South Korea's most global brand shines in troubled times
Mon Feb 18, 8:52 PM ET
By SANG-HUN CHOE, Associated Press Writer
SEOUL, South Korea - Half of all South Korean consumers sit in front of Samsung television sets, keep food in Samsung refrigerators, chatter on Samsung cellphones and surf the Internet on Samsung computers, eyes glued to monitors bearing the same trademark.
And they probably bought it all with Samsung credit cards.
Samsung, the world's biggest seller of computer memory chips, flat panel screens, monitors, VCRs and electric ranges, is the only remaining South Korean conglomerate, or chaebol, to stand tall after the Asian currency crisis of the late 1990s.
Daewoo, once South Korea's No. 3 conglomerate, is in pieces. Giant Hyundai has splintered under heavy debt, its motor and shipbuilding units alone retaining their luster.
Now, Samsung 's innovative handheld devices and home appliances have boosted its name recognition to levels that rival Nokia, Sony, and Philips.
No longer is the company considered merely a cheap alternative to precision Japanese goods.
"Samsung is one of the few Asian companies outside Japan that has succeeded in establishing itself as a global brand," said Tim Condon, a Hong Kong-based economist for securities firm ING Barings.
With domestic rivals foundering, Samsung is now biggest and most lucrative family run business group in this nation that President George W. Bush is visiting this week.
Honeymooners dream of spending their first night together at ritzy Samsung hotels and thereafter, in modern Samsung apartments. One-fifth of South Korea's 47 million people visited Samsung's amusement park last year.
Samsung-Renault's SM-5 cars, built with Nissan technology, are the most sought-after model. Drivers take out Samsung insurance policies.
"Samsung will soon start rivaling Sony in brand power as a consumer electronics maker, if it hasn't already," said Jin Young-hoon, an industry analyst at Seoul's Daishin Securities Co.
As part of its push into more innovative, higher-quality goods, Samsung recently ditched mass-market discounters such as Wal-Mart as a major retailer of its products.
In China's exploding cell phone market, Samsung now shuns the low-end market. Its latest model sells for dlrs 615, more then twice the average monthly pay of a Chinese worker.
In the U.S. market, its DVD players, cell phones, flat panel screens and digital TV sets are as expensive and well-received as Japanese products.
Last year, Samsung's 35 subsidiaries produced a combined dlrs 94.6 billion in sales, an 8.9 percent drop from 2000. Total profits dropped 20 percent to dlrs 5.1 billion. Still, it was an impressive performance in a year when painful losses humbled many global giants.
Inside South Korea, Samsung strives for a distinct corporate culture. Unlike more flamboyant counterparts at Hyundai and Daewoo, Samsung chairman Lee Kun-hee rarely appears in public. His workers are dapper and polite.
Thousands of police officers, railway conductors and bank clerks attend Samsung's "Service Academy" to learn to bow and answer customer questions. Samsung's early work shift allows workers to avoid rush-hour traffic jams.
Critics say Samsung would be even stronger — and more attractive to investors — if it opened its business practices to public scrutiny. Typical of South Korean conglomerates, or chaebol, analysts say Samsung has engaged in its share of questionable dealings and used cozy ties with politicians to its benefit.
"Samsung Electronics is the crown jewel of Korea Inc.," said Jang Hasung, an economist at Seoul's Korea University. "But investors question its corporate governance. That's why its shares are so seriously devalued, compared to its U.S. and even Taiwanese competitors, which are not doing nearly as well."
Samsung Electronics, the conglomerate's most globalized outfit, saw net profits halve to dlrs 2.3 billion last year on revenues of dlrs 24.8 billion.
Yet with dlrs 538 million in profits from semiconductor sales, Samsung Electronics was the only major computer-memory chip maker to earn a profit last year.
Plunging chip prices pushed competitors like Micron Technology, Hynix and Infineon into the red.
Last year, the company lowered its dependence on lower-end computer memory, which has plummeted in price, focusing more on Rambus and DDR memory chips for newer, faster computers.
At the same time, Samsung Electronics' telecommunications division overtook the semiconductor arm in revenue, selling 29 million handsets worth dlrs 5.4 billion.
"It was with cell phones that Samsung could finally cast off its consumer image as a mass producer of cheap goods," said Michael Min of Seoul's Korea Investment Trust Management & Securities.
Samsung now is a distant fourth in the cellular phone market dominated by Nokia and Motorola.
But its share is creeping up. The company makes some of the world's slimmest phones. Some feature video-capable color screens, others double as MP3 players.
In the U.S. market, Samsung has provided Sprint PCS, the fourth-largest U.S. wireless carrier, with 8 million phones since 1997. In January, it signed a new dlrs 3 billion deal with Sprint to sell even more phones.
The company is branching out into home networking, promising to unveil new products this fall — in alliance with Microsoft — that will merge computers, televisions and other digital home media.
It also began producing 'Nexio' handheld computers that double as mobile phones.
James Chung, a spokesman for Samsung Electronics, puts it simply:
"We want to lead the way in innovation."
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