Company Perspectives:

We strive to devote our people and technology to create superior products and services, thereby contributing to a better global society. Working closely together with customers, building strong ties to the local communities we serve, and responding creatively to future challenges, are principles deeply instilled in the minds of our employees.

Shortly after introducing its 64K chip, Samsung teamed up with some Korean competitors in a research project that was coordinated by the government Electronics and Telecommunications Research Institute. The result was a 1-megabit DRAM (and later a 4-megabit DRAM) chip. During the middle and late 1980s, Samsung parlayed knowledge from the venture to become a significant supplier of low-cost, commodity-like DRAM chips to computer and electronics manufacturers throughout the world. Meanwhile, its other electronics operations continued to grow, both domestically and abroad. Samsung opened a television assembly plant in Portugal in 1982 to supply the European market with 300,000 units annually. In 1984, it built a $25 million plant in New York that could manufacture one million televisions and 400,000 microwave ovens per year. Then, in 1987, it opened another $25 million facility in England with capacity for 400,000 color televisions, 300,000 VCRs, and 300,000 microwave ovens.

Between 1977 and 1987, Samsung Group’s annual revenues surged from $1.3 billion to $24 billion (or about 20 percent of South Korea’s entire gross domestic product). Much of that growth was attributable to Samsung Electronics. Byung-Chull Lee died in 1987 and was succeeded by his son, Kun-Hee Lee. Kun-Hee Lee recognized the importance of the electronics division and moved quickly to make it the centerpiece of the Samsung Group. To that end, he consolidated many of the Group’s divisions and eliminated some operations. He also introduced various initiatives designed to improve employee motivation and product quality. Kun-Hee Lee was credited with stepping up Samsung Electronics’s partnering efforts with foreign companies as part of his goal to put Samsung at the forefront of semiconductor technology.

Focus on Electronics and Research and Development: Late 1980s to Early 1990s

Sales at Samsung Group grew more than 2.5 times between 1987 and 1992. More important, Samsung drew from potential profit gains to more than double research and development investments as part of Kun-Hee Lee’s aggressive bid to make Samsung a technological leader in the electronics, semiconductor, and communications industries. Besides partnering with U.S. and Japanese electronics companies, Samsung Electronics acquired firms that possessed important technology, including Harris Microwave Semiconductors and Integrated Telecom Technologies. In 1993, Kun-Hee Lee sold off ten of Samsung Group’s subsidiaries, downsized the company, and merged other operations to concentrate on three industries: electronics, engineering, and chemicals.

Under the leadership of chief executive Kim Kwang-Ho, Samsung Electronics took the microchip world by storm when it introduced its 4-megabit DRAM chip in 1994. Sales of that chip helped to push Samsung’s sales from $10.77 billion in 1993 to $14.94 billion in 1994. Profits, moreover, spiraled from $173,000 to nearly $1.3 billion. In addition, Samsung had staged a bold grab for domestic market share in 1995 by slashing prices for consumer electronics and home appliances by as much as 16 percent and had wowed industry insiders when it unveiled an advanced thin-film-transistor liquid-crystal display (TFT-LCD) screen—used for laptop computers—at a world trade show in Japan.

Samsung Electronics’ rapid rise and technical achievements put the company in the spotlight in the semiconductor industry. Its 4-megabit chip, in fact, had made it the leading global producer of DRAM chips by early 1995. Furthermore, Samsung Electronics was increasing its investment in development still further, as evidenced by a $2.5 billion outlay to develop a 64-megabit DRAM chip by 1998. In December of 1995, development on the world’s first 1-gigabit synchronous DRAM chip was also in the works. Exports for the year increased to more than $10 billion.

Restructuring Under the Leadership of Yun Jong-Yong: Late 1990s

In just one short year, however, the market for the company’s largest revenue producer became unstable. In 1996, DRAM prices fell drastically because of oversupply in the industry. While the company’s telecommunications equipment and computer segment showed substantial growth, Samsung’s semiconductor-related sales fell by 31.8 percent. In response, the firm implemented a new management structure that focused on increasing efficiency by implementing a new business strategy. The initiative included reforming price management to better recognize growth markets, improving communication between company managers, increasing overseas management support, implementing a new marketing strategy, and focusing on growth in telecommunications, microprocessors, and other non-memory products. Yun Jong-Yong was named CEO in January 1997 to oversee the new strategy.

