Samsung bid for high-tech supremacy

Press, 20 July 1988, Page 32

Samsung bid for high-tech supremacy

NZPA-Reuter Seoul Samsung Group, whose cheap television sets, microwaves and personal computers have hit it big on the American market, has ambitions to become one of the world’s top high-tech makers by the early 19905. The group, among South Korea’s three biggest “chaebol” or business conglomerates, says it also intends to reach into the chemical sector, building a huge complex to produce hundreds of thousands of tonnes of ethylene-based oil products by 1992. The expansion plans, which business sources say are bold even for such an experienced group, are the fruit of the new thinking at Samsung since Mr Lee Kun-hee took control after the death last November at age 77 of his father, founder Mr Lee Byungchull.

The group announced in June it would merge its flagship companies, Samsung Electronics and Samsung Semiconductor and Telecommunications (S.S.T.), as early as November.

The merger will streamline the two companies’ sometimes overlapping production of electronic items. “We want to be in the world top five makers of high technology by the early 19905,” said one senior Samsung executive who declined to be identified.

Samsung Electronics’ range of home appliances includes colour televisions, video cassette recorders, refrigerators, personal computers, and microwave ovens. Some 75 per cent of their products are exported.

5.5. makes semiconductors including 64 Kilobyte DRAM (Dynamic Random-access Memory) and 256 K-Dram chips, and has developed a onemegabyte DRAM chip due to go into mass production early in 1989, the company says. It currently produces 7 million 256 KDram chips a month. 5.5. like its sister company, also produces personal computers. Sales have been so good that it doubled this year’s export target to more than 60,000 units from 30,000 in 1987, mostly sold to the United States. Samsung Electronics, meanwhile, expects to sell 250,000 units abroad in 1988, sharply up from about 100,000 exported last year, the majority again to the American market.

With the merger, separate personal computer sales and production efforts will end,, the official said.

“The company will be better prepared to cope with harsh international market conditions, including U.S. protectionist efforts,” he added.

Seoul’s growing trade surplus in the past two years has brought criticism from the United States and other trading partners. Under heavy American pressure. South Korean currency (the won) has been revalued more than 8 per cent this year after an 8.72 per cent rise last year. The Samsung merger was designed to pair products with technology in the electronic sector, on the model of advanced countries such as Japan, the official said. “We also want to lower the ratio of our sales given over to consumer electronics, in favour of more profitable industrial and office automation,” he said.

One U.S. analyst in Seoul, Mr Bill Stoops of Citicorp Scrimgeour Vickers, said Samsung Electronics, as a consumer electronics maker, would benefit from having an in-house chip manufacturer just like its Japanese competitors. “But it will now be directly exposed to the notorious cyclicality of the semiconductor business, and to the precarious finances S.S.T. has acquired through non-stop capital expenditure to expand their facility in the last several years,” Last year, Samsung Electronics posted a net profit of 34 billion won (8NZ74.6 million) on sales of 2.4 trillion won (SNZ4.7 billion). S.S.T. gained a net profit of 15.6 billion won (SNZ34M) on turnover of 564.3 billion won (SNZI33M).

Coupled with the rationalisation of its electronics sector, Samsung’s attack on the petroleum products market has raised a lot of eyebrows in the South Korean chemical industry. Within four years, its new factory complex on the west coast near Sosan is scheduled to be turning out 350,000 tonnes of ethy-lene-based products It will be a new departure for the Samsung Group, which — unlike huge rival Hyundai with its car and ship-building divisions — has had little exposure in heavy industry, concentrating its efforts on textiles and electronics.