Samsung Electronics wants to dominate cutting-edge chipmaking

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A gamble by Lee Jae-yong, the company’s boss, will have profound consequences—and not just for Samsung

SAMSUNG ELECTRONICS is a behemoth. The South Korean tech company is the crown jewel of the mighty Samsung, as the country’s conglomerates are known. It makes more smartphones than any other company in the world, as well as home-entertainment systems and appliances. It dominates the manufacturing of memory chips, which are used to store data on electronic devices and whose price has been pushed up by the global semiconductor shortage.

The outcome of Mr Lee’s gamble will have profound consequences—and not just for Samsung. It matters to South Korea, whose president justified Mr Lee’s parole as being in the national interest, given the’s importance to the economy. And it will affect the global semiconductor industry, the critical nature of which has been underscored by the worldwide chip shortage. To ensure success, the man whom acquaintances describe as shy, decent and astute must also summon ruthlessness.

One option would be to follow Apple and develop a services business, which has grown from 8% of the iPhone-maker’s revenues in 2012 to a fifth. However, despite a few successes, notably in payments and health apps, SE’s efforts to add software and services to its world-beating hardware have been sporadic.

This array of complications and risks helps explain SE’s underperformance relative to other giants, both in consumer technology and chipmaking . Because it combines several relatively distinct businesses, the company suffers from a conglomerate discount. The stock is listed only in Seoul, where limits on exposure to individual stocks have in the past pushed local investors to sell SE, which accounts for nearly a fifth of the KOSPI stockmarket index, whenever its share price spiked.

Perceived conflicts of interest are not its only challenge. Although the memory and logic businesses share some commonalities and overheads, they differ in important ways. Producing memory chips is chiefly about speed, volume and economies of scale. Making high-end logic processors is much more complex technologically, with engineering done at nanoscopic scales and customers increasingly desiring silicon customised for their purposes.

 

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Too bad they still can't make reliable, long-lasting appliances.

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Let's hope it fails. Poor quality in everything it does. AND take a look at it's privacy policy some time. When I had a Samsung phone, it actively prevented me from screenshotting some horrible Terms.

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