Samsung Electronics Co., Ltd

Samsung Electronics Co., Ltd.

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Company Profile

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Reference Code: 1453

Publication Date: Apr 2005

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SAMSUNG ELECTRONICS CO., LTD.TABLE OF CONTENTS

TABLE OF CONTENTS

Company Overview ....................................................... 4

Key Facts........................................................................ 4

SWOT Analysis .............................................................. 5



SAMSUNG ELECTRONICS CO., LTD.Company Overview

COMPANY OVERVIEW

Samsung Electronics (Samsung) provides electronic products including TVs,computers and related products, semiconductors, and fiber optic products. Thecompany is part of the Samsung Group and operates in more than 30 countries. It isheadquartered in Seoul, South Korea and employs about 88,000 people.

The company recorded revenues of KRW57.6 trillion (approximately $56.9 billion)during the fiscal year ended December 2004, an increase of 32.1% over 2003. Theoperating profit of the company during fiscal 2004 was KRW12 trillion (approximately$11.9 billion) compared to an operating profit of KRW7.2 trillion (approximately $7.1billion) in fiscal 2003. The net profit was KRW10.8 trillion (approximately $10.7 billion)during fiscal year 2004 compared to KRW6 trillion (approximately $5.9 billion) in 2003.

KEY FACTS

Head Office Samsung Electronics Co., Ltd.250, Taepyung-ro 2-gaJung-guSeoul 100 742South Korea

Phone +82 2 727 7114

Fax +82 2 727 7985

Web Address http://www.samsung.com

Revenues/turnover(US$ Mn)

56900

Financial Year End December

Employees 88000

SIC Codes SIC 3631 Household Cooking EquipmentSIC 3632 Household Refrigerators and Home and Farm FreezersSIC 3633 Household Laundry EquipmentSIC 3634 Electric Housewares and FansSIC 3635 Household Vacuum CleanersSIC 3639 Household Appliances, NEC

NAICS Codes 335221, 335222, 335224, 333414, 335211, 339999, 335212, 333298, 335212, 335228

Seoul Ticker 005930



SAMSUNG ELECTRONICS CO., LTD.SWOT Analysis

SWOT ANALYSIS

Samsung develops and sells electronic products including TVs, computers andrelated products, semiconductors, and fiber optic products. The company is part of theSamsung Group. The company has a strong brand in the market and is present inmore than 30 countries in the world. However, the consolidation in the PC businessmay put pressure on the price of computer related products like printers and monitors.

Strengths

Market leading products

Samsung has a broad range of market leading products across the globe. It is themarket leader for TVs, Monitors, VCRs, LCD, Microwaves and CDMA Mobile phones.The company became the second largest cell phone seller worldwide in December2004, beating Motorola. Samsung holds the number one position in color monitor andDRAM’s market. Holding a market leading position provides Samsung withrecognition which would aid the company in attracting customers.

Strong brand and global presence

Samsung enjoys high brand awareness and a reputation for innovation and quality. Itsstrong brand creates barriers to entry in the markets it operates in and helpsguarantee future sales. Its global presence and operations in more than 30 countriesprovides the company the benefits of diversification. .

Strategic alliances

Strengths WeaknessesMarket leading products

Strong brand and global presence

Strategic alliances

Product failure

Inconsistent sales growth

High dependence on the semiconductor business

Opportunities ThreatsBooming US semiconductor market

Chinese market

3G market

Shift from PC’s to MP3’s

Consolidation in the PC business

Slowing DRAM’s demand




Samsung has been involved in many successful strategic alliances. The company hasformed strategic partnerships with a number of well known companies includingMaytag (for washing machines); IBM (for technology development); Sony (anexclusive patent cross-licensing agreement to share knowledge on developingtechnologies); Time Warner Cable (for building two-way interactive-compliant TV setsand cable infrastructure); and IMEC (to develop key technologies for future portablecommunication products). Samsung has also established a Samsung-Toshiba jointventure for optical storage devices. Working in close relationships with companiessuch as Microsoft, Sony, and AOL provides Samsung with valuable technicalknowledge.

