What Makes Samsung Tops in TVs

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But bringing out new TVs in all sizes and technologies at the same time allows them to occupy one section of the display shelf, making it easier to stop shoppers in front of them.

Growth Through HDTV

Another crucial step was to standardize parts that are shared in different models. For instance, Samsung uses identical printed circuit boards for both 32-in. LCD TVs sold in Europe and 60-in. plasma sets sold in the U.S. From next year, all Samsung TVs will share the same software. Such efforts have slashed the minimum time to roll out a globally available model to four weeks, compared with 16 weeks in 2005. That lets factories with supply problems in Europe rely on Asia plants to make up for the shortage.

The leadership at Samsung believes it is poised to benefit from an explosive growth of high-definition TVs. "We are pretty confident we'll grow twice as fast as the industry," says Chu Woo Sik, Samsung's executive vice-president in charge of investor relations. Samsung's TV revenues jumped to $18.6 billion in 2007 from $3.3 billion in 2004, according to DisplaySearch. Samsung doesn't release its revenue targets but said its goal in LCD TVs, the main segment, is to sell between 18 million and 20 million sets this year, up from some 13 million in 2007. For the overall company, operating profits are expected to jump 46%, to $9 billion this year, on revenues of $78 billion, up 19%, thanks largely to better performances in its LCD panel and cell-phone businesses, according to Seoul brokerage CJ Investment & Securities. Samsung's stock has remained little changed so far this year, while the benchmark Kospi index on the Korea Exchange has fallen some 15%.

Sure, the profits are thin in the cutthroat TV business. Yet Samsung has maintained the industry's best profit performance by reporting mid- to high-single-digit margins in the past two years. Chu figures his company should be able to eke out a margin of about 5% this year, despite the negative impact from the U.S. subprime mortgage crisis, thanks to its growing presence in emerging markets. In Eastern Europe, Samsung's market share of 29% is more than 9 percentage points higher than any other rival.

Banking on Minimalist Design

Samsung's optimism stems partly from a stream of innovative design dreamed up by its six design centers in Asia, the U.S., and Europe. The company's minimalist TV design is in sync with a leading trend in interior design these days. "As TV gets bigger and emerges as an important piece of furniture in the living room, greater attention must be given to craftsmanship and lifestyle when you design a TV," says Kang Yun Je, Samsung's chief TV designer.

A good example is its Bordeaux TV. Designers removed speakers from the front to give it a clean, simple look and gave its back a high-gloss finish to make it look more attractive in living rooms even when it is not in use. Samsung has sold 8 million Bordeaux TVs since its rollout in 2006, far exceeding the initial target of more than a million. This month, Samsung began selling a new minimalist model using a bezel reminiscent of crystal, which it hopes will be a bigger hit than the Bordeaux.

If things pan out as Samsung plans, a success in its TV business will help its digital media unit expand its reach. "We expect spillover effects from the brand name established through TVs," says Chu. "As an anchor household product, television could serve as a window to promote our printers and notebook PCs."

Not everyone is convinced. Michael Min, an IT specialist at fund manager Tempis Capital Management, agrees Samsung has all the elements to stay as a strong TV player in the foreseeable future. But he points out that with the migration to digital and high-definition TVs just beginning to take off, "the race to rule the industry is far from over." On top of the likes of Sony and Sharp (BusinessWeek.com, 2/27/07), startups such as Vizio could also eat into Samsung's market share. "Forget about its impacts on printers and notebooks. Its leadership in the notoriously competitive TV industry isn't guaranteed at all."

Probably. But in the past 15 years, Samsung has trounced Japanese rivals in memory chips, cell phones, and flat-panel displays. Until earlier this decade, few would have expected it to jump past Sony or Sharp in TVs. Next up for Samsung: printers and notebooks. Dell (DELL), Toshiba (TOSBF), and Hewlett-Packard (HPQ) should be wary.

Moon is BusinessWeek's Seoul bureau chief.