Samsung announced its plans for world domination Tuesday.
The South Korean conglomerate said it would invest approximately $20.6 billion and boost employment by around 45,000 as part of its expansion into solar, energy efficiency, light-emitting diodes and other green markets. Samsung has already said it wants to be number one in solar by 2015.
In January, Samsung said it would invest around $6.6 billion into solar and wind projects into Ontario.
If you work at a green company, this is probably really scary news. Why? I'll give you three reasons.
First: while many conglomerates often become saddled by bureaucratic inertia, internal politics and conservative product planning, Samsung has shown it can escape that trap. Back in the mid-1990s, the company was a second-tier maker of the kind of electronics you might buy at a drugstore: alarm clocks, portable air conditioners, portable TVs. The company's management didn't put much stock in industrial design, branding and marketing. Quality control was middling.
Then came the 1997 Asian currency crisis, which hit South Korea particularly hard. Samsung was forced to slash roughly 34 percent of its work force, dropping from 83,800 employees to 55,000 worldwide. It also had to sell, dissolve or restructure 100 business groups.
Rather than follow the usual strategy -- cut prices -- Samsung decided to go upscale. It hired Foote, Cone & Belding and Western marketing execs to build a brand and became an Olympics sponsor. It even began to hire designers in Tokyo and from schools like Parsons, the New School for Design in New York and the Royal Academy of Art, whereas the old Samsung was just as likely to hire a ring-tailed lemur as an art-school grad. An early presentation on global branding by a new marketing hire was met with silence by execs, a Samsung executive told me a few years ago, until then-CEO Jong Yong Yun said: "I know what you are thinking, but touch him and you're dead."
By the middle of this decade, Samsung had become the leader (or within striking distance of the number-one spot) in TVs, cell phones, flash memory chips, displays and other categories. It received kudos for things like the first dual-screen phones and improved quality, which then made it a sought-after partner. Samsung no longer lived in the shadow of Sony (NYSE:SNE). In consumer electronics, it was the equivalent of the Super Bowl.
During another episode, cell phone quality began to falter. Yun had workers build a huge pile of recently produced cell phones. They were then crushed.
Second: manufacturing prowess. Samsung Electronics has 111 subsidiaries, offices in 194 locations and nearly 167,000 employees. It produces components as well as finished products. And this is just the electronics division. The Samsung group includes companies specializing in hotels, construction, chemicals, securities, sugar, etc., all of whom are potential test customers and lab partners. Much of the research and manufacturing know-how for solar panels will come straight from their LCD TV lines.
Three: nationalism. South Korea's unemployment rate hit 5 percent in January, high for the nation. It also sees China absorbing the export opportunities in green. The recovery from the currency crisis was paved by exports. Relations between the government and Samsung and LG remain quite amiable. A former Samsung president a few years ago served as the minister of information technology.
Thus, you've got a company that's rich, powerful, obsessive and willing to adapt itself, that also works with the government on industrial policies. Rather than buy companies like Siemens (SI) or General Electric (NYSE:GE), Samsung builds from within. But don't take my word for it -- ask Sony about them.
The company has already laid out an ambitious carbon reduction plan. It wants to reduce greenhouse gas emissions from both its operations and from the use of its products by 50 percent by 2013 on a normalized sales basis. In 2008, Samsung and its products emitted 9.4 million tons of greenhouse gases, with about 60 percent of the emissions coming indirectly through product use. By 2010, greenhouse gases will be down 45 percent from 2001. By the end of the year, it wants to reduce standby power on all of its electronics to 1 watt.
"A large portion of our manufacturing is in semiconductors, so there, reduction is about simplifying the lines, being more efficient about processing the wafers," David Steel, senior vice president of strategic marketing, told us last year.
What could hurt it? Conglomeritis could always strike and stifle the push. The company may also come to learn that selling TVs remains far more profitable than solar panels. LED bulbs will quickly decline in price, taking some of the excitement out of the market. Many of the markets Samsung wants to enter already have strong incumbents, as well.
On the other hand, the electronics giants all fear that consumer electronics may continue to get more difficult and challenging over time. Green, many believe, will be the best path for growth. Either way, expect to see Asian giants like Samsung more often.