As part of the firm’s new focus, Samsung continued to pare down its dependency on memory chips. It developed new technologies and quickly made a name for itself in the telecommunications and cellular phone market. In May 1997, the company was named the official Olympic partner for wireless communications equipment for the 1998 Winter Games and the 2000 Sydney Games. The firm also established a telephone switching system in Ecuador, entered the Chinese wireless market by teaming up with Shanghai Great Wall Mobile Communications Co., and began selling its cellular phones to AT&T in the United States.

Key Dates:

1969:

Samsung Electronics is established.

1971:

The company exports its first black-and-white television to Panama.

1978:

Samsung Group enters the semiconductor market by forming Samsung Semiconductor and Telecommunications Co.

1983:

The company enters the personal computer market.

1984:

The firm officially adopts the name Samsung Electronics Co., Ltd.

1988:

Samsung Electronics and Samsung Semiconductor merge.

1992:

The company develops the world’s first 64M DRAM.

1994:

Sales increase after the 4-megabit DRAM chip is developed.

1995:

Exports reach $10 billion.

1997:

The company battles the Asian economic crisis.

1999:

The firm undergoes a major restructuring, and profits reach $2.4 billion.

2000:

Sales reach $26 billion and net profits climb to $4.7 billion.

A crisis hit the Asian economy in the fall of 1997, and by early 1998, the Korean won—the nation’s currency—was valued at 1,800 won to the dollar, which was less than half of its value just one year earlier. Samsung was forced to drastically change the way it had operated in the past and it began selling off segments that were not related to its core business. In addition, it cut 26 percent of its domestic workforce and 33 percent of its international workforce, and it slowed production.

While many Asian-based companies faltered, Samsung continued to forge ahead. The company established U.S.-based subsidiary Alpha Processor Inc. to oversee sales and marketing for its 64-bit Alpha processor product line. The firm also secured the top position in the TFT-LCD global market by capturing 18 percent of the market. In August of 1998, the firm developed a flat-screen television. Despite the trying economic times, Samsung recorded a greater than eight percent increase in gross sales. In January 1999, Forbes Global Business & Finance recognized the firm as the world’s premiere consumer goods and services company.

Under the leadership of Yun, Samsung had successfully diversified its product line from dependence on memory chips despite the trying economic times. By the end of 1999, the chips accounted for 20 percent of sales—in 1995 they had secured 90 percent of profits and half of total sales. The company divested more than 57 of its businesses and decreased long-term debt by $10.8 billion. In addition, all of its product groups were able to secure profits during the year. Samsung also held a strong share of the cellular phone market and was one of the six top manufacturers of wireless phones and the leading producer of computer monitors. Sales for the year increased 24 percent to $22 billion while profits reached $2.4 billion. The firm’s stock also rose dramatically, increasing by 233 percent to $227 a share.

Alliances for the New Millennium

Yun’s successful leadership of the company during its restructuring and the Asian crisis was noted throughout the industry. In January 2000, Fortune magazine named Yun Asia’s Businessman of the Year. The firm, which had adopted the phrase “Leading the Digital Convergence Revolution” for the new millennium, continued to develop new technologies and seek growth in high-margin markets. The company partnered with Yahoo! to utilize its network to sell its products on-line. It also teamed up with Microsoft to design and develop a line of cellular phones. At the same time, Samsung’s exports of cellular phones increased in Kazakhstan, Mexico, Central Asia, and Central and South America. By this time, it was operating as the fourth largest producer of such phones.

Samsung’s positive results continued in 2000 as the firm secured $26 billion in sales and $4.7 billion in net profits. Memory chips accounted for 38 percent of sales, information and telecommunications equipment secured 22 percent, digital media took 27 percent, and home appliances accounted for 8 percent of sales. The company looked to strategic partnerships, research and development, and growth, to maintain its positive financial record. In March 2001, it teamed up with Dell Computer Corporation in a $16 billion technology and research and development agreement. In addition, the company was selected by China to provide CDMA cellular phone networks in its four major cities.

Sales figures did decrease slightly in the first part of 2001, however, due to a slowdown in the personal computer market, an oversupply of LCDs, and a slowdown in the cellular market. Nevertheless, Samsung management continued to focus on remaining a leader in the electronics industry.

Principal Subsidiaries

Samsung Electronics America Inc.; Alpha Processor Inc.

Principal Competitors

LG Group; Matsushita Electric Industrial Co. Ltd.; NEC Corporation.

