Samsung's Rise in Digital TV

The South Korean company that made its name in chips is ready to dominate the living room with its all-purpose, flat-screen televisions

by Moon Ihlwan

Samsung Electronics (SSNGY) has pulled off a coup in the cutthroat electronics industry. Until around 2000, Japanese companies ruled the consumer-electronics world, particularly in the television business where Sony's (SNE) Trinitron models dominated for decades. No more. Now the South Korean company is at the top of the pecking order.

In a recent report on the $99 billion industry, market researcher iSuppli noted that Samsung, which has achieved premium, global-brand stature only in this decade, kept its lead in the second quarter of this year with a 12.4% share in the world TV market. Korean rival LG Electronics , was the runner-up with 11.4%, followed by Dutch group Philips (PHG) with 7.1%, and Japan's Sanyo Electric (SANYF) with 6.3%.

Leapfrogging Competitors

"Samsung's leadership is going to continue in the future," reckons Riddhi Patel, principal TV analyst at iSuppli. "In the past few years, Samsung has done a great job in improving its brand image."

Samsung's advantage could widen once traditional, picture-tube TVs are phased out. In the high-tech segment of flat-screen TVs using svelte plasma or liquid crystal display (LCD) panels, Samsung has been the top player for the last seven quarters. In the April-to-June period, its flat-panel share of 17.3% was a whopping 6.3 percentage points bigger than second-place Sharp's (SHCAY) 11%.

This is no small achievement for the Korean company, which in the 1980s and 1990s absorbed the needed technologies from its Japanese mentors before seeking out the innovations to beat them at their own game. Samsung first leapfrogged its rivals in the 1990s in memory chips. Early this decade, it did the same in cell phones and flat-panel displays.

Capturing Customers with a "Smart Package"

Now Samsung wants to stake out a leadership position in digital TV—an anchor product in the age of the networked digital home.

"We've targeted digital TV as our flagship product in consumer electronics," says Chu Woo Sik, Samsung's executive vice-president. "In this age of digital convergence, consumers tend to ask for a total solution for their entertainment, education, and security at home and we can provide a smart package." Samsung is talking to leading content providers in the U.S. for a tieup to provide such services, according to Chu.

It's part of Chief Executive Yun Jong Yong's plan to bolster Samsung's digital media unit, which has long lagged behind the chip and cell-phone divisions in terms of generating revenues and profits. Last year, Samsung became the world's first company to top $10 billion in revenues from TVs alone. "We have for years braced ourselves for a paradigm shift from analog to digital technology and our efforts are beginning to pay off," says Kang Young Kie, the vice-president in charge of charting long-term strategy for Yun. "Spillover effects from our TV brand will be significant."

Rollout for the New Bordeaux

To prepare itself for a digital TV future, Samsung has made sure it has an ample supply of flat panels. In 2003, it began a $20 billion project at Tangjeong, south of Seoul, to churn out LCD TV panels measuring 40 inches or larger diagonally. Two of the three LCD panel factories are owned and financed by a joint venture with Sony (BusinessWeek.com, 11/28/06).