Young trendsetters around the world know which handsets make for essential accessories. Nokia (NOK), of course, and maybe Motorola (MOT). Samsung, definitely. Samsung? Any consumer over 30 may sniff with disdain at the memory of Samsung's cheap televisions and clunky laptops. But that image doesn't apply to today's Samsung Electronics Co. Its flat-panel TVs and laptops feature state-of-the-art design, and its feather-light handsets are the talk of Asia and beyond. Now, the Korean giant is competing with Nokia Corp. and Sony Corp. (SNE) for leadership in high-end, Web-surfing mobile phones.
If you want to know who made Samsung cool, look no farther than Lee Ki Tae, the company's telecom boss. A conservative dresser, he doesn't look like a hipster--yet since taking over as chief executive of Samsung Electronics Telecommunications Network in 2000, Lee has abandoned Samsung's earlier practice of flooding export markets with cheap me-too goods. Instead, his strategy has been to tempt the affluent with high-quality, stylish phones.
The move upmarket is paying off. Last year, Samsung sold 29 million handsets, for 7.1% of global market share, which put the Korean company in fourth place behind Nokia's 35%, Motorola's 15%, and Siemens' 7.4%. In the first quarter of this year, Samsung's market share jumped to 10%, landing it in the No. 3 spot worldwide. Just four years ago, Samsung was in ninth place, with 2.7% of the market. More important, apart from Nokia, Samsung was the only other profitable handset maker last year. Its profit margin: almost 20%, about the same as Nokia's. On top of all that, Lee's division was the star player at Samsung Electronics last year, contributing nearly half of the company's $2.4 billion in profits.
Soon after taking over Samsung's phone operations, Lee, 54, recognized that digital technologies offered a chance to rise into the industry's top tier---a crucial opportunity after Samsung spent billions in the 1980s and '90s trying to catch up in analog applications. "At a time of digital convergence, we can make new waves," declares Lee. To exploit this moment, Lee recruited top engineers to roll out a slew of models. His aim was to sell phones with nifty features--and to be first in the export market to do so. Samsung was the first to field phones that dial on voice command and double as MP3 music players and TVs. And Samsung was the first to come out with an ultralight (under two ounces) phone that is worn like a wristwatch.
A former military officer who taught at an army-communications school, Lee is soft-spoken but demanding. He has been known to throw handsets on the floor to demonstrate their durability while giving tours of his factories. Lee also credits his success to his refusal to lower prices. The average selling price of Samsung phones is now higher than that of Nokia products---$198 vs. $152, on average. "My colleagues thought I was brash, but I was just trying to get a fair price," Lee says, maintaining that the extra features justify the price.
Colleagues and friends say Lee, who has been at Samsung for 29 years, thinks nonstop about his job. "[He] simply can't separate his life from handsets," says Park Sang Jin, his chief marketing executive. If his engineers develop a new model, his wife, two sons, and daughter act as a de facto quality-control team. At his Seoul home, Lee has hung a board where his children enter their opinions and criticisms of Samsung's new products as they play with them. At the office, Lee makes sure that high performers are rewarded handsomely and get the promotions they deserve.
Having sprinted to third place among handset makers, Samsung execs are now racing for second behind Nokia. To Lee, a top ranking is not the sole goal. "What I want to see is Samsung becoming a BMW or Mercedes-Benz of handsets," says Lee. "Revenues are important--but what's more important is the leadership in setting industry standards." That's why Lee is already thinking about 4G phones: Nokia and Motorola are still working on 3G. He won't rest until Samsung invents the next big thing.