Further Reading

“Dell, Samsung Electronics Enter $16 Billion Alliance Agreement,” Business Wire, March 21, 2001.

Engardio, Pete, and Moon Ihlwan, “How a Korean Electronics Giant Came Out of the Crisis Stronger Than Ever,” BusinessWeek Online, December 20, 1999.

“A Giant with Wings?,” Business Korea, December 1994, pp. 21–23.

Jameson, Sam, “Samsung Isn’t Content to Be a Mere Giant,” Los Angeles Times, July 5, 1990, p. Dl.

Kraar, Louis, “The Man Who Shook Up Samsung,” Fortune, January 24, 2000, p. 28.

Nakarmi, Laxmi, with Kevin Kelly and Larry Armstrong, “Look Out, World—Samsung Is Coming,” Business Week, July 10, 1995, pp. 52–53.

Ota, Alan K, “Samsung Expands Overseas in Drive to Transform Itself,” Oregonian, July 2, 1995, p. F9.

“Samsung and Microsoft Announce Strategic Alliance,” AsiaPulse News, June 14, 2000.

“Samsung Chairman Lee Kun-Hee: A Modern Day Fortuneteller?,” Business Korea, August 1993, pp. 18–19.

“Samsung Electronics Records $26 BLN in Sales in 2000,” AsiaPulse News, January 19, 2001.

“Samsung Electronics Records US$6.54 BLN in Ql Sales,” AsiaPulse News, April 23, 2001.

“Samsung Electronics to Expand Overseas Market for Mobile Phones,” AsiaPulse News, March 23, 2000.

“Samsung Group: Lee Kun-Hee’s First Five Years,” Business Korea, December 1992, p. 37.

“Samsung Ranks World’s 4th Largest Mobile Phone Maker,” Korea Herald, February 10, 2000.

“Samsung: Steering a New Course,” Business Korea, February 1992, p. 26.

“Samsung to Raise Profit to 10% of Sales or Higher by 2005,” Korea Herald, December 21, 1999.

Selwyn, Michael, and Erwin Shrader, “Samsung Takes on the Giant,” Asian Business, October 1990, pp. 28–34.

Sohn, Jie-Ae, “Samsung Group Embracing Breathtaking Changes,” Business Korea, August 1993, pp. 15–18.

Steers, Richard M., with Yoo Keun Shin and Gerardo R. Ungson, The Chaebol, New York: Harper & Row, 1989.

Tänzer, Andrew, “Samsung of South Korea Marches to Its Own Drummer,” Forbes, May 16, 1988, pp. 84–89.

—Dave Mote
—update: Christina M. Stansell

Samsung Electronics Co., Ltd.

416, Maetan 3-Dong
Pardar-Gu Suwon 440-370
South Korea
(82) 331 27516114
Fax: (82) 331 27516111

Wholly Owned Subsidiary of Samsung Group (South Korea)
Founded: 1969
Employees: 51,926
Sales: US$14.94 billion
Stock Exchanges: Seoul
SICs: 3559 Special Industry Machinery Nee; 3561 Pumps
& Pumping Equipment; 3571 Electronic Computers; 3578
Calculating & Accounting Equipment; 3579 Office
Machines Nee; 3670 Electronic Components &
Accessories; 3585 Refrigeration & Heating Equipment;
3594 Fluid Power Pumps & Motors; 3599 Industrial
Machinery Nee

Samsung Electronics Co., Ltd., is the chief subsidiary of South Korea’s giant Samsung Group and one of the largest electronics producers in Asia. Products built by Samsung Electronics include televisions and many other kinds of home appliances, telecommunications equipment, and computers. Its most important product is semiconductors. Savvy management and heavy investment in research and development in the late 1980s and early 1990s were turning the company into a leading contender in the global electronics industry.

Samsung Electronics was created in 1969 as a division of the mammoth Korean chaebol Samsung Group. The unit was established as a means of getting Samsung into the burgeoning television and consumer electronics industry. The division’s first product was a small and simple black-and-white television that it began selling in the early 1970s. From that product, Samsung Electronics gradually developed a diverse line of consumer electronics that it first sold domestically, and later began exporting. The company also began branching out into color televisions, and later into a variety of consumer electronics and appliances. By the 1980s Samsung was manufacturing, shipping, and selling a wide range of appliances and electronic products throughout the world.

