TECHNOLOGICAL CAPABILITIES AND SAMSUNG ELECTRONICS

The fourth section examines Samsung’s Asian production networks in detail. Initial investments were for consumer goods for both export and local markets. The networks were promptly integrated backwards and linked to the networks of other producers in the region. The final section provides a brief summary of the findings about Samsung’s production networks, along with an analysis of the directions the firm must go if it is to remain competitive in a rapidly changing environment

Samsung in the 1970s: from textiles to televisions

Samsung was first incorporated in 1938 by Lee Byung-Chull, and its main business line was trade. The trading function has continued to be important, first with imports and later with exports, starting in the mid-1970s. Samsung had become one of Korea’s top ten firms by 1950.

In the mid-1950s Samsung entered two manufacturing sectors: sugar in 1953 and textiles in 1956 Domestic demand was huge, and Samsung could start production using imported equipment from Japan and Germany. It was not until 1969 that the firm entered the electronics industry, with the incorporation of SEC.

Samsung’s entry into the electronics industry had four important features that continued to characterize Samsung’s electronics activities into the 1980s: an emphasis on mass production, reliance on foreign technology, a follow-the-leader strategy, and government support. First, its electronics business was significantly influenced by the two manufacturing activities of textiles and sugar. Both industries required a large scale of operation, and Samsung developed know-how through learning-by-doing for more than a decade before it entered the electronics industry. Secondly, its business started with imported foreign technology, having a close relationship with Japanese electronics firms. Having been educated in Japan, Lee Byung-Chull was able to establish informal contacts. Originally Samsung had considered cooperation with American firms, but it finally chose Sanyo and NEC as joint venture partners because of the language difficulties inherent in learning about the American technology  Thirdly, Samsung entered the Korean electronics industry as a market follower. Another Korean firm, Goldstar Electrical, had started assembling vacuum tube radios for a US firm in 1959 and had built up export capabilities for ten years before Samsung entered the industry. Finally, Samsung enjoyed government support for its expansion into electronics. In 1968, the Korean government introduced the Electronics Industry Promotion Law, marking the beginning of official support for the industry.

Samsung’s initial strategy was nothing more than the mimicking of its Japanese rivals. Its aim was to become a vertically integrated electronics