Samsung Electronics

Is SMIC a threat to Samsung Electronics?

Samsung is the largest conglomerate in South Korea and according to Gartner report it maintains a lead in the smart-phone market. It has stood against many brands like Philips, Kodak and Panasonic.Samsung is the market leader in memory chip technology and constantly remained ahead of its competitors. Samsung was able to create new market and was developing new applications of memory and latest better technology. Since their operations & their Net Income have always been increasing except when there was an economic downturn. However, even during a downturn they have always been able to maintain their profits and never ran into losses. They have always invested heavily in R&D and hired and tried to retain right talent and trained them so that they could effectively help Samsung Electronics to move ahead.

By 2010, China was expected to become the world’s second largest purchaser of semiconductors after US (Source: HBS Case, Samsung Electronics). And SMIC revenues have increased from $50.3 million in 2002 to $365.8 million in 2003 and have dual listing on the NYSE and Hong Kong Stock Exchange.  In spite of all these facts, it is not a threat to Samsung Electronics. If we see their Operating Margin it is (-) 9.3% compared to 24.1% of Samsung. Moreover, Samsung seems to be a market leader in this industry as it has the highest profit compared to its competitors like Micron, Infineon, and Hynix. SMIC’s profit is less than Hynix and Infineon. So before competing with Samsung, SMIC has to first compete with Hynix and Infineon, thus it is definitely not a threat to Samsung.

Contributed by:-

Ravi Kant

Section A

Strategic Management