Although the rapid growth of Samsung Electronics during the 1970s and early 1980s is impressive, it did not surprise observers who were familiar with the Samsung Group, which was founded in 1938 by Byung-Chull Lee, a celebrated Korean entrepreneur. Lee started a small trading company with a $2,000 nest egg and forty employees. He called it Samsung, which means “three stars” in Korean. The company enjoyed moderate growth before the Communist invasion in 1950 forced Lee to abandon his operations in Seoul. Looting soldiers and politicians on both sides of the conflict diminished his inventories to almost nothing. With savings contributed by one of his managers, Lee started over in 1951 and within one year had grown his company’s assets twenty-fold.

Lee established a sugar refinery in 1953, a move that was criticized at the time because sugar could be easily obtained through American aid. But for Lee the act was important because it was the first manufacturing facility built in South Korea after the Korean War. From sugar, wool, and other commodity businesses, Lee moved into heavier manufacturing. The company prospered under Lee’s philosophy of making Samsung the leader in each industry he entered.

From manufacturing, Samsung moved into various service businesses during the 1960s, including insurance, broadcasting, securities, and even a department store. Lee experienced several major setbacks during the period. For example, in the late 1960s, shortly before Samsung Electronics was created, Lee was charged with an illegal sale of about $50,000 worth of goods. The charges turned out to be the fabrication of a disgruntled government official to whom Lee had refused to pay a bribe. Nevertheless, one of Lee’s sons was arrested and Lee was forced to donate a fertilizer plant to the government to win his release. Despite that and other problems, Samsung continued to flourish. Indeed, by the end of the 1960s the conglomerate was generating more than US$100 million in annual revenues.

Shortly after Lee’s son was arrested, Lee decided to break into the mass communication industry by launching a radio and television station, as well as by manufacturing televisions and electronic components through the Samsung Electronics division. The industry was dominated at the time by several U.S. and European manufacturers, and some Japanese companies were beginning to enter the industry. Nevertheless, Lee was confident that Samsung could stake its claim on the local market and eventually become a global contender. During the early 1970s the company invested heavily, borrowed and coaxed technology from foreign competitors, and drew on its business and political connections to begin carving out a niche in the consumer electronics industry. In addition to televisions, Samsung branched out into other consumer electronics products and appliances.

Samsung Electronics’s gains during the 1970s were achieved with the assistance of the national government. During the 1950s and 1960s Samsung and other Korean conglomerates struggled as the Rhee Sungman administration increasingly resorted to favoritism and corruption to maintain power. Student revolts in the 1960s finally forced Rhee into exile. The ruling party that emerged from the ensuing political fray was headed by military leader Park Chung-Hee. His regime during the 1960s and 1970s was characterized by increasing centralization of power, both political and industrial, as his government was obsessed with economic growth and development. So, while Park was widely criticized for his authoritarian style, his government is credited with laying the foundation for South Korea’s economic renaissance.

In order to rapidly develop the economy, Park identified key industries and large, profitable companies within them. The government worked with the companies, providing protection from competition and financial assistance as part of a series of five-year national economic growth plans. By concentrating power in the hands of a few giant companies (the chaebols), Park reasoned, roadblocks would be minimized and efficiencies would result. Between 1960 and 1980 South Korea’s annual exports surged from $33 million to more than $17 billion.

Samsung Electronics and the entire Samsung chaebol were beneficiaries of Rhee’s policies. Several countries, including Japan, were barred from selling consumer electronics in South Korea, eliminating significant competition for Samsung. Furthermore, although Samsung Electronics was free to invest in overseas companies, foreign investors were forbidden to buy into Samsung. As a result, Samsung was able to quickly develop a thriving television and electronics division that controlled niches of the domestic market and even had an edge in some export arenas.

During the 1970s and 1980s Samsung Group created a number of electronics-related divisions, several of which were later grouped into a single entity known as Samsung Electronics Co. Ltd. Samsung Electron Devices Co. manufactured picture tubes, display monitors, and related parts. Samsung Electro-Mechanics Co. made VHF and UHF tuners, condensers, speakers, and other gear. Samsung Corning Co. produced television glass bulbs, computer displays, and other components. Finally, Samsung Semiconductor & Telecommunications Co. represented Samsung in the high-tech microchip industry. Rapid growth in those industries, combined with savvy management, allowed the combined Samsung Electronics Co., Ltd., to become Samsung Group’s chief subsidiary by the end of the 1980s.

