Samsung’s Lee Urges Shift Beyond Hardware in Apple Battle

January 3, 2014 Leave a comment

Samsung’s Lee Urges Shift Beyond Hardware in Apple Battle

Samsung Electronics Co. (005930) Chairman Lee Kun Hee urged workers to adopt new ways of thinking and move beyond their focus on hardware as the world’s biggest maker of smartphones and televisions seeks to maintain growth.“We have to change once again,” Lee said today, according to e-mailed notes from the company. “We must give a bigger push for innovations, including in business structure, so that we can lead industry trends.”

Samsung shipped a record number of handsets in 2013 and posted its highest quarterly earnings, yet its shares had their first annual decline in five years amid signs of slowing growth in high-end handsets and competition from Apple Inc. (AAPL)’s new iPhones. The Suwon, South Korea-based company, the biggest maker of memory chips and flat-panel displays, is focusing on cheaper devices in emerging markets as prices for handsets drop.

Samsung fell 4.6 percent to 1,309,000 won in Seoul today, its biggest decline since June 7, after LIG Investment & Securities Co. cut its share price forecast by 7.9 percent and lowered earnings estimates, citing a maturing of smartphone markets. The benchmark Kospi index fell 2.2 percent.

Lee’s speech comes a day after Google Inc.’s Motorola Mobility unit reduced the price of its Moto X flagship handset to $399 on any U.S. carrier without a contract. That’s about 25 percent less than the previous price at AT&T Inc.’s online store and about 38 percent less than the Samsung S4’s $640 price on the same website.

Higher Currency

Samsung is starting the year with the South Korean won near a 29-month high as the currency’s gains crimp the value of overseas revenue. Samsung got 85 percent of sales from outside its home market in 2012.

Samsung should create new businesses by integrating technologies from different industries, Lee said today.

The company faced patent battles with Apple on four continents and competition in TVs from Japanese and Chinese makers and in chips from smaller Korean maker SK Hynix Inc. (000660)

“Our leading businesses are constantly being chased by competitors, while time is running out for our less-competitive businesses,” said Lee, South Korea’s richest man. “Last year, we engaged in do-or-die battles with companies around the world and endured patent wars in light of market slowdown and prolonged, weak global economic growth.”

Record Earnings

Samsung Electronics will release preliminary earnings on Jan. 7. Full-year operating income will rise to a record 38.7 trillion won ($37 billion) in 2013, according to the average of 40 analyst estimates compiled by Bloomberg. Sales are projected to reach 231 trillion won.

Lee, 71, also leads Samsung Group, which has about 80 affiliated companies globally, including the electronics business. He has a net worth of $11.2 billion, according to the Bloomberg Billionaires Index.

Samsung shipped almost 29 percent of the world’s mobile phones in the third quarter, researcher Strategy Analytics said in an Oct. 29 report.

Global industry smartphone shipments will more than double to 1.7 billion units by 2017, IDC said in a Nov. 26 report. During the same period, the average price will fall to $265 from $337.

Samsung added new models last year, including smartphones with a curved screen and a clamshell design, as it sells products from less than $150 to more than $900.

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

Filed under Macro Trends, TMT Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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