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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 

Today, according to Yun, Samsung each year hires as many as 5,000 employees—90 per cent are engineers, many with bachelor's degrees or higher. Astonishing to every company that deals with Samsung are its almost bottomless engineering resources.

"Samsung has as many as 20 different engineering teams—all working in parallel—set out to solve the same problem," said Fisher, recalling the days when he was pitching his former company's UWB technology to Samsung.

A senior executive at a mobile TV technology company, who spoke on condition of anonymity, agreed. "If you work with Nokia Corp., you know exactly where your project stands. Unless someone makes a very good case that a particular handset design wouldn't work, the handset model you're in won't get cancelled." In contrast, of 70 to 90 handset projects under way in parallel at Samsung at any given time, only 25 per cent will reach the commercial market. "That's a luxury Nokia wouldn't have," the executive said.

Several industry sources attributed Samsung's success to the cost of engineering.

In South Korea, top graduates of the nation's best engineering schools can take an exam and apply for a job at major technology companies, including Samsung. Once accepted, they work for three years in exchange for waiving mandatory two-year military service. If they work at Samsung, their salaries are subsidised by the Korean government.

Yun confirmed the practice but downplayed its significance. The number of students who qualify for this programme is limited to 100 annually, he said. Considering the huge number of engineers the company hires every year, that's a drop in the bucket.

Sourcing strategies
Samsung also practises multiple-sourcing strategies.

"I've seen Samsung purchase GSM/GPRS base band chips from several different vendors, like Agere, SkyWorks and Broadcom," said Will Strauss, CEO of Forward Concepts. "I couldn't understand how Samsung could afford to have three or more parallel design efforts to reach the same end product." Similarly in 3G, Samsung is using "Broadcom, Qualcomm and Infineon base band chips in various 3G handsets," Strauss said. "Again, three parallel design efforts to reach the same end product."

Richard Doherty, principal of Envisioneering, offered another view. "Managers at Samsung are paranoid about losing a product to a chip source delay or blockage," he said. That may explain why Samsung insists on staying with the vertically integrated manufacturing model.

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