Samsung’s entry into the semiconductor business was pivotal for the company. Lee had determined in the mid-1970s that high-tech electronics was the growth industry of the future, and that Samsung was to be a major player. To that end, he formed Samsung Semiconductor and Telecommunications Co. in 1978. To make up for a lack of technological expertise in South Korea, the South Korean government effectively required foreign telecommunications equipment manufacturers to hand over advanced semiconductor technology in return for access to the Korean market. This proved crucial for Samsung, which obtained proprietary technology from Micron of the United States and Sharp of Japan in 1983. Utilizing its newly acquired knowledge, Samsung became the first Korean manufacturer of low-cost, relatively low-tech, 64-kilobit dynamic random access memory (DRAM) chips.

Shortly after introducing its 64K chip, Samsung teamed up with some Korean competitors in a research project that was coordinated by the government Electronics and Telecommunications Research Institute. The result was a 1-megabit DRAM (and later a 4-megabit DRAM) chip. During the mid- and late 1980s, Samsung parlayed knowledge from the venture to become a significant supplier of low-cost, commodity-like DRAM chips to computer and electronics manufacturers throughout the world. Meanwhile, its other electronics operations continued to grow, both domestically and abroad. Samsung opened a television assembly plant in Portugal in 1982 to supply the European market with 300,000 units annually. In 1984 it built a $25 million plant in New York that could manufacture one million televisions and 400,000 microwave ovens per year. Then, in 1987, it opened another $25 million facility in England with capacity for 400,000 color televisions, 300,000 VCRs, and 300,000 microwave ovens.

Between 1977 and 1987 Samsung Group’s annual revenues surged from $1.3 billion to $24 billion (or about 20 percent of South Korea’s entire gross domestic product). Much of that growth was attributable to Samsung Electronics. Byung-Chull Lee died in 1987 and was succeeded by his son, Kun-Hee Lee. Kun-Hee Lee recognized the importance of the electronics division and moved quickly to make it the centerpiece of the Samsung Group. To that end, he consolidated many of the Group’s divisions and eliminated some operations. He also introduced various initiatives designed to improve employee motivation and product quality. Kun-Hee Lee was credited with stepping up Samsung Electronics’s partnering efforts with foreign companies as part of his goal to put Samsung at the forefront of semiconductor technology.

Sales at Samsung Group grew more than 2.5 times between 1987 and 1992. More importantly, Samsung drew from potential profit gains to more than double research and development investments as part of Kun-Hee Lee’s aggressive bid to make Samsung a technological leader in the electronics, semiconductor, and communications industries. Besides partnering with U.S. and Japanese electronics companies, Samsung Electronics acquired firms that possessed important technology, including Harris Microwave Semiconductors and Integrated Telecom Technologies. In 1993 Kun-Hee Lee sold off ten of Samsung Group’s subsidiaries, downsized the company, and merged other operations to concentrate on three industries: electronics, engineering, and chemicals.

Under the leadership of chief executive Kim Kwang-Ho, Samsung Electronics took the microchip world by storm when it introduced its 4-megabit DRAM chip in 1994. Sales ofthat chip helped to push Samsung’s sales from US$10.77 billion in 1993 to US$14.94 billion in 1994. Profits, moreover, spiraled from US$173,000 to nearly US$1.3 billion. In addition, Samsung had staged a bold grab for domestic market share in 1995 by slashing prices for consumer electronics and home appliances by as much as 16 percent, and had wowed industry insiders when it unveiled an advanced thin-film-transistor display screen—used for laptop computers—at a world trade show in Japan.

Samsung Electronics’s rapid rise and technical achievements put the company in the spotlight in the semiconductor industry. Its 4-megabit chip, in fact, had made it the leading global producer of DRAM chips by early 1995. Furthermore, Samsung Electronics was increasing its investment in development still further, as evidenced by a $2.5 billion outlay to develop a 64-megabit DRAM chip by 1998. In mid-1995, Samsung Electronics was hoping to generated profits of $2.3 billion on sales of $19.3 billion—a revenue gain of nearly 30 percent over 1994. In addition to its DRAM chip pursuits, the company was working to establish a major presence in multimedia products, flat screens, and telecommunications gear.

Principal Subsidiaries

Samsung Semiconductors Inc.; Samsung Information Systems America Inc. (United States); Samtron Displays Inc.

Further Reading

“A Giant with Wings?” Business Korea, December 1994, pp. 21-23.

Jameson, Sam, “Samsung Isn’t Content to Be a Mere Giant,” Los Angeles Times, July 5, 1990, Sec. D, p. 1.

