Samsung Looks to Future With New Drivers
By Kim Yoo-chul
Staff Reporter
Will the ambitious ``Six New Growth Engines'' plan dispel growing uncertainties surrounding the future of Samsung Group and bolster stock prices of the group's electronics unit?
The upcoming possible ``money sources'' ― printers, system LSI units, WiBro mobile Internet technologies, energy and bio technologies, healthcare and robot businesses ― were announced a month ago amid stalled growth of its core businesses ― chips, handsets, LCD TVs and falling stock prices.
The total value of the company dropped to 78.36 trillion won as of Oct. 26, from 92.06 trillion won earlier this year, according to data from Korea Exchange.
Moreover, the share price of Samsung Electronics, which once peaked at 687,000 won in July, plunged nearly 20 percent over the past few months despite upbeat results in the third quarter.
The steady decline of its shares led Vice President Chu Woo-sik to publicize detailed plans in a meeting with Park Hyun-joo, chairman of the Mirae Asset Financial Group.
``The price book-value ratio (PBR) of Samsung Electronics is too low,'' Chu said a month ago, adding Samsung will spend 30 to 50 percent of its net profit on dividends and share buybacks.
Nonetheless, the global memory chip giant has been in difficulty finalizing detailed investment plans for 2008 as the corruption scandal involving Samsung Group deepens amid worries over a temporary managerial vacuum.
Active Merger and Alliance
On Oct. 30, Chu said Samsung Electronics will achieve 20 trillion won in pre-tax profit on 150 trillion won in consolidated annual sales in 2012 by largely promoting the new drivers.
Although industry analysts were still uncertain about the overall outlook of the ``new drivers'' for the company's future, as steadily falling prices of dynamic random access memory (DRAM) chips were mounting burden on the world's No. 1 DRAM manufacturer with a market share of 28.3 percent from job cuts to profits, Samsung Electronics is spearheading the ``engines'' through active mergers and technology sharing.
Earlier this month, Samsung Electronics Vice Chairman Yun Jong-yong said the company will do all it can to develop its printer and system LSI units into core business areas with sales of $10 billion.
In the printer sector, Samsung was the runner-up of the industry leader Hewlett-Packard in all three printer sectors ― black-and-white laser printer, black-and-white laser combination and color laser printer, with a market share of 9.7 percent, 22.1 percent and 18.5 percent, respectively.
Samsung is accelerating its marketing efforts to sell more color laser printers with a business-to-business method by using its global channels.
``The printer business still accounts for a meager 3 percent of the company's total sales. However, we hope the business will rise 25 percent to reach around $2.5 billion in revenue by the end of the year from $2 billion last year,'' an official from the company said, adding the color laser printer market will rise an average of 12.1 percent over the next couple years.
A month ago, Samsung struck a deal with larger corporate clients in Europe and Southeast Asia to supply 20,000 high-speed laser printers.
According to industry estimates, the global printer market is to reach $167.4 billion by 2012 from $138.4 billion this year.
Equipped with Intel's vPro or Centrino processor and MS' PC management solution of ``System Center Configuration Manager 2007,'' Samsung has begun selling desktops codenamed DB-P70 and DB-Z70 and an NT-P55 notebook to local corporate clients with the belief that the local PC market will take up 50 percent of the total four million this year.
In the non-memory chip sector, Samsung took over TransChip, an Israeli non-memory chip developer, for reportedly $70 million for the first time in a decade to cushion the weakening memory chip prices.
The unit price of the outdated 512-megabit DRAM plunged over 90 percent from early January this year and is now about to sink below $1. Analysts expect the chips used in personal PCs to fall a maximum of 20 percent by the first quarter of 2008.
Additionally, Samsung has been engaged in the final stage of merger talks with two or three other overseas companies relating to the non-memory sector and officials say the result will be available by the end of the year.
``The decision to buy the chip designer for image sensors (CIS) used in camera, mobile phones and other multimedia devices well reflect the company's will to reap greater profits in a brighter market,'' an official from the company's chip division said.
Samsung expects the number of CIS it produces will rise to 1.68 units in 2009 from this year's 746.3 million units.
iSuppli, a market researcher, predicted that the global CIS market will grow to $3.49 billion by then from $2.97 billion in 2006.
Health Sector
Wireless broadband Internet (WiBro), which has been adopted as an international standard at an International Telecommunications Union's conference in Geneva last week, is another ``money pot'' for the company, as the technology will create a market worth 94 trillion won over the next five years in South Korea, one of the world's most Internet savvy countries.
Two weeks ago, Samsung Electronics unveiled four sets of WiBro devices ― a smart phone, a multi-handset and two USD modems. The 16.6-millimeter bar-type SPH-M8200 smart phone provides photo-editing functions, while the folding device SPH-P9200 model supports voice-video calls, according to company officials.
Along with its interests in the solar cell, robot and bio technology sectors, Samsung wants to challenge Philips and Siemens in the growing healthcare industry after developing a finer digital flat panel X-ray detector (FPXD) with Vatech, a local manufacturer of medical devices.
The company hopes that the product will become a stable money pot as it will bring in over 50 percent profit per unit and be advantageous to security, construction and shipbuilding sectors.
``We will start mass-producing the detector during the first quarter of 2008,'' Yun Jin-hyuk, executive vice president of Samsung Electronics' Mobile LCD Division, told reporters last week, adding that the company has been in talks with local manufacturers to introduce advanced detectors, offering real player functions in July 2008.
Industry sources say the global FPXD market is expected to reach $7.2 billion in 2012, or 212,000 units, from $700 million, or 19,000 units in 2008.
Mixed Outlook
``We still maintain a `buy' position for Samsung Electronics as the recently announced plans and expected massive restructuring in the global semiconductor industry will add upward momentum to the company,'' said Kim Hyun-jung, an analyst from Tongyang Investment & Securities.
``The overall outlook of Samsung Electronics is quite positive, considering its fast shift in searching for new growth engines and brighter perspectives in its traditional sectors ― handsets and LCD TVs. However, the gloomy outlook in the semiconductor division will hamper a strong rebound in its stock price until the second quarter of 2008,'' Hyundai Securities analyst Kim Jang-yeol said, emphasizing the semiconductor division had accounted for 70 percent of the total sales, last year.