Uncovering the secrets of Samsung’s empire: more than just selling phones

As you know, according to a report recently released by market research firm Strategy Analytics, global smartphone shipments in the first quarter of this year were 345 million units, of which Samsung shipped 83.2 million units, accounting for 24.1% of the market share, up 4.2 percentage points from the fourth quarter of last year, while Apple's mobile phone shipments fell to 17.9%. Strategy Analytics said: "In the first quarter, Samsung Electronics' global sales continued to grow steadily, regaining the honor of the world's largest smartphone manufacturer."

But the embarrassing thing is that despite the seemingly gorgeous numbers, the voices of pessimism are still endless. For many consecutive quarters, every time Samsung Electronics' financial report is released, you can hear a song of sadness without any surprise. Facing the encroachment of Apple and the fierce competition from the Chinese mobile phone red ocean, it is needless to say that Samsung's mobile phone market share has declined. Even in the writings of some commentators, you can vaguely hear the sound of the rubble of the Samsung empire collapsing. They are accustomed to comparing Samsung with "martyrs" such as Nokia or Motorola to show the crisis of the empire.

However, in the eyes of others, it is too early to say such pessimism. The reason is simple. Apart from the fact that Samsung still has strong advantages in hardware and supply chain, it is a bit far-fetched to equate "Samsung" with "Samsung Electronics" or even "Samsung Electronics" with "Samsung Mobile Phones" from the underlying logic. Samsung Electronics, which ranked 13th in the Fortune 500 last year, is only one of the dozens of subsidiaries of Samsung Group. Even for Samsung Electronics, mobile phones are far from everything. In their view, it seems a bit unreasonable to think of the collapse of the entire Samsung empire from the decline of mobile phones.

Well, leaving aside the status of mobile phones for Samsung and the future of smart life, if you only review Samsung's history and product lines on paper, you will find that the so-called "empire" may not be a simple metaphor. At this year's CES, Samsung Electronics President and CEO Yoon Boo-keun said: "Last year, Samsung sold more than 665 million products. We have begun to explore the hidden value of connected devices and everyday objects."

Not long ago, Samsung announced that it hopes to become one of the top ten IT service companies in the world. Although somewhat helpless, this giant that failed in the mobile phone battlefield also shouted loudly: Don't get me wrong, we are not just a company that sells mobile phones.

IT Service Company

Let’s start with “IT service company”.

About five years ago, the iPhone launched a new wave of electronics. Before that, Samsung Electronics, standing on the shoulders of Japanese companies, had been betting on micro batteries and smartphones for ten years. According to an article titled "South Korea: The Republic of Samsung" in The Washington Post, "When Japanese companies were obsessed with decorative and expensive home electronics, Samsung bought mature technologies and quickly began to produce cheaper and higher-quality products. In the case of smartphones, such a strategy led to a global patent war with its biggest competitor, Apple." So when the smartphone era came, relying on years of technological accumulation, Samsung's production line covered almost everything from memory, CPU to batteries and even plastic casings.

But you all know what happened next. After about 2012, with the relative maturity of the entire mobile phone market industry chain and the pressure from Apple (especially the larger Apple) and domestic manufacturers, Samsung was surrounded by enemies on all sides.

However, a closer look reveals that Samsung's vertical industry chain integration capabilities have not been "buried" - interestingly, many of its internal components are directly used in the mobile phones of "friendly companies". Taking last year's Q4 financial report as an example, Samsung's chip business actually exceeded the 1.96 trillion won of its mobile business with a profit of 2.7 trillion won - Samsung has become the industry's most important supplier of mobile phone components, providing important components such as processors, screen panels and flash memory to Apple, Xiaomi and other Chinese partners (such as Huawei, Lenovo, Meizu, etc.). In other words, no matter which of these partners sells mobile phones well, they will bring profits to Samsung Electronics, which occupies the upstream of the industry chain. In order to consolidate its advantages, according to media reports, Samsung is spending about US$14.3 billion to build a super-large chip factory in Pyeongtaek, South Korea, which is expected to be put into production in the first half of 2017.

