Media Credit Danny Reise
Seoul Machine Cell phones Memory chips Plasma TVs How Samsung made Korea a consumer electronics superpower By Frank RoseEven today people talk about the voluntary incineration at Gumi A drab factory town in south central Korea Gumi is home to one of Samsung s biggest plants A decade ago the company was best known for budget air conditioners and low end TVs Its leader Kun hee Lee had grander ambitions but when he sent out Samsung s new wireless phones as his 1995 New Year s gift word came back that they didn t work So that March he paid a visit to Gumi At Lee s command the factory s 2 000 employees donned headbands labeled Quality First and assembled in a courtyard There they found their entire inventory piled in a heap cell phones fax machines nearly $50 million worth of equipment A banner before them read Quality Is My Pride Beneath it sat Lee and his board of directors Ten workers took the products one by one smashed them with hammers and threw them into a bonfire Before it was over employees were weeping Ritual purification at the command of a heroic leader is an ancient and powerful tradition in this part of the world With a few superficial changes this whole scene could have played in a Zhang Yimou costume epic Certainly it had the desired effect After Lee s visit to Gumi shoddiness was not an option Ki tae Lee then the Gumi factory manager and now head of Samsung s mobile telecom division personally tests new models by hurling them against a wall or dropping them from a second story window Once he even ran over a handset with his car It still worked Kun hee Lee s ambition was straightforward He wanted to transform his company into the world s top consumer electronics brand the place that makes the coolest stuff A decade later he s just about done it Samsung is ranked number 21 among the world s top brands by the consulting outfit Interbrand just one notch below Sony In sales Samsung has shot to number three behind Matsushita and Sony in consumer electronics and is fighting Motorola for the number two spot behind Nokia in cell phones Samsung is also the world s leading manufacturer of flash memory and flat panel screens two of the core technologies of the digital era And it s the most profitable tech enterprise on the planet with a cool $10 billion in earnings last year more even than Microsoft The bonfire at Gumi was typical of Lee s style which is as gutsy as it is dramatic In the late 90s when Korean labor became too expensive he cut thousands of jobs and built factories in cheaper parts of the world Ignoring business pundits who argued that consumer electronics companies should outsource their components and go into more profitable businesses like content he poured billions into plants where Samsung would make its own memory chips and LCD screens Now his gamble is paying off as those technologies fuel a new generation of digital cell phones video cameras still cameras music players computer monitors high definition TVs As a vertically integrated globally networked manufacturer Samsung can produce all these gadgets at low cost and blistering speed At the same time it makes money selling components to its competitors Either way Samsung wins Sony with its marquee brand and proud history of innovation has always been the company to beat But the billions Sony poured into the music industry and the movie business left it hobbled its technological prowess dulled by media execs too fearful of piracy to endorse cutting edge products Meanwhile Samsung moved ahead The result is in the numbers Samsung is valued by investors at $75 billion while Sony s market cap is roughly half that As the world moves toward a playground of endlessly replicable slice and dice digital media Samsung a former also ran from a small half nation wedged uncomfortably between China and Japan is the company best positioned to get us there Seoul is a gritty workaday city folded into a rugged mountain range at the butt end of Manchuria Though home to more than 10 million people it feels remote Government economic policies have made South Korea the most connected country on the planet but just over the horizon is North Korea where the bomb exists and the Internet doesn t Everywhere you look in Seoul are neon crosses and jesus saves signs testament to the success of Christian missionaries Almost as ubiquitous is Samsung not just Samsung Electronics but Samsung Securities Life Insurance Petrochemicals Heavy Industries Engineering even a Samsung Everland theme park Together they make up South Korea s leading conglomerate or chaebol Samsung Electronics sits next to Samsung Life in a steel and glass high rise on a broad boulevard near Namdaemun the Great South Gate a 14th century portal inside an enormous traffic circle But the company s really run from a mansion several miles away half hidden among the wooded slopes of Namsan Mountain There near the spectacular new art museum that bears his name lives Kun hee Lee Lee rarely shows up at headquarters he doesn t have to At 63 with an estimated net worth of $4 3 billion he is the richest and arguably the most powerful man in South Korea His authority is felt in inverse proportion to his presence While Confucianism with its deep respect for order and hierarchy is prevalent across China and Japan its most extreme form is found in Korea and few things are more Confucian than the leader who s so removed as to seem godlike He s the invisible chairman behind the scenes having absolute power and control an insider says After the near disastrous economic meltdown that hit South Korea in 1997 other chaebol became more open like Western corporations But Samsung has been able to rebuild itself without jettisoning the old ways It s a global mega corporation that s run as a very old Korean style company Samsung the name means three stars in Korean three being a lucky number was founded by Lee s father in the late 1930s as a small exporter of fruit and dried fish In the 60s and 70s it became a key partner in the government s industrial development drive venturing not just into electronics but shipbuilding petrochemicals heavy machinery and construction The junior Lee was considered an irresponsible playboy when he took over after his father s death in 1987 Instead armed with a Japanese economics degree and an MBA from the US he set out to make Samsung a premium brand one that like Sony would not have to compete on price Clearly that meant Samsung would have to do better than the cheesy looking Econo model TV sets it was exporting to countries like Panama Quality was key but so too was design Consumers Lee realized must be courted The obvious place to look for inspiration was Japan with its rising auto manufacturers and consumer electronics brands Sony in particular Lee wanted a design philosophy to give his products a common identity so he hired a Japanese consultant who told him that Samsung s products should be infused with Korean values But what did that mean Korea had been systematically purged of its identity during a brutal Japanese occupation that lasted from 1905 to 1945 its language suppressed its palaces destroyed its citizens forced to assume Japanese names Reclaiming a Korean identity would not be easy even if a Japanese designer said it was the key to Samsung s future So the company began a search for places and objects that embody the Korean spirit Lee himself is said to have identified the key cultural touchstone Seokguram a remote mountain grotto that houses an exquisite eighth century Buddha He also issued the slogan Balance of Reason and Feeling to express Samsung s design philosophy It s very Oriental not black and white but a balance of things explains Hyun joo Song the executive in charge of design identity It states that we will meet the emotional needs of our customers with the technological solutions we have In his 1996 New Year s address Lee proclaimed the Year of Design Revolution He was referring to design in the broadest sense not just styling but consumer research and marketing as well Engineers had once defined new products and decided what features to give them now specialists in everything from industrial design to cognitive science would take that role When Lee issued his decree most of us didn t understand what he was talking about says Kook hyun Chung the senior vice president who heads the Corporate Design Center in Seoul Now we understand that we have a new bigger broader responsibility Just as Lee s design revolution was getting under way however disaster struck First the market for memory chips Samsung s one standout success at the time went into a nosedive taking the company s profits with it Then in October 1997 speculators began a run on the Korean won which like other East Asian currencies had been weakened by reckless corporate borrowing Within months the value of the won plummeted by half interest rates shot sky high new loans became impossible to secure and Samsung deep in debt faced bankruptcy Before the crisis ended less than a year and a half later Samsung Electronics would shed 30 percent of its employees some 24 000 people most of them factory workers and eliminate dozens of businesses The chaebol were expected to keep their employees for life a tradeoff for government financing and other favors but Samsung could no longer afford to now that Korean wages had ceased being competitive We moved a lot of manufacturing to other areas China Malaysia Mexico Brazil Hungary Slovakia recalls digital media president Gee sung Choi at his satellite office in the port city of Suwon where old factory buildings are giving way to high rise R during the 90s financial crisis they got equally juiced on its new knowl Seoul Machine Cell phones Memory chips Plasma TVs How Samsung made Korea a consumer electronics superpower By Frank RoseEven today people talk about the voluntary incineration at Gumi A drab factory town in south central Korea Gumi is home to one of Samsung s biggest plants A decade ago the company was best known for budget air conditioners and low end TVs Its leader Kun hee Lee had grander ambitions but when he sent out Samsung s new wireless phones as his 1995 New Year s gift word came back that they didn t work So that March he paid a visit to Gumi At Lee s command the factory s 2 000 employees donned headbands labeled Quality First and assembled in a courtyard There they found their entire inventory piled in a heap cell phones fax machines nearly $50 million worth of equipment A banner before them read Quality Is My Pride Beneath it sat Lee and his board of directors Ten workers took the products one by one smashed them with hammers and threw them into a bonfire Before it was over employees were weeping Ritual purification at the command of a heroic leader is an ancient and powerful tradition in this part of the world With a few superficial changes this whole scene could have played in a Zhang Yimou costume epic Certainly it had the desired effect After Lee s visit to Gumi shoddiness was not an option Ki tae Lee then the Gumi factory manager and now head of Samsung s mobile telecom division personally tests new models by hurling them against a wall or dropping them from a second story window Once he even ran over a handset with his car It still worked Kun hee Lee s ambition was straightforward He wanted to transform his company into the world s top consumer electronics brand the place that makes the coolest stuff A decade later he s just about done it Samsung is ranked number 21 among the world s top brands by the consulting outfit Interbrand just one notch below Sony In sales Samsung has shot to number three behind Matsushita and Sony in consumer electronics and is fighting Motorola for the number two spot behind Nokia in cell phones Samsung is also the world s leading manufacturer of flash memory and flat panel screens two of the core technologies of the digital era And it s the most profitable tech enterprise on the planet with a cool $10 billion in earnings last year more even than Microsoft The bonfire at Gumi was typical of Lee s style which is as gutsy as it is dramatic In the late 90s when Korean labor became too expensive he cut thousands of jobs and built factories in cheaper parts of the world Ignoring business pundits who argued that consumer electronics companies should outsource their components and go into more profitable businesses like content he poured billions into plants where Samsung would make its own memory chips and LCD screens Now his gamble is paying off as those technologies fuel a new generation of digital cell phones video cameras still cameras music players computer monitors high definition TVs As a vertically integrated globally networked manufacturer Samsung can produce all these gadgets at low cost and blistering speed At the same time it makes money selling components to its competitors Either way Samsung wins Sony with its marquee brand and proud history of innovation has always been the company to beat But the billions Sony poured into the music industry and the movie business left it hobbled its technological prowess dulled by media execs too fearful of piracy to endorse cutting edge products Meanwhile Samsung moved ahead The result is in the numbers Samsung is valued by investors at $75 billion while Sony s market cap is roughly half that As the world moves toward a playground of endlessly replicable slice and dice digital media Samsung a former also ran from a small half nation wedged uncomfortably between China and Japan is the company best positioned to get us there Seoul is a gritty workaday city folded into a rugged mountain range at the butt end of Manchuria Though home to more than 10 million people it feels remote Government economic policies have made South Korea the most connected country on the planet but just over the horizon is North Korea where the bomb exists and the Internet doesn t Everywhere you look in Seoul are neon crosses and jesus saves signs testament to the success of Christian missionaries Almost as ubiquitous is Samsung not just Samsung Electronics but Samsung Securities Life Insurance Petrochemicals Heavy Industries Engineering even a Samsung Everland theme park Together they make up South Korea s leading conglomerate or chaebol Samsung Electronics sits next to Samsung Life in a steel and glass high rise on a broad boulevard near Namdaemun the Great South Gate a 14th century portal inside an enormous traffic circle But the company s really run from a mansion several miles away half hidden among the wooded slopes of Namsan Mountain There near the spectacular new art museum that bears his name lives Kun hee Lee Lee rarely shows up at headquarters he doesn t have to At 63 with an estimated net worth of $4 3 billion he is the richest and arguably the most powerful man in South Korea His authority is felt in inverse proportion to his presence While Confucianism with its deep respect for order and hierarchy is prevalent across China and Japan its most extreme form is found in Korea and few things are more Confucian than the leader who s so removed as to seem godlike He s the invisible chairman behind the scenes having absolute power and control an insider says After the near disastrous economic meltdown that hit South Korea in 1997 other chaebol became more open like Western corporations But Samsung has been able to rebuild itself without jettisoning the old ways It s a global mega corporation that s run as a very old Korean style company Samsung the name means three stars in Korean three being a lucky number was founded by Lee s father in the late 1930s as a small exporter of fruit and dried fish In the 60s and 70s it became a key partner in the government s industrial development drive venturing not just into electronics but shipbuilding petrochemicals heavy machinery and construction The junior Lee was considered an irresponsible playboy when he took over after his father s death in 1987 Instead armed with a Japanese economics degree and an MBA from the US he set out to make Samsung a premium brand one that like Sony would not have to compete on price Clearly that meant Samsung would have to do better than the cheesy looking Econo model TV sets it was exporting to countries like Panama Quality was key but so too was design Consumers Lee realized must be courted The obvious place to look for inspiration was Japan with its rising auto manufacturers and consumer electronics brands Sony in particular Lee wanted a design philosophy to give his products a common identity so he hired a Japanese consultant who told him that Samsung s products should be infused with Korean values But what did that mean Korea had been systematically purged of its identity during a brutal Japanese occupation that lasted from 1905 to 1945 its language suppressed its palaces destroyed its citizens forced to assume Japanese names Reclaiming a Korean identity would not be easy even if a Japanese designer said it was the key to Samsung s future So the company began a search for places and objects that embody the Korean spirit Lee himself is said to have identified the key cultural touchstone Seokguram a remote mountain grotto that houses an exquisite eighth century Buddha He also issued the slogan Balance of Reason and Feeling to express Samsung s design philosophy It s very Oriental not black and white but a balance of things explains Hyun joo Song the executive in charge of design identity It states that we will meet the emotional needs of our customers with the technological solutions we have In his 1996 New Year s address Lee proclaimed the Year of Design Revolution He was referring to design in the broadest sense not just styling but consumer research and marketing as well Engineers had once defined new products and decided what features to give them now specialists in everything from industrial design to cognitive science would take that role When Lee issued his decree most of us didn t understand what he was talking about says Kook hyun Chung the senior vice president who heads the Corporate Design Center in Seoul Now we understand that we have a new bigger broader responsibility Just as Lee s design revolution was getting under way however disaster struck First the market for memory chips Samsung s one standout success at the time went into a nosedive taking the company s profits with it Then in October 1997 speculators began a run on the Korean won which like other East Asian currencies had been weakened by reckless corporate borrowing Within months the value of the won plummeted by half interest rates shot sky high new loans became impossible to secure and Samsung deep in debt faced bankruptcy Before the crisis ended less than a year and a half later Samsung Electronics would shed 30 percent of its employees some 24 000 people most of them factory workers and eliminate dozens of businesses The chaebol were expected to keep their employees for life a tradeoff for government financing and other favors but Samsung could no longer afford to now that Korean wages had ceased being competitive We moved a lot of manufacturing to other areas China Malaysia Mexico Brazil Hungary Slovakia recalls digital media president Gee sung Choi at his satellite office in the port city of Suwon where old factory buildings are giving way to high rise R during the 90s financial crisis they got equally juiced on its new knowl
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