Weaknesses

Product failure

The company’s sliding phones have not been well accepted in Europe. Samsung’ssliding phones saw disappointing sales in Europe, especially the newly releasedE800. Component makers have noted that orders for components of sliding phoneshave been short of forecast by about 30%. Samsung is pushing the sale of slidingphone as another form factor to differentiate the company’s brand. The company maynot be in a position to recover it expenses including the research and developmentexpenses that it incurred for manufacturing the phones.

Inconsistent sales growth

The company’s sales growth has been uneven since 2000. Samsung’s sales grew by31.3% in 2000, (5.6%) in 2001, 25.1% in 2002, 7.6% in 2003 and by 32.2% in 2004.Growth has not followed any consistent path, and the historical sales growth trend isindicative of its inability to align business and operating strategy with marketconditions.

High dependence on the semiconductor business

During fiscal 2004, the company generated an operating profit of KRW12 trillion(approximately $11.7 billion). The semiconductor division contributed 62.2% of thetotal operating profit (KRW7.5 trillion or $7.3 billion) during 2004. Thetelecommunication networks division (operating profit of KRW2.8 trillion or $2.7 billion)and the LCD division (KRW1.9 trillion or $1.9 billion) accounted for 39.2% of the totaloperating profit. Other divisions including digital media and digital appliance incurredoperating. The company is highly dependent on the semiconductor business togenerate cash flows. The business contributes disproportionately to operating profit




as it accounts for about 31.6% of total revenues. With an increasing Won and risingprice commoditization in the semiconductor business, Samsung would find itchallenging to maintain existing profitability levels in this segment.

Opportunities

Booming US semiconductor market

In 2004, the US semiconductor industry posted higher growth rates, compared to2003, driven primarily by wireless communication chips. The industry size wasestimated at $69.3 billion in 2003, with annual growth in demand forecasted at 14.1%till 2008. Demand from the processor-based electronic goods industry is expected topropel most of the growth in the future. Samsung’s major presence in the US and thebooming US semiconductor market may fuel demand for the company’ssemiconductor products.

Chinese market

Leading technology companies are shifting their production base to Asia, particularlyChina and Southeast Asia, to take advantage of lower production costs. Chinarepresents a highly lucrative and attractive market for Samsung. It can provide goodgrowth prospects in its emerging and growing markets. The Chinese and Asia-Pacificmarket for mobile phone handsets is estimated to be the only major world market todemonstrate double-digit growth in 2005. In February 2004 Samsung increased itspresence in China establishing a SystemLSI research facility in Hangzhou. Also InApril 2004 the company revealed it had entered into a joint venture agreement withEastern Communications in east China. The growing Chinese market offersnumerous opportunities for the company as a market and as a low cost productionbase.

3G market

During February 2005, Samsung launched a new range of 3G handsets, including theSGH-Z500, which it claims is the world’s smallest 3G handset. The company unveiledthe SGH-Z300 and SGH-Z130, as well as the SGH-Z500 handsets. It is expected thatin 2005, 3G technology will become increasingly popular and that its new range ofhandsets will meet the demands of a more intuitive consumer. These new 3Gproducts may help the company in winning market share of the booming 3G market.

Threats

Shift from PC’s to MP3’s




Samsung is targeting digital consumer products and semiconductors. To do so, thecompany requires better brand recognition as well as development capability todifferentiate itself from the competition in increasing memory density. This isespecially true as demand is gradually shifting from performance-driven products,such as PCs, to entertainment-driven products, such as MP3. The company’srelatively lower exposure to this market as compared to peers such as Matsushitawould weaken its position in the market.

Consolidation in the PC business

The PC business, the largest customer segment of the computer storage devicesindustry, is consolidating. Mergers and acquisitions in the PC business (including theHP-Compaq merger and the IBM-Lenovo deal) have resulted in the formation of largeclients, with higher bargaining power. This is expected to further reduce margins ofcomputer products including monitors, LCD panels and printers, thus affecting thecompany’s margins.

Slowing demand for DRAM

The demand of DRAM (dynamic random access memory) is related to the demand forPC’s. In 2005, it is expected that annual PC unit shipments will grow by 8%, which islower than the 11% growth in both 2003 and 2004. Due to a slowdown in the PCmarket, the demand for Samsung’s products including DRAM would also slow.Furthermore, as the next replacement cycle is not expected before 2007, the growthfor DRAM would be slow in the short term.



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Samsung Electronics Co., Ltd