|The logo of Samsung Electronics is seen during a media tour at the company's headquarters in Suwon, Gyeonggi Province, June 13. Reuters-Yonhap|
Korea's tech giant asked to be agile to accelerate growth
By Kim Yoo-chul
Leadership has required commitment and a willingness to move in directions that others have avoided. In history, great leaders have the ability to convince, encourage and persuade others to follow.
Late Apple co-founder Steve Jobs, for example, had stared down the derision of market analysts and key industry peers when deciding to open Apple retail stores. Those stores went global and outpaced conventional retail stores in terms of retail sales rates. Subsequently, Microsoft, Samsung Electronics and Sony all followed Apple's lead with brand-centric tech retail stores.
The example of does not necessarily reflect all key fundamental factors behind the measurement of business sustainability. However, this case is one example of why leaders and executives should stay agile. Therefore, companies can act much faster, more resiliently and increase speed and adaptability to keep up with changes in today's challenging business environment.
Drastic and rapid changes require firms to develop ideas and to read markets at a very early stage. Tech experts contacted by The Korea Times stressed agile methods can help companies avoid misallocation from the outset.
But when it comes to Samsung Electronics, the world's top producer of memory chips, some company insiders and experts are voicing concerns about what lies ahead under the weight of a challenging business environment.
Developing winning strategy
Because Samsung Electronics' products range from consumer electronics, displays and telecom equipment to chips, the tech giant is ideally positioned to pursue greater synergy between its key businesses.
|A Samsung Electronics' digital billboard is seen in the Times Square area of New York City, March 2. Reuters-Yonhap|
The vertically-integrated nature of Samsung's business is sometimes considered as a source of concern for its chief competitors. However, this nature makes it possible to deepen in-house partnerships allowing the company's affiliates to share new technologies and to apply them in end-products. Samsung Electronics did not invent the smartphone. But it developed transformative new technology and ran with them.
For the TV and smartphone businesses, for example, Samsung typically releases its own version at least a few months or a year after such releases by sector leaders. This strategy has so far been highly effective as the company's unique and notorious vertically-integrated structure could be able to help it figure out where the markets are heading in terms of popular tech products, insiders said.
"Basically, Samsung has long been pursuing a fast-follower strategy. While some critics say pushing speed-focused goals won't work as today's tech world favors the pursuit of interconnected software and software-hardware systems. But the point is that a fast-follower strategy requires creativity and skill. This classic strategy is something that Samsung can handle with no huge risks," an executive said. "If Samsung wants to become leaner and meaner, it's necessary for the top corporate management to specify a new version of winning strategies that will convince employees."
Samsung's semiconductor business is known to have suffered an operating loss of 8 trillion won during the first six months of this year as it was still on track to clear out inventories, according to estimates by local brokerages. This lies in stark contrast to the early 2010s when Samsung remained profitable despite huge market turmoil in the wake of the Asian financial crisis.
"There's no need to highlight the addiction to past success. However, as Samsung is a technology company, technology matters the most. In memory chips, where Samsung controls nearly 50 percent of global consumption, when the company's competitors struggled, Samsung's management reached a consensus to eat up more shares from its rivals. This was only possible because Samsung's technology was far better than its rivals. But it seems like Samsung has the desire to pursue co-existence and stability with its rivals that include SK and Micron Technology of the U.S.," a company insider said by telephone.
|Samsung Display's Rollable Flex displays are showcased at SID Display Week in Los Angeles, May 23. Courtesy of Samsung Display|
Despite repeated denials to do so, Samsung Electronics announced it was adjusting by lowering its memory chip production to a "meaningful level." Samsung did not disclose the size of the production cut. While the decision has been hailed by SK and Micron in terms of limiting the sector's supply growth, a positive factor for an early rebound in chip prices, Samsung's decision also signaled that its price bargaining position in memory chips is not as strong as it was.
Pierre Ferragu at New Street Research, a London-based independent research boutique, explained, "When you are not fighting for your life anymore, you become complacent. Samsung Electronics has been ranked as the fourth-largest semiconductor brand after NVIDIA, TSMC of Taiwan and Broadcom of the U.S., in terms of market capitalization based on last week's market close. Samsung Electronics was the world's most valuable semiconductor brand in 2018."
Developing winning strategies and earning profits from them is a time-consuming approach. However, even the most effective business strategies, powerful products and appealing services should evolve continuously as both challenges and opportunities arise.
Choi Doh-yeon at Shinhan Investment in Seoul stressed the necessity of Samsung Electronics embracing agility at scale. While Samsung Electronics is a company featuring a vast amount of technological expertise, the company is advised to find the best possible ways to create an innovative environment to help its employees blaze the trail to eventual success.
As the global memory chip market is dominated by the "big three" players, Samsung said it was aiming to become the global leader in contract manufacturing of logic-based "brain processors" by 2030. However, it was still struggling to stabilize the production yields of cutting-edge logic chips below the 5-nanometer tech level, according to market analysts.
Sales of the so-called "non-memory semiconductors" are the most valuable parts of the world's $580 billion semiconductor market. Amid the rise of artificial intelligence (AI), data sciences and quantum computing, these types of chips are increasingly regarded as the most strategically important from national security standpoints. TSMC, which only manufactures client-only custom chips unlike Samsung, is the global leader in this sector.
In smartphones, Samsung Electronics' profit during the April-June period is seen to have worsened from the previous quarter, while its appliance business is also expected to report widened operating losses during the same period, according to estimates by IBK Investment and Hana Investment, local brokerages.
While it may be an exaggeration to say that Samsung is losing its momentum, company insiders say, however, that they asked the management to apply available measures to overcome "enemies of business agility" to help the tech giant remain flexible. Samsung representatives in Seoul declined to comment.