Nakarmi, Laxmi, with Kevin Kelly and Larry Armstrong, ’Look Out, World—Samsung Is Coming,” Business Week, July 10, 1995, pp.52-53.

Ota, Alan K., “Samsung Expands Overseas in Drive to Transform Itself,” Oregonian, July 2, 1995, Sec. F, p. 9.

“Samsung Chairman Lee Kun-Hee: A Modern Day Fortuneteller?”Business Korea, August 1993, pp. 18-19.

“Samsung Group: Lee Kun-Hee’s First Five Years,” Business Korea, December 1992, p. 37.

“Samsung: Steering a New Course,” Business Korea, February 1992, p. 26.

Selwyn, Michael, and Erwin Shrader, “Samsung Takes On the Giant,” Asian Business, October 1990, pp. 28-34.

Sohn, Jie-Ae, “Samsung Group Embracing Breathtaking Changes,”Business Korea, August 1993, pp. 15-18.

Steers, Richard M., with Yoo Keun Shin and Gerardo R. Ungson, The Chaebol, New York: Harper & Row, 1989.

Tänzer, Andrew, “Samsung of South Korea Marches to Its Own Drummer,” Forbes, May 16, 1988, pp. 84-89.

—Dave Mote

Samsung Electronics Co., Ltd.

founded: 1969

Contact Information:

headquarters: samsung main bldg.
250-2 ga, taepyung-ro chung-gu seoul, korea phone: 82-2-727-7114 fax: 82-2-727-7985 url: http://www.sec.samsung.co.kr

OVERVIEW

Samsung Electronics, a key subsidiary of the Sam-sung Group, is one of the largest electronics producers in the world. The Samsung Group is one of Korea's chaebol, which are huge conglomerates with operations in an extraordinary range of businesses—chemicals, cars, fashion, hotels, insurance, and others. The operations of Sam-sung Electronics can be divided into four areas: semiconductors; consumer electronics; information and computer systems; and telecommunications. Manufacturing home appliances such as refrigerators and washing machines, televisions and audio equipment, phones and fax machines, and semiconductors and computer memory chips, the company had 20 plants in 15 countries in the late 1990s. In addition, holding an 18-percent market share, Samsung is the world's second largest producer of microwave ovens.

COMPANY FINANCES

From 1995 through 1997 total sales for Samsung Electronics Co., Ltd. have decreased. In 1995 the company had a net income of $2.9 billion on sales of $24.2 billion, for 1996 net income was $130.4 million on sales of $23.6 billion, and in 1997 net income was $77.2 million on sales of $11.5 billion.

In 1998, the problems of the Korean economy were forcing the country's chaebol to reform their financial practices. Samsung Group and other Korean conglomerates announced plans to adopt consolidated financial statements, so their accounts would be more "transparent" (in other words, it would be easier to see how the group as a whole performed). Samsung Group said it would reduce its debts to 150 percent of its equity from a level of 270 percent. (Equity is capital provided by shareholders, while debt is capital provided by third parties.) Samsung Electronics also said it would attempt to list its shares on the New York Stock Exchange within five years.

HISTORY

The Samsung Group was founded in 1938 by Byung-Chull Lee. (The name Samsung means "three stars" in Korean.) The company began as a small trading firm with 40 employees and enjoyed moderate growth in the 1940s. In the early 1950s the Korean War nearly destroyed the company, but Lee managed to recover quickly. In 1953 he built a sugar refinery, which was the first significant manufacturing facility constructed in Korea after the war. Lee entered other commodity businesses, such as wool, and eventually moved into heavy manufacturing. In the 1960s, Samsung Group entered various service industries, including insurance, broadcasting, securities, and retailing.

In 1969 Samsung Electronics was established as a member of the Samsung Group. The company grew rapidly, and by the 1980s it was shipping a wide range of appliance and electronic products around the world. Samsung Electronics became an important player in the semiconductor business in the late 1980s and 1990s. In the mid-1990s Samsung Electronics was the world's leading producer of four-megabit chips.

STRATEGY

In 1995 Samsung Electronics generated almost $3 billion in profits from its semiconductor operations. At the same time, South Korea was being forced to lower the barriers that protected local companies from foreign competition. Hun-hee Lee, the chairman of the Samsung Group, devised a strategy that would use the profits from Samsung Electronics to prepare the entire chaebol for the new economic environment. First, he would create innovative new products, instead of merely trying to gain market share at any price. Second, he would make Samsung Group a true multinational that would no longer be dependent on the small South Korean market. Third, he would only operate in industries where Samsung could rank first or second in the business. As part of this overall strategy, he wanted the Samsung name to become a premium brand that would command higher prices.

