Heads Back into M&A Market

Samsung Electronics takes over TransChip of Israel to strengthen position in system LSI sector, celebrates 38th anniversary

Samsung Electronics Co. celebrated its 38th anniversary on Nov. 1 by announcing a new vision to increase the number of its products that are global market leaders to 20 by 2012 from the current 11.
Vice Chairman Yun Jong-yong, in his anniversary speech, said revenue from sales would amount to $100 billion this year for the first time in the company's history and will maintain its phenomenal growth rate through 2009 to make itself a global first-rate company firmly managing its operations around the world.
He sees more changes in the next 10 years than those in the past, when the company transformed itself into a top-class electronics maker known around the world during the change from analog to digital.
In order to reach those targets, he said the company needs to sustain the strength of its leading products and make inroads into emerging markets, create new markets, and build-up its creative organizational culture.
The vice chairman said the sales of its core products including memory chips, cell phones,
LCD and digital TV would reach $10 billion with printers and system LSI to be added to the core-products category.
He said the company will explore new markets for its new products in a business frame totally different from the existing one as well as continue to create new products.
Those new business areas include the bio, health, energy and environment fields under its strategy to search and create new markets for new products.
In the meantime, Samsung Electronics bought Israeli non-memory chipmaker TransChip, which develops technologies for system LSI chips, for $70 million, the company announced recently.
The move is the first one for the company in 13 years, when it took over AST, a computer maker in the United States, which shows the company may have changed its strategy of developing its own new growth engines to growth through M&As. The company said on Oct. 30 the takeover is part of its strategy to strengthen its system LSI business, now emerging as its new growth engine. It set up Samsung Semiconductor Research Lab in Israel with some 60 research staff. The company has been focusing on the development of the system LSI sector since 2002 by making large investments in technology and manpower, but has been unable to keep the non-memory chip sector growing along with its memory chip sector, which is leading the world.
TransChip develops CMOS image sensors CIS that go into cell phones. The company, set up in 1999, is capitalized at 42.5 billion won. Investors in the company included Texas Instruments and it drew its research staff from such well-known computer makers as IBM and processing chipmaker Intel. Industry people see