Samsung Electronics Co., Ltd.

Company Profile
Publication Date: 6 Oct 2010

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TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 SWOT Analysis.....................................................................................................5

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Samsung Electronics Co., Ltd.

Company Overview

COMPANY OVERVIEW
Samsung Electronics Company (Samsung Electronics or the company), a part of the Samsung group, is one of the leading consumer electronics brands in the world.The company primarily operates in Asia, Europe and Americas. It is headquartered in Seoul, South Korea and employs about 157,701 people. The company recorded revenues of KRW138,993,671 million ($109,805 million) during the financial year ended December 2009 (FY2009), an increase of 14.6% over 2008. The operating profit of the company was KRW11,577,651 million ($9,146.3 million) in FY2009, an increase of 91.9% over 2008. The net profit was KRW9,649,487 million ($7,623.1 million) in FY2009, an increase of 74.6% over 2008.

KEY FACTS
Head Office Samsung Electronics Co., Ltd. Samsung Electronics Building 1320-10 Seocho 2-dong Seocho-gu Seoul 137 857 KOR 82 2 2255 0114

Phone Fax Web Address

http://www.samsungelectronics.com

Revenue / turnover 138,993,671.0 (KRW Mn) Financial Year End Employees Korea Ticker December 157,701 005930

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SWOT Analysis

SWOT ANALYSIS
Samsung Electronics, a part of the Samsung group, is one of the leading consumer electronics brands in the world. The company is a global leader in semiconductor, telecommunication, digital media and digital convergence technologies. Samsung Electronics enjoys a strong market position in most of its product segments. The company is the global leader in monitors and televisions. It is the world's largest producer of DRAM, SRAM, and flash memory. Strong market position strengthens the company's brand image and gives it an edge over its competitors. However, increasing competition may affect the market share of Samsung Electronics. Strengths Robust market position bolstered by the strong brand equity Constant focus on research and development Diversified business portfolio across multiple product categories Opportunities Strategic alliances which enhances the companys product offerings Initiatives to tap the Indian mobile phone market Launch of Galaxy Tab in the emerging tablet PC market Weaknesses Instances of product recalls reflect poorly on brand image of the company Weak presence in two of the key segments of the cell phone market in the developing countries

Threats Highly competitive business environment Patent litigation lawsuit Weakening demand scenario in the liquid crystal display (LCD) flat screens market

Strengths

Robust market position bolstered by the strong brand equity Samsung Electronics is one of the leading players in semiconductor, telecommunication, digital media and digital convergence technologies. The company enjoys a strong market position in most of its product segments. It is the global leader in monitors and televisions, and is the world's largest producer of DRAM, SRAM, and flash memory. The company is also a leading player in the handsets and smartphones market. According to DisplaySearch, the company is the top player in the global television market with an almost 25.0% market share in flat-panel televisions category. Besides, it holds 19.0% market share in the cell phones market, second only to Nokias 38.0%.

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SWOT Analysis

In addition to the robust market position, the company has built strong brand equity over the years. According to Interbrands 2010 Top 100 Brands, Samsung Electronics was ranked in the 19th place overall with its brand value increasing 11% year-on-year to $19.5 billion. Among the information technology companies, it occupies the fifth position. The robust market position coupled with strong brand equity imparts significant competitive edge to the company in terms of scale and recognition, which in turn augers well for the companys expansion plans. Constant focus on research and development Samsung Electronic has been regularly strengthening its research and developments (R&D) function. The company devotes significant resources and attention to develop consumer-preferred products with innovative and distinctive features. It is evident from the fact that, the company invested approximately 5.0% of its revenue in R&D activities over 2008 and 2009. The company plans to enhance the spending to nearly KRW9,300 billion ($7 billion) in 2010, up from KRW7,600 billion ($6 billion) in 2009. The company has deployed nearly 42,000 people in the research activities across its 42 research facilities around the world. Further, the company owns several research centers across the world. Its R&D network spans six centers in Korea and 18 more in nine other countries, including the US, the UK, Russia, Israel, India, Japan and China. These R&D activities helped the company to launch various new products in the recent past. For instance, in FY2009, the company introduced the ML-2855ND mono laser printer and the N110 and N120, the newest additions to their mini notebook lineup. Large-scale capex and R&D spending allows the company to cater to changing preferences with ease, which in turn enhances its competitive advantage and increases its profitability. Diversified business portfolio across multiple product categories Samsung Electronics is one of the leading telecommunications equipment and consumer electronics companies in the world with revenues of $109,805 million in FY2009. The company is engaged in the manufacture of semiconductors, LCD panels and other products. The company mainly operates in two businesses; digital media and communications, and device solutions.. The digital media and communications division primarily offers a range of digital media and telecommunication products including digital TVs; monitors; audio-visual devices; printers; consumer home appliances like refrigerators, air conditioners, washers, ovens, vacuum cleaners; mobile phones; network systems; MP3 players; digital set top boxes; computers; and other telecommunication systems. The device solutions division operates in the storage, memory, integrated circuits, liquid-crystal display (LCD) technologies, notebook PCs and desktop monitor products, among others. A broad and diversified business portfolio of products services not only enhances market share of the company across various markets, but it also gives a diverse revenue stream to the company. This in turn limits the company's exposure to the risks associated with a particular segment.

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SWOT Analysis

Weaknesses

Instances of product recalls reflect poorly on brand image of the company Samsung Electronics was involved in several instances of product recalls in recent past. During May 2009, for instance, the company has issued a voluntary recall of its 160,000 Jitterbug phones. The company recalled these phones after regulators determined that they could fail to connect to Emergency 911 in a no-service area. The US Consumer Product Safety Commission stated that the recall involves Jitterbug cell phones model numbers SPH-a110 and SPH-a120 with standard key pads and version BB14 software. Later in November 2009, the company recalled its 1000 watt over-the-range microwave ovens distributed in the US market. During the same month, the company recalled Jiperu refrigerators in the South Korean and Chinese market after incidents of explosion occurred in the model. Significant product recalls like these negatively affects the consumer confidence in the company's products and tarnish the brand image of the company. Weak presence in two of the key segments of the cell phone market in the developing countries Although Samsung Electronics is the leading player in the global cell phone market, the company lags behind in two key segments: high-end smartphones and ultracheap models for developing countries. Samsung holds merely 3.5% of the global market share in the smartphones category which grew at approximately 31.0% in the year 2009; while in the lower-end category Samsung has a very limited presence in comparison to the market leader Nokia. In India, one of the fastest growing markets for lower-end cell phones, Samsungs market share is less than 10.0% as compared to the Nokia's 58.0%. Besides, the company also has limited launches in the lower-end category. The limited exposure in two of the key market segment hampers the companys further growth opportunities; which is then leveraged by its competitors to enhance their customer base.

Opportunities

Strategic alliances which enhances the companys product offerings Samsung Electronics has entered into strategic agreements with some of the well known companies of the world in the recent past. For instance, during June 2009, the company signed a patent cross license agreement with Toshiba for semiconductor technologies. Toshiba is the leading player in the NAND flash memory market with thousands of patens under its name. Toshiba is also in the forefront of innovations in this product category with several new technologies under its credit. By signing the cross licensing patent agreement with Toshiba, Samsung Electronics continues to have access to important NAND flash process technology as well as multi-level cell flash memory design IP relevant for future NAND flash generations. Earlier in 2008, the company entered into partnership

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SWOT Analysis

agreement with Netflix, the world's largest online movie rental service. As per the agreement, the companies would offer consumers the ability to instantly stream movies and TV episodes from the Netflix Web site directly to their living rooms through Samsung's BD-P2500 and BD-P2550 Blu-ray disc players. The agreement enabled the Samsung Electronics to introduce advanced features in its products, resulting in improved customer offerings. The company has been able to form strategic alliances with some globally renowned players who are strong in there respective domains. Alliances such as these will not only help the company tap newer avenues of business but also help the company adapt newer landscapes for revenue growth. Initiatives to tap the Indian mobile phone market The Indian mobile phone market has been growing significantly in the last few years. There has been a significant rise in demand for touch screen and 3G mobile phones in India. According to the industry reports, the market for touch screen mobiles reached 0.8 million in 2008 and is likely to grow to 1.2 million by the end of 2009. The company has a strong presence in the Indian market. In order to further strengthen its market position, the company has taken several initiatives recently. For instance, the company has planned to invest $5 million at its manufacturing facility in India, in FY2009, which is over and above the $24 million that the company has already invested at the Noida facility, India. In addition, it has launched 14 mobiles so far this year, of which five are touch screen and 3G phones, and expects to release nearly two dozen models in 2009. Initiatives like this would strengthen the competitive position of the company in the growing Indian mobile phone market and hence, help in the top line growth of the company. Launch of Galaxy Tab in the emerging tablet PC market The company introduced its first tablet computer Galaxy Tab during 2010. The device, which uses Google's Android software, offers access to books, films and music and directly competes with Apples i-Pad. The Galaxy Tab, which is expected to be in the lower price range as compared to the i-Pad, could emerge as an operator-friendly and cheaper alternative to Apple's i-Pad. The company has forged partnerships with the top four US mobile carriers and with media companies which are providing programming for its Media Hub service. The companys pricing strategy coupled with strong distribution network and brand equity imparts significant competitive edge to target the lucrative tablet PC market globally.

Threats

Highly competitive business environment

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SWOT Analysis

The company's business segments operate in a highly competitive business environment and face intense competition from a growing number of competitors, many of whom have strong consumer brand equity. Several of these competitors, such as LG Electronics, Whirlpool, Motorola, Nokia, and Sony, are large, well-established companies that rank among the Global Fortune 150. Competition in the global market is based on a number of factors including performance, innovation, product features, quality, cost, selling price, distribution, and financial incentives, such as cooperative advertising, marketing funds, sales person incentives, volume rebates, and terms. In the past, Samsung Electronics' competitors, especially global competitors with low-cost sources of supply, have aggressively priced their products and introduced new products in order to increase market share. Hence, increasing competition may lead to price wars, which in turn could negatively affect the market share of Samsung Electronics. Patent litigation lawsuit Samsung Electronics was involved in the patent litigation lawsuit recently. For instance, Spansion, a leading flash memory solutions provider, filed patent infringement complaints against Samsung Electronics with the International Trade Commission and in the US District Court in Delaware, in 2008. As part of the complaints, Spansion was seeking the exclusion from the US market of mp3 players, cell phones, digital cameras and other consumer electronic devices containing Samsung's flash memory components. The complaint in the US District Court in Delaware also sought an injunction and treble damages based on Samsung's sale of flash memory. Although both the parties have settled down the lawsuit in April, 2009, Samsung Electronics had to pay Spansion $70 million as per the settlement. Occurrence of similar incidents in future could damage the company's reputation as well as adversely impact its financial health. Weakening demand scenario in the liquid crystal display (LCD) flat screens market Samsung, one of the leading players in the LCD market, is facing weakening demand and industry scenario in this product category. Moderate economic environment coupled with weak demand has dragged down the prices of LCDs in majority of the markets. The overall demand for the LCDs stood at 154 million units in the first quarter of 2010 and 157 million units in the second quarter of 2010. The company projects this demand to remain flat at 160 million units in the third and fourth quarter of 2010. The weak demand has resulted in lower prices which in turn has affected the companys revenues. China's tightening monetary policy has further exacerbated the problems for the LCD market due to its negative implication on the sales of personal computers and slim TVs which use LCDs. Since the LCD product segment contributes nearly 16.0% to the total revenues and 11.9% to the operating profit, continued weakness in demand could hamper the companys revenues and profits in the FY2010.

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