A key part of Lee's plan was to shift the business focus of Samsung Electronics from semiconductors to multimedia systems. According to Electronic Business Today, Samsung Electronics was to spend $6 billion to become a top multimedia company. The money to transform the company was to come from semiconductor profits and bank borrowings.

The strategy was changed in 1997 for two reasons. First, semiconductor prices—and profits—collapsed in 1996 and remained depressed in 1997. Second, the financial difficulties of other Korean chaebol and a downturn in the Korean economy made it harder to borrow money. The $6-billion spending program was cut to less than $2 billion ($770 million for multimedia and $1.1 billion in communications). The company still intended to increase its international presence, shifting its emphasis away from South Korea operations. It also wanted to expand its multimedia operations. But the financial pressures the company faced required the implementation of a tough cost-cutting program. In short, lower profits from semiconductors and tougher borrowing requirements were making it difficult for the company to achieve its strategic objectives.

FAST FACTS: About Samsung Electronics Co., Ltd.

Ownership: Samsung Electronics is traded on the Korea Stock Exchange.

Officers: Kung-Hell Lee, Chmn.; Bon-guk Ju, Exec. VP, Corporate Technical Operations; Chang-heon Kim, Exec. VP, Customer Satisfaction Center; Haimin Lee, Exec. VP, Multimedia

Employees: 10,713

Principal Subsidiary Companies: Samsung Electronics is a subsidiary of the Samsung Group.

Chief Competitors: As one of the largest electronics companies in the world, Samsung Electronics competes with a wide range of Korean and international firms. Its major Korean competitors include: LG Group; Hyundai; and Daewoo. Among its overseas rivals are: Matsushita Electric; Sony; and Micron Technology.

In late 1997 Samsung Electronics announced that it would scale back its investment plans for 1998 by 30 percent or more. A planned expansion of the company's operations in the United Kingdom was postponed. Samsung Electronics was reviewing additions to its manufacturing operations in China. It also postponed plans to enlarge its wafer (semiconductor) fabrication plant in Austin, Texas.

INFLUENCES

Following its establishment in 1969, Samsung Electronics received significant help from the Korean government. The country's political leaders instituted economic policies that were especially helpful to Korea's chaebol, including Samsung Electronics. Important foreign competitors, including Japanese companies, were forbidden entry to such domestic markets as consumer electronics, which were considered essential for Korea's economic growth. So Samsung Electronics was able to expand its offerings of televisions, household appliances, etc. with little foreign competition. The company also used its political and business connections to strengthen its operations.

It would be wrong, however, to dismiss the success of Samsung Electronics as simply the result of protectionism and good connections. Byung-Chull Lee, founder of the Samsung Group, was confident that his company could succeed in the electronics business and become a world-class competitor. He invested heavily in these operations and was also able to coax technology out of foreign investors. Rapid growth and savvy management allowed Samsung Electronics to expand the range of its electronics offerings and the geographic markets in which it operated.

Indeed, the ability of Samsung Electronics to become a leader in the semiconductor industry is one of the great business success stories of the twentieth century. In 1975 Samsung Electronics was barely involved in the business. Twenty years later it was the world's largest maker of dynamic random access memory (DRAM) chips and the seventh-largest semiconductor manufacturer. A turning point came in 1983, when Samsung began production of very large scale integrated (VLSI) circuit. The task force that helped the company produce a VLSI 64K chip worked around the clock to make it a success. As Dr. Sang-Joon Lee, a team leader at Sam-sung Electronics, told the California Management Review, "I was so immersed in working on the 64K DRAM that I stopped smoking and drinking. I hardly slept more than three or four hours a day for six months."

Besides hard work, several other factors enabled Samsung Electronics to become a world-class semiconductor company. When large multinationals refused to license technology to Samsung Electronics, the company acquired the technology it needed from small, troubled semiconductor firms. As semiconductors became increasingly powerful and sophisticated in the 1980s and 1990s, the company continually used the knowledge obtained in developing the last generation of integrated circuit technologies to develop the next one. The firm also successfully partnered with foreign companies to expand into new markets. These strengths allowed Samsung Electronics to introduce the four-megabit DRAM in 1994, which by 1995 made it the leading producer of DRAM chips.

