416, Maetan 3-Dong
Pardar-Gu Suwon 440--370
Telephone: (82) 331 27516114
Fax: (82) 331 27516111
Wholly Owned Subsidiary of Samsung Group (South Korea)
Sales: US$14.94 billion
Stock Exchanges: Seoul
SICs: 3559 Special Industry Machinery Nec; 3561 Pumps & Pumping Equipment; 3571 Electronic Computers; 3578 Calculating & Accounting Equipment; 3579 Office Machines Nec; 3670 Electronic Components & Accessories; 3585 Refrigeration & Heating Equipment; 3594 Fluid Power Pumps & Motors; 3599 Industrial Machinery Nec
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 of that 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.
"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.
Tanzer, Andrew, "Samsung of South Korea Marches to Its Own Drummer," Forbes, May 16, 1988, pp. 84--89.
Source: International Directory of Company Histories, Vol. 14. St. James Press, 1996.