Chapter 3. Samsung Electronics
3.1 Company History
3.2.1 Business Divisions of Samsung Electronics
announced its acquisition of the cloud-computing company “Joyent”, for the purpose of growing its cloud-based services for its smartphones and Internet-connected devices.6
In November 2016, Samsung Electronics also purchased American automotive equipment maker Harman for USD $8 billion.7 Through these acquisitions, Samsung is expected to gain a solid footing in the automotive component business, as Harman is a Tier 1 supplier, with deep relationships with a wide range of car makers. These acquisitions will also allow Samsung Electronics to diversify their revenue source.
3.2 Overview of Samsung Electronics
3.2.1 Business Divisions of Samsung Electronics
Samsung Electronics Co., Ltd. is a South Korea-based multinational electronics and information technology company, which is the flagship affiliated company of the Samsung Group. It is also South Korea's the biggest chaebol, which is a traditional, family-run conglomerate with nearly 90 subsidiaries.
As of the end of 2015, Samsung had 325,677 employees in 80 countries and 199 worldwide operation hubs, including 15 rational head offices, 38 manufacturing subsidiaries, 34 global R&D center and 6 global design centers.8
Since 2013, Samsung reinforced a global management system into three key divisions; IM (IT and Mobile Communications), CE (Consumer Electronics) and DS (Device Solutions). (refer to figure 3.1 and table 3.2)
6Catherine Shu, "Samsung will acquire cloud-computing company Joyent", Techcrunch, June 15th, 2016, accessed May 26th, 2017
https://techcrunch.com/2016/06/15/samsung-joyent/
7 Full Bio, “Why Samsung Is Buying Harman”, Forbes, Nov 16th, 2016, accessed May 26th, 2017
https://www.forbes.com/sites/greatspeculations/2016/11/16/why-samsung-is-buying-harman/#31b0934352e5
8 Samsung Sustainability Report 2016, p11, accessed May 26th, 2017 http://www.samsung.com/us/
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Table 3.2 Business Divisions of Samsung Electronics
Classification Major Products
IM HHP (Handheld Player), network system, computer
CE TV, monitor, refrigerator, laundry machine, Air conditioner, medical equipment
DS DRAM, NAND Flash, mobile AP, LCD panel, OLED panel
IT and Mobile Communications Division
IT and Mobile Communications (IM) Division is divided into mobile communication business and network business.
The operation profit of IM division is about KRW10.8 trillion which is 37.0% of total operating profits in 2016, its telecommunication network business area includes multi-service DSLAMs and fax machines; cellular devices such as mobile phones, PDA phones, mobile intelligent terminals (MITs); and satellite receivers.
According to Strategy Analytics report in 2015, Samsung Electronics was ranked as No.1 vendor in both Mobile phone (21.2%) and smartphone (22.2%) market and No.2 vendor in Tablet
market (15.0%). Samsung Electronics seems to firmly maintain its leader position in the global mobile business by keep providing cutting-edge innovation products. In addition, in recent year Samsung Electronics seems to constantly develop future growth engines like Samsung pay, wearable devices, and Internet of Things (IoT), while also reinforce products line not only for high-end market but also for low-end market like Galaxy A and Galaxy J series.
At the same time, Samsung Electronics seems to do great job in networks business as well.
The company has played a pioneer role in the network equipment market based on its 4G LTE communications technology and now it pursues leadership position in newly emerging 5G communications technology market.
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Consumer Electronics (CE) Division is divided into visual display business and digital appliance business, printing solutions business and heath/medical business.
The operation profit of CE division posted KRW 2.6 trillion in operating profit which accounts 8.9% of total operating profits in 2016, and its main products are TV, monitor, refrigerator, laundry machine, Air conditioner, medical equipment etc.
In the visual display business sector, Samsung TV was once again ranked as the world’s No.1 with 27.6% of TV market share in 2015, and it has been for the last 11 years consecutive.
Particularly, Samsung Electronics is leading company in global UHD TV market; it accounted 34.1% market share in 2015. The market of high-end TV such as UHD and curved TVs is predicted to grow continuously; the company is expected to keep its leading position in the premium TV market in the future. Even if the consumer electronics division’s profit contribution is relatively low (see Figure 3.2 ), Samsung Electronics continues to lead in digital appliance and medical equipment sector, and business is anticipated to achieve even greater growth by
combining future promising technologies like Internet of Things (IoT) and Big data technology which will also serve to strengthen the company’s dominancy.
On the other hand, Samsung sold Printing solution Business to HP for $1.05 Billion in September 2016, and the transaction including regulatory approval is expected to close within 12 months.9 It seems to be the part of the business portfolio slimming down, and it can be seen as an action to strengthen and concentrate on the better-performing sector.
Device Solutions Business
Device Solutions (DS) business is divided into two business units; memory business and system LSI business. And its System LSI business division is largely divided into four segments;
system on chip (SoC) team which develops mobile APs, LSI development team, which designs
9 Clark Don and Jeong Eun-Young, “HP Agrees to Acquire Samsung Printer Business for $1.05 Billion”, The Wall Street Journal, Sept. 12, 2016, accessed May 20th, 2017
https://www.wsj.com/articles/hp-to-acquire-samsung-printer-business-in-1-billion-deal-1473667204
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display driver chips and camera sensors, foundry team and support team.10
Samsung Electronics has lead the global memory semiconductor industry for 24
consecutive years; According to IHS research report, the company accounted 45.3% of market share in DRAM market and 39.1% market share in NAND Flash market in 2016.