CURRENT TRENDS

A severe slump in the semiconductor industry in 1996 was a significant setback to Samsung Electronics. In the first five months of that year, prices on four-megabit and 16-megabit DRAMs dropped by more than 50 percent. The company's profits fell to $130 million, from $2.9 billion in 1995. The company's AST Research division, which makes desktop computers, was also performing badly. Samsung Electronics had succeeded in the DRAM business by rushing to build new plants to maintain its position of leadership. The decline in profitability put pressure on the company's expansion plans, since the cost of building a new DRAM plant was more than $1 billion.

In addition, Samsung Electronics wanted to build more sophisticated semiconductors, such as microprocessors, application-specific chips, and other non-memory chips. Maintaining its top spot in DRAMs while expanding into these so-called logic chips required tremendous amounts of cash. In 1997, lack of profits was forcing the company to rethink its future. In late 1997 the company attempted to float a 100 billion won (South Korea's currency) bond issue, but found no buyers.

CHRONOLOGY: Key Dates for Samsung Electronics Co., Ltd.

1969:

Company is established with Sanyo as a member of the Samsung Group

1972:

Sanyo and Samsung no longer work together and Samsung takes over

1975:

Begins to get into the semiconductor business

1983:

Samsung begins production of very large scale integrated circuits

1992:

Opens Samsung Gallery of Korean Art

1994:

Introduces the four-megabit DRAM

1995:

Becomes leading producer of DRAM chips

Still, it was important to remember just how much Samsung Electronics had accomplished. To give just a few examples: It held an 18-percent share of the worldwide market for microwave ovens, second among all manufacturers. It was the number-one seller of TVs in the Confederation of Independent States (CIS), selling 1.2 million units a year. It was a top manufacturer of computer monitors and VCRs. It was a leader in CDMA (code division multiple access), a key technology for wireless telecommunication. And, of course, it was a top semiconductor company. While Samsung Electronics was experiencing difficulties in the late 1990s, it remained one of the leading electronics companies in the world.

PRODUCTS

Samsung Electronics continually introduces new products in the semiconductor, consumer electronics, telecommunication, and computer areas. One interesting offering planned for the late 1990s was an identity card that would replace the ID tags on the baggage of airline passengers. The cards will have FRAMs (ferroelectric random-access memory chips) that can be read at a distance and retain data without recharging. Another intriguing product is a home system for online commerce that would be marketed by banks to consumers. It works through a box that sits on a TV set and allows the user to surf the Internet. The boxes have smart cards inside to enable payment for Internet products and services. The set-top boxes were expected to be introduced in 1998.

CORPORATE CITIZENSHIP

Samsung participates in a wide variety of charitable enterprises. Many of these activities are related to some aspect of Korean culture and society. For example, the company supports Korean language programs at major universities, such as Harvard. In 1992 it opened the Sam-sung Gallery of Korean Art at the Victoria and Albert Museum in London. The company is also trying to save the Jindo dog and other Korean breeds from extinction. In addition to these Korea-related activities, Samsung Electronics supports a variety of sporting, environmental, and educational causes around the world.

SOURCES OF INFORMATION

Bibliography

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brull, steven. "samsung's $8 billion gamble on upscale chips." business week, 2 june 1997.

cho, namju. "samsung to sell units and focus on core industries." wall street journal, 22 january 1998.

"how samsung electronics will reduce investment." electronic news, 8 december 1997.

kim, linsu. "the dynamics of samsung's technological learning in semiconductors." california management review, spring 1997.

lee, catherine keumhyun. "samsung: not just the chips are down." business week, 29 july 1996.

lee, charles s. "chips with everything." far eastern economic review, 27 june 1996.

nakarmi, laxmi. "look out, world—samsung is coming."business week, 10 july 1995.

power, carol. "device to combine internet, tv, smart cards." american banker, 16 may 1997.

remick, norman, jr. "samsung: a global vision." appliance manufacturer, february 1997.

schuman, michael. "korea's mighty conglomerates vow cutbacks for tough times." wall street journal, 28 november 1997.

young, lewis. "work slows on samsung's big picture." electronic business today, september 1997.

young-ju, sohn. "new players in the information revolution." business korea, december 1996.

For an annual report:

on the internet at: http://www.sec.samsung.co.kr/insidesec/company/annual/index.html

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. samsung's primary sics are:

3571 electronic computers

3577 computer peripheral equipment, nec

3579 office machines, nec

3674 semiconductors & related devices