Samsung Group

Samsung (which means "three stars" in Korean) was founded by Byung-Chull Lee, the son of a wealthy landowner who had studied briefly in Japan. In 1936, at the age of 35, he moved to the city of Taegu and set up a rice mill, but he ended up spending more time trading a variety of commodities, including dried fish, wool and textiles. Two years later he incorporated the trading operation as the Samsung Commercial Co. and soon branched out to Beijing and Manchuria.

Lee managed to go on operating during the Second World War; in fact, he expanded into transportation, food and beverages, real estate, and other businesses. In 1947 he moved his headquarters to Seoul and established an international trading operation called Samsung Mulsan.

Samsung's operations were devastated during the Korean War, looted by both sides during the conflict. Lee was left with only one business, the Choson Brewery in Pusan, a city that had been spared by the fighting. Using that as a base, he re-established Samsung in 1951 and resumed rapid growth, thanks in large measure to the company's role in supplying the United Nations forces that remained in the country. He created the Cheil Sugar Company in 1953 and the Cheil Wool Textile Company the following year. (Cheil means "number one" in Korean.)

With the success of these operations, Lee moved into the service sector, with the founding of the Dongbang Life Insurance Company and Samsung Construction and the purchase of extensive bank holdings. By the end of the 1950s Samsung had become a true chaebol.

After Park Chung Hee seized power in 1961, Lee was accused of tax evasion and other financial crimes. Yet he managed to have the politically-motivated charges dropped in exchange for an agreement to turn over to the government a huge fertilizer plant he was constructing. Lee later regained control of the plant, but in the mid-1960s found himself and one of his sons again embroiled in a public scandal. And once again, Lee managed to escape jail by turning over the fertilizer plant to the government.

These troubles did not slow down the company's growth. Samsung diversified into department stores, papermaking, broadcasting, newspaper publishing, and other fields. In 1969 the company established Samsung Electronics with help from Japan's Sanyo. The electronics company first got involved in producing inexpensive black-and-white television sets (designed by disassembling foreign models) that were supplied to customers such as Sears and J.C. Penney, which sold them under their own name. The company soon expanded to color televisions, VCRs, and microwave ovens.

Meanwhile, the Samsung Group continued to grow, entering, with government encouragement, such fields as shipbuilding, aircraft engine maintenance, petrochemicals, and other heavy industry. The government, however, limited automobile production to company rivals Daewoo and Hyundai. In 1980 the company purchased Korea Telecommunications and renamed it Samsung Semiconductor and Telecommunications, which soon became an important producer of memory chips and was later merged into Samsung Electronics. After Chun Doo Hwan seized power in 1981, the government took over Samsung's television and radio stations.

Samsung Electronics gradually transformed itself from a low-end producer into a manufacturer of more sophisticated equipment. This went along with an ambitious marketing drive to make the company's name better known to consumers abroad. By the late 1980s Samsung was becoming as familiar as Japanese brands like Toshiba and Hitachi.

Under pressure from the Korean government, Samsung took steps to limit its focus on a smaller number of industries, especially electronics, chemicals, and heavy industry (including shipbuilding). As for electronics, Samsung moved beyond mass-produced memory chips to a leading position in the production of specialized semiconductors, thanks to alliances with Japanese companies such as NEC and Toshiba. Samsung’s heavy industry business sought to expand into automobiles (with help from Japan’s Nissan) and airliners.

The company’s ambitions were tempered by the Asian financial crisis of the late 1990s, but once conditions improved, Samsung moved aggressively in markets such as telecommunications devices, flat-panel displays and digital appliances. At the same time, Samsung gave up on automobiles, selling its car business to Renault in 2000.

By 2003 Samsung led the world in memory chips and flat-panel displays and trailed only Nokia in mobile telephone sets. The company’s electronic products were so well regarded that in March 2005 the New York Times published a story headlined: “Samsung Is Now What Sony Once Was.” That year the company announced it would invest the equivalent of $33 billion to build nine new chip lines in South Korea, creating 14,000 jobs in the process.

Soon, Samsung’s business results were looking less impressive. Operating profits began to slump as Samsung faced increasing competition in its key markets. Business Week suggested in mid-2007 that Samsung was having “a Sony moment.” The bribery investigation launched by Korean prosecutors in late 2007 may be a sign of worse things to come.