(Changes attribution of Samsung statement to Samsung Group in
By Miyoung Kim
SEOUL Jan 27 Only a handful of reporters were
at Samsung's booth at the Consumer Electronics Show in Las Vegas
earlier this month when Jay Y. Lee dropped by.
They had been tipped that the sheltered heir to the Samsung
business empire was about to make his first public appearance
since his father named him one of the new presidents of the
conglomerate's flagship, Samsung Electronics , in
Most of the Korean media contingent eagerly awaiting his
appearance at the show had been diverted to another news
conference. They didn't miss much. Jay Lee's remarks were brief
and bland. He mainly wanted to make it clear his ambition was to
be a chip off the old (and equally aloof) block.
"I'm trying very hard to learn his challenging attitude and
personalise it," said Jay Lee, 42, the only son of Samsung Group
Chairman Lee Kun-hee. "The chairman has this DNA that just won't
let him be seen being beaten," said the boyish-looking Lee,
wearing rimless spectacles and a business suit with an open
His father's formula has helped turn Samsung into a top
global brand over the past decade or so, boasting a market value
of $143 billion, bigger than Intel and Hewlett Packard
and equal to the combined value of Sony Corp ,
Nokia , Toshiba and Panasonic Corp .
Yet that's still less than half of Apple's $320 billion
Samsung, which has had better net earnings than any other
global tech firm except Microsoft and IBM over
the past decade, is set to report its lowest profit in six
quarters when it issues December quarter corporate results on
Friday, although 2010 will be another record profit year.
The outlook for this year and beyond is unclear as global
technology firms grapple with weak demand and falling prices for
memory chips and flat screens, and new players enter the market
for smartphones and tablets.
Successful business leaders are very good storytellers, it
is often said, and the industry is looking for a new narrative
from Samsung, as it passes the generational torch while trying
to evolve into a more innovative and content-driven company.
Jay Lee, who graduated from the Seoul National University
with a degree in East Asian history, has an MBA from Japan's
Keio University and studied for a doctorate at Harvard, is
deferring to his elders for now. But eventually Samsung will be
his story to tell.
He is taking over at a pivotal point for Samsung
Electronics, the world's biggest maker of flat screens and
memory chips, the second-biggest mobile phone maker behind Nokia
and a core holding in any emerging market portfolio.
His company faces the challenge of moving beyond being a
hardware company, clever at copying ideas, to becoming more
creative, better adept at software, at a time when consumer
gadgets are getting smarter all the time. In short, it faces a
In a statement to Reuters, Samsung Group said its strong
performance during the aftermath of the global financial crisis
has proved the value of its management model.
"Samsung's management is based on a complementary
relationship between the founding family and professional
managers. On the one hand, Chairman Lee Kun-hee provides
long-term business visions and the basis for sustainability. On
the other, professional managers bring to bear their day-to-day
management skills without being unduly pressured by short-term
and quarterly results."
Samsung had the biggest booth, the thinnest products, and by
some accounts, the best buzz at the annual Las Vegas show. But
the stars of this Las Vegas extravaganza, which drew a record
140,000 technology enthusiasts, were the tablet computers. More
than 30 tablets were announced over the two-day show, and while
Samsung's Galaxy Tab was one of the precious few actually in
stores, all the new players pointed to Apple's iPad as the one
To catch up, Samsung has vowed to inject some Silicon Valley
culture into the ranks of its salarymen.
"Does Samsung want to be Apple? Probably not," says Lee
Seung-woo, an analyst at Shinyoung Securities in Seoul. "I think
they'll continue to pursue their strategy of being the fast
executioner. They'll be the first you'll see in the market with
a copycat product when there's a new opportunity, like a tablet
market. Being an innovator and creating a new market requires
lots of risk and I don't think Samsung is ready yet to take that
level of risk."
And yet big business is fraught with risk in South Korea,
where the public seems to have a love/hate relationship with the
family conglomerates or chaebol that have long dominated the
Lee Kun-hee's visit to Samsung's new headquarters in Seoul
on Dec. 1 was his first since he reinstated himself as chairman
last March, and two weeks after elevating his son to a
He had stepped down after receiving a three-year suspended
jail sentence for tax evasion and breach of trust in 2008. South
Korean President Lee Myung-bak later pardoned him, saying he was
too important to the nation to be behind bars.
What's good for Samsung is good for South Korea, Kun-hee
might well argue. His conglomerate after all accounts for around
20 percent of the country's exports and a big chunk of its GDP.
Yet he is constantly exhorting his employees to act as if the
company was on the verge of extinction, warning them Samsung
products could all be obsolete in 10 years if they don't keep up
with the times. "Change everything but your wife and children,"
he is fond of saying.
The elder Lee had come to Samsung Group's new headquarters
-- three office towers housing 10,000 employees in Seoul -- to
bestow year-end promotions and awards, including to Galaxy S
smartphone designer, Lee Sung-sik.
Sung-sik, in fact, epitomized the qualities Samsung has long
been known for -- a "fast executioner" who gets something
quickly to market. Samsung sold 10 million Galaxy S units in
just six months after a June launch, tripling its share of the
smartphone market to almost 10 percent, though still trailing
Nokia, Apple and RIM's Blackberry.
But Sung-sik's story also illustrates Samsung's essential
challenge -- it only developed the Galaxy after Apple took the
market by storm with its latest iPhone early last year.
"Thanks to iPhone, we've been to hell," said a senior
executive at Samsung who did not want to be identified because
he is not authorised to speak to the media. "We had more than 1
trillion won of (telecoms) profit in the first quarter (of
2010), but saw it halved the following quarter simply because we
didn't have attractive smartphone lineups. We couldn't give
anything to our distributors when they were asking for models to
Samsung's TV business has unveiled a new business
slogan,"Samsung creates and others follow" but it's the other
way around for other products. The Galaxy S is an imitation
iPhone that runs on Google's Android operating system. And the
Galaxy Tab is basically just a bigger version of its smartphone.
Samsung has yet to come up with the kind of original,
iconic, market-leading products that powered rival brands such
as Apple's i-series or Sony's Walkman. Nor has it taken the kind
of initiatives in software that Google and Apple did to
"If they want to pursue an innovation strategy then they can
master the connected home as they already are in almost every
household," said Francisco Jeronimo of market intelligence firm
IDC. "They need to create services that connect and explore the
different products. That's what Apple is trying to do with a
service like Apple TV."
Samsung Group plans to spend 12.1 trillion won ($10.7
billion) this year on research and development, up from 10.6
trillion won last year and 8.8 trillion the year before.
The new investment is targeted at ac