In fact, judging from a series of actions, Samsung is increasingly looking like a "service" company: the relative relaxation of AMOLED panel licensing; the external authorization of mobile payment services; direct competition with TSMC for next-generation chip manufacturing technology...all indicate Samsung Electronics' ambition to "split" into an upstream technology company.

Live in the trend

Of course, no giant is willing to give up the most important and brilliant link in the value chain, but all giants also know that there is no eternal giant - unless they are reborn at the turning point of human technology and strive to live in the trend. So you can clearly see that when the mobile phone business is declining, Samsung is thinking about one thing: how to stand in the center of the stage in an elegant posture.

As early as February this year, Samsung Electronics formed a product innovation team, independent of the company's original structure. It is reported that the team's focus is not on a specific product, but to develop a set of solutions that meet Samsung's own production capacity, which may involve drones, virtual reality, robots, 3D printing, unmanned driving, etc. - although each of the above seems to have been taken by others, Samsung obviously wants to get a piece of the pie. What's more, from a paper point of view, Samsung's technical capabilities are quite promising - according to the statistics of the US Patent and Trademark Office's authorized patents in 2014, Samsung ranked second (the boss belongs to IBM), with 4,952 authorized patents. And there are also data showing that in recent years, in addition to the mobile phone field, Samsung's patents applied for include virtual reality, medical equipment, home automation and alternative fuel vehicles - in fact, even if you simply sort out Samsung's recent actions, you will get a glimpse of its judgment on the future.

For example, in April this year, Samsung SDS, a subsidiary of Samsung Group, announced that it would soon release a self-developed biometric mobile payment service, which would be initially promoted in South Korea and then expanded globally. In addition to being aimed at smartphone manufacturers, this technology will also seek cooperation with e-commerce and security industries to provide customers with biometric solutions that adapt to different business models, such as fingerprints, voices, and irises. As for irises, in fact, as early as 2012, Samsung began to combine iris modules with the front camera of mobile phones, hoping to complete the most secure mobile payment through iris recognition - just like you have seen in many science fiction works.

Another example is cars - yes, Samsung also has cars. At least in the eyes of Lee Kun-hee in his early years, cars are products that integrate scientific and technological achievements, so he willfully established Samsung Motors. However, data shows that facing Japanese and even domestic rivals such as Hyundai, Samsung was somewhat reluctant. In the end, Renault acquired 70% of Samsung Motors' shares and established Renault Samsung Motors, which has been a joint venture for many years (in March this year, there was news that BYD would enter South Korea to compete with Renault Samsung for the taxi market...).

As for the automotive parts market, Samsung also has considerable ambitions. In February this year, Samsung SDI, a subsidiary of Samsung Group, announced that it would acquire the battery pack business of Magna Steyr, a global leading automotive supplier, which assembles cars for Audi, GM and other manufacturers, and also designs automotive parts including battery packs. Some commentators analyzed that with Samsung's technological advantages in the battery module market and Magna Steyr's position in the battery pack market, this transaction will strengthen Samsung SDI's ability to produce electric vehicle batteries, and it is bound to gain capital to compete with Panasonic, which is Tesla's main supplier.

Another example is the Internet of Things, which has been imagined by the technology industry for many years but still seems to be both real and illusory. Many Samsung fans still remember that at Samsung's huge CES booth, its new generation flagship phone S6 was not exhibited, but the stage was given to those "big things" that seemed to be related to the future. Along with it was the sonorous promise of Samsung Electronics President Yoon Boo-geun: "Within five years, 100% of Samsung's products will become Internet of Things products." Perhaps tired of hearing the endless pessimism about its own mobile phones, at CES, Samsung released 7 hardware products in one go, 2 UGC video content platforms (MilkVideo and MilkVR), and updated its own Tizen TV system and Multiroom home control application. Well, to some extent, Samsung, which has always been a standard hardware company, seems to want to transform into a service provider and smart hardware platform.

Of course, in addition to the above industries, Samsung also has some other sub-sectors, such as acquiring the US display manufacturer YESCO Electronics to enter the digital signage business and acquiring the US mobile payment company LoopPay. Therefore, in the view of some industry insiders, how to integrate these industries and resources into an ecosystem is very important for Samsung today.

Samsung Empire

Well, let's officially talk about the "Samsung Empire".

Yes, as mentioned before, Samsung Electronics, which is in the technological wave, is only a part of Samsung. Due to historical reasons, the scope of the Samsung Empire may be far beyond your imagination. Let's put it this way, in the list of the world's top 500 in 2014 alone, there are three companies on the list: Samsung Electronics, Samsung C&T and Samsung Life Insurance - of course, except for Samsung Electronics, which ranks 13th, the latter two are only ranked 460th and 458th respectively.

So what exactly does Samsung do? You can see Samsung in the construction of the Petronas Twin Towers in Kuala Lumpur, Taipei 101, and the Burj Khalifa in Dubai; you will be surprised to find that Samsung Shipyard is one of the shipyards with the largest number of orders in the world; and in the fields of solar energy, wind energy, etc., you will also see Samsung flags flying; if I tell you that Samsung also has its own fashion, hotels, amusement parks, hospitals, film and media, if you don’t know its history, you will definitely feel bad.

If you turn your attention to South Korea, you will find that "there are three things that Koreans cannot avoid in their lives - death, taxes and Samsung." Among all the descriptions of the "Samsung Empire", perhaps the least metaphorical comes from a widely circulated photo in which South Korean President Lee Myung-bak bows respectfully to Samsung leader Lee Kun-hee. Considering the status of the Samsung Group in South Korea, this move, which may only be a show of etiquette, caused an uproar. The Washington Post wrote in "South Korea: The Republic of Samsung" published in late 2012: "Samsung is South Korea's greatest economic success (representative) and has recently become a controversial subject. Economists, small and medium-sized business owners and some politicians say that Samsung is no longer just controlling the country, but has surpassed it. The influence of the company is almost comparable to that of the government. Discussions on how to control the size and power of Samsung and other family-run conglomerates have become a key issue in South Korea's presidential election."

Everything comes from history. In fact, as the Korean scholar Lin Bingrun said, "The chaebol is the entire metaphor of the Korean economy. Without understanding the chaebol, you cannot understand the Korean economy." Kang Mingxun, an official of the Bank of Korea, also said in the book "The Past and Present of the Korean Chaebol": Most of the Korean chaebols originated during the Japanese colonial rule and the Korean War, but the key to their current achievements lies in the special policies formulated by the Korean government after the 1960s - this naturally includes Samsung, which was still mainly engaged in the export of vegetables and Korean dried fish in 1938.

In a sense, the rise of Samsung is like the "red-topped businessmen" of the past. After the Korean War, South Korea's national economy hit rock bottom, and the United States provided South Korea with about 2.15 billion US dollars in material aid over a decade. The South Korean government sold many materials and used the money to invest in industry and commerce and issue loans, so some officials and businessmen who had close ties with the government took advantage of this opportunity - Samsung founder Lee Byung-chul also took this opportunity to emerge, and through the allocation of foreign aid and government preferential treatment in finance and other aspects, a group of privileged chaebols such as Samsung and LG were formed. By the end of the 1970s, thanks to the government's preferential policies, many chaebols began to turn to steel, petrochemicals, automobiles, shipbuilding, electronics and other fields, forming today's pattern to a certain extent. Today, Samsung has proudly grown into a behemoth, with revenue even accounting for 1/5 of South Korea's GDP.

So, that's it. Do you still think Samsung is just a company that sells mobile phones?

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.