Inside Samsung, one of the most unique tech companies
For nearly 300 weeks in a row, my co-host Freddy and I have been following the goings-on in the tech sector to talk about it in our podcast Computer Club. For five years, we’ve read articles, listened to podcasts and watched videos to prepare for the week’s podcast. The better that research, the more spontaneous the conversation feels — just as a jazz musician dares to improvise because he knows he has a solid foundation.
By doing this, we have a lot of ready knowledge about current events, but sometimes, it’s necessary to dive deeper into a topic so you can ask even more focused questions. As I’m on Unpacked in Silicon Valley this week, I decided to delve into Samsung, one of the most extraordinary tech companies in the world. In addition to many newspaper articles and documentaries like this one by Vice, I’ve significantly benefited from Samsung Rising, the book by American tech journalist Geoffrey Cain.
A tangle of companies
Samsung originated in 1938 as a vegetable business but stayed that way for a short time. Over the decades, the company — which means “three stars” — began to diversify increasingly. Offering insurance? Check. Operating an amusement park? Why not, too. Have its own hospital? Fine! Build boats? Sure. The result is not a conglomerate or a holding company as we know it in the West but a spider web of organizations that partially own each other.
The company’s history goes hand in hand with South Korea’s, especially what happened after the Korean War. In the 1970s, courtesy of money from the United States, the government started supporting certain companies and assigning them specific sectors. Hyundai, LG, and especially Samsung grew into giants that became incontournable. Over half of South Korea’s GDP has come from the five largest companies for years — as much as 70 per cent in 2012.
‘It feels like you’ve failed when you don’t work for one of the conglomerates,’ a South Korean student told Vice in an interview. The job applications feel like a state exam: companies only hire people there every six months, and South Korean young people study to pass those tests. Every year, more than half a million students, accounting for 73 per cent of recent graduates, try to get into one of those conglomerates.
These companies have such high standing in South Korea due to the enormous wealth and high standard of living they have brought to the country. Indeed, in theory, South Korea has everything against it: it has few natural resources, and a dictatorial madman runs its only neighbouring country. As such, politics is thoroughly intertwined with businesses, and especially with the families behind them: the so-called chaebol.
Whoever thinks our local businessmen have a lot of power may want to visit South Korea. There, the law of the family of Lee (Samsung), Koo (LG), Chey (SK), Shin (Lotte) and Chung (Hyundai) applies. These chaebol — “wealth groups” — have so much power that they can continue to run their businesses from prison if necessary. Top Hyundai and Korean Air executives have been convicted several times; others skillfully ensured they never ended up in jail.
Quality is my pride
Because Samsung did so well in its protectionist home market, it focused primarily on South Korea for a long time. Consequently, as it expanded internationally, it clashed behind the scenes with cultural differences that are well described in Geoffrey Cain’s book. In it, a picture is painted of a company run like an army for decades, with a lot of hierarchy and top-down decisions. One recruited Samsung Men, generalists who were well rewarded and from whom much loyalty was expected in return.
One of the anecdotes that stuck with me was how Samsung had launched a cell phone in 1995 that was very defective. The management wanted to make a point and called workers from the factory in Gumi outside, where a banner hung with “Quality is my pride” on it, and 140,000 discarded devices lay. These were then set on fire, after which a bulldozer drove over them. That was a message that could count.
The Microwave Man
Decades later, the culture is obviously no longer the same, but not only internally did the company have to search for a long time for how to bring East and West together. On the international stage, the company also sought a unique positioning.
That was decades ago when it wanted to break through in America. In that market, Motorola was already focusing on telephones and Sony on televisions, so Samsung wanted to break open another segment. That became… microwave ovens. Still, that was a risky gamble because, at the time, people thought that those appliances could potentially cause cancer. Peter Arnell, a marketing legend, came up with an original idea. He had a handsome man — a Russian cab driver who had brought him home — pose half-naked with a microwave oven. “Simply healthy” was the campaign’s slogan, because food heated this way would retain more vitamins. See, if Jeremy Allen White could sell more underpants the same way….
From follower to leader
A few years ago, Samsung wanted to reclaim a place in a different market: that of smartphones. The company faced a problem: being such a giant, its competitors are often partners or customers. For example, Samsung uses Google’s software but competes with it simultaneously.
Even more punishing is its relationship with Apple. The Cupertino-based competitor has long bought so many parts from the South Koreans that it would be almost unwise to attack them. For example, the iPhone X, which cost $999, contained so much from Samsung that the company earned $110 per device sold. It forces Samsung into a very schizophrenic situation.
Still, Samsung decided to persevere — and they were right since Apple recently decided to manufacture more and more parts in-house. The South Koreans chose to focus entirely on innovation as a differentiator in their marketing, as few companies worldwide spend as much on research and development. Over the years, the cards have been reshuffled: where Apple was once considered a pioneer, it has become a follower. More than a fifth of all smartphones sold today are Samsung — the once unbeatable Apple comes in second.
I also notice it when friends use my Galaxy S23 Ultra — quite a mouthful. A device with an insane camera that is so powerful that I can use it like a laptop when I connect it to an external display. Courtesy of gaeseon — South Korean for “incremental innovation — the company plans to improve with technologies that competitors will only integrate two years from now. This year, of course, that innovation will revolve entirely around one technology: AI.
