analysis of samsung in 2012_sum

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ROA HOLDINGS ISSUE REPORT

Analysis of Samsungs Competitiveness in 2012

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ROA Holdings, INC.

Report No.012501

[email protected]

Copyright2012 ROA HOLDINGS, INC All Rights Reserved.

Analysis of Samsungs

Competitiveness in 2012Focusing on Samsungs Business Structure, Investment,

Marketing and Strategy for Software-Driven Company


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Table of Contents

Executive Summary

Analysis of Competitiveness

1 Finance

1.1 Strong Performance of the Communications Business

1.2 Competitiveness of Product Portfolio

1.3 ROE

2 Analysis of Corporate Structure

2.1 Corporate Restructuring to Generate

Synergy and Prepare for Market Change

2.2 Launch of Software Center and

Development of Global Contents

2.3 Restructuring for Future Businesses

2.4 Control Tower

3 Analysis of Each Divisions Business Result

3.1 Digital Media & Appliances

3.2 Communications

3.3 Semiconductor

3.4 Display Panel

4 Global Top-Tier Strategy

4.1 Visual Display

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4.2 Home Appliances

4.3 Communications

4.4 Semiconductor

4.5 Display Panel

5 Marketing and Brand Strategy

5.1 Increases in Marketing Investment

5.2 Improved Brand Value with Sports Marketing

5.3 Premium Brand Strategy for More Growth amid

Economic Downturn

5.4 Premium + Localization in the Emerging Market

6 Analysis of R&D Investment

6.1 R&D Investment Compared to Sales in 2011

6.2 Patent Strategy and Focus on Software Business

7 New Main Businesses

7.1 Investment Targets for 2020

7.2 Current Status

- Substantial Results in Three Future Businesses

Conclusion

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List of Figures

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[Figure 1] Strategies before and after Restructuring: SW, Synergy Effects and Separation

[Figure 2] Sales and Operating Profit (2002-2011)

[Figure 3] Quarterly Sales and Operating Profit (2009-2011)

[Figure 4] Composition of Sales in 2011

[Figure 5] Composition of Operating Profit in 2011

[Figure 6] Profit Margin of Samsung Electronics (2009-2011)

[Figure 7] ROE of Samsung Electronics (2002-2011)

[Figure 8] New Organization of Samsung Electronics

[Figure 9] SW Development Structure

[Figure 10] Main Businesses and Products

[Figure 11] Sales and Operating Profit of Digital Media & Appliances (2009-2011)

[Figure 12] Sales and Operating Profit of Communications (2009-2011)

[Figure 13] Sales and Operating Profit of Semiconductor (2009-2011)

[Figure 14] Sales and Operating Profit of Display Panel (2009-2011)

[Figure 15] Image of Smart Functions of TV ES8000

[Figure 16] Image of Smart HomeNet - Home Solution Technology of Samsung

[Figure 17] Image of 55-inch OLED TV

[Figure 18] Marketing Expenditure (2006- 2010)

[Figure 19] Image of Sponsoring 2012 London Olympics

[Figure 20] Super Bowl Commercial (Image)

[Figure 21] R&D Investment (2007-2011)

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List of Tables

[Table 1] High-end Smartphone Models of Samsung Electronics in 2011

[Table 2] Mass-market Smartphone Models of Samsung Electronics in 2012

[Table 3] 8 Content Services of Samsung Electronics

[Table 4] Five Future Businesses and Current Status

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Samsung Electronics wide product line-up ranges from set

products to components, encompassing semiconductor, TV,

and LCD and LED display. In the global market, it has been

presenting a successful growth in a tough business environment.

For this reason, Samsung can be referred to as the benchmark

for companies in development of successful business strategies.

Samsungs sales reached a new high in 2011 despite recession

in the IT industry. It recorded KRW 165 trillion in sales which

increased KRW 10 trillion from 2010.

Each of communications, semiconductor and TV business

presented a strong performance, driving the sales increase. Its

mobile handset production surpassed 300 million units last year.

In particular, smartphone shipments reached 100 million of whichGalaxy series made a large contribution. The semiconductor

segment continues to be the cash cow for the company with

improved product mix although DRAM price fell to a record low.

The digital media and home appliance business tripled in profi t

earnings thanks to the popularity of LED TV.

Samsungs TV business enhanced profi tability by being focused

on premium LED TV products and the communications business

posted a new record in terms of shipment by strengtheningsmartphone product line-up.

Executive Summary


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Despite the successful results, Samsung is placed under

pressure to seek new growth engines because its current

business structure is faced with various challenges and it needs

to maintain a steady growth. To achieve the goal, Samsung will

make a huge investment in five strategic businesses by 2020.

In line with that, corporate restructuring has been conducted

through merger, creation of new business segments and

separation since July 2011.

Samsungs restructuring efforts has three goals: first, to fill the

entire product line-up with world-best products; second, to

improve relations with the global partners including Sony and

Apple; and, third, to shift its paradigm to a Software Driven

Company. In 2012, corporate restructuring will be focused on

separation of set product business and component business,

enhancement of competitiveness in software and content

businesses, and preparation for future businesses. It is expectedthat Samsung Electronics will evolve into a new company when

restructuring is completed. On the other hand, businesses

struggling with low profitability due to aggravating business

environment or immature market demand will be integrated with

others for an efficient management. For instance, LED display

business was integrated into component business on April 1,

2012 and LCD display will be merged with SMD to concentrate

on OLED display production.


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[Figure 1] Strategies before and after Restructuring: SW, Synergy Effects and Separation

Samsungs Organization Structure Before 2010 and After 2012

Before After

HARDWARE DrivenHARDWARE Driven

Key Cash Cow Biz

Visual Display Unit

Home AppliancesWireless Business

Semiconductor Business

Software Driven CompanySoftware Driven Company

DMC

DS

CE IM

Global Top-Tier

VDHome

Applicances

WirelessIT

MSC

Software/DesignPower

Software Center

MSCA

Total Spin o / Independent Operation

Mid and Long-Term Growth Engine

Bio Chemistry / Medical Equipment/ Secondary Battery / LED / Solar

+

2010 2012

Source: ROA Holdings

Samsung Electronics has been dedicated to improving its

competitiveness in hardware technologies including mobile

DRAM, AP, NAND flash and OLED display, which, in turn,

resulted in high-quality set products by being combined with

software, design and solutions.

It looks to expand the synergy effect between hardware

technologies and some set products to entire product line-

up, in a way to become the top-tier company in the world.

Besides, solutions and display technology of smart devices will

be adopted for TV and home appliance products, in line with

the business goal of Samsung to become a Software Driven

Company. Samsung has been progressive in sport marketing

and pursues a two-track marketing strategy which is composed

of Premium and Localization. Its annual marketing expenditure

amounts to 6% of sales.


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In case of R&D, it strives to register more patents in preparation

for possible lawsuits. In addition, progressive efforts will be made

in the software business. Competitive software technologies

are gaining importance in the market as smart devices are

spreading from IT and mobile industries to others including home

appliances. It seems that Samsung is willing to respond to rapid

changes in the IT market, including the takeover of Motorola

by Google, HPs pulling away from PC business, and Apples

onslaught of lawsuits around the world.

This report is based on consolidated financial report of

Samsung released in 2012.

Data from 2007 to 2009 is based on ROA Holdings 2010

report (published in Japanese)


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Copyright ROA Holdings. All Rights Reserved. Additional reproduction is

strictly prohibited without a written permission from ROA Holdings. For receiving

written permission, please write to [email protected]. The opinions

and estimates presented in this report are based on information sources that

are believed to be reliable and accurate. The contents of this report reflect the

current opinions and are subject to change without notice. For more information

on ROA Holdings reports, visit www.roaholdings.com

About ROA Holdings

ROA Holdings is a research and consulting company, specialized

in mobile and convergence markets in Asia. ROA Holdings head

offi ce is in Tokyo, and branch offi ce is in Seoul. ROA Holdings main

clients are mobile carriers, handset manufacturers, government

agencies and global IT companies.

ROA Japan HQ

4F,Okada Building,1-10-5,

Shinjuku, Shinjuku-ku

Tokyo 160-0022, Japan

ROA Korea Office

Posco Center Building, West Tower

11th Fl.

892, Daechi 4-dong, Gangnam-gu

Seoul, South Korea

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