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How Samsung found its way to the top

Posted: 18 Nov 2008     Print Version  Bookmark and Share

Keywords:Japan companies  memory chips  consumer electronics  multiple-sourcing strategies 

How Samsung Electronics Co. Ltd made the transition from a consumer electronics dwarf to a global brand is a well-told story. Over the past decade, Samsung has soared to the status of media darling and envy of the industry as it has transformed itself into the world-leading supplier of everything from CE to PCs to wireless handsets to flat-panel displays (FPDs) to memory and semiconductors.

Less well-known, however, is the story of how Samsung, based in Seoul, South Korea, achieved its current supremacy by battling Japan companies on their own turf—CE and memory chips. Samsung co-opted the Japan playbook, which calls for a commitment to win at any cost, and eventually beat Japan at its own game.

Learning from Japan
After languishing for years on the sidelines, watching Japan's technology giants score big, Samsung adopted a new strategy: "If you can't beat 'em, join 'em—then beat 'em."

Jong Yong Yun, former vice chairman and CEO at Samsung Electronics and now the company's permanent advisor, personifies that strategy. Yun, protege of Samsung Group's legendary former chairman Kun Hee Lee, spent five years in Japan. He was first sent to Japan in 1978 to head the company's branch office there. In 1992, Yun returned to Japan as president and CEO of Samsung Tokyo headquarters.

Yun, who deftly switched among Japanese, English and Korean during an interview with EE Times, spoke nostalgically of his days in Tokyo. Back then, Japan executives and consumers never called Samsung by its preferred pronunciation, "Samsung." Instead, they called it "Sansei," translating the Korean word Samsung—Three Stars—into Japanese.

The 1970s and 1980s were heady days for the Japan CE industry. JVC and Sony were engaged in a fierce VCR format war; Sony created a brand new product category called Walkman; Pioneer, RCA and JVC fought tooth and nail in a pre-DVD, analogue video-disc format battle; Sony and Philips formed an alliance to push CD.

By contrast, Samsung's consumer product lines consisted of TVs, radios, radio cassette recorders and appliances. For Samsung, VCRs represented a particularly high barrier to entry, Yun said. By the early 1980s, leading Japan CE companies were working together to establish various cross-licensing agreements. Samsung then, with less intellectual property to trade, was never one of them. To build a VCR, "We had to pay royalties not only to JVC but also to Sony, in addition to RCA, since each VCR integrated an RCA-patented TV tuner," recalled Yun.

The soft-spoken Yun described the Samsung of those days as a "kohatsu"—a "latecomer," in Japanese—to the electronics industry. During that era, "Japanese manufacturers never let Samsung be part of their group or alliance," Yun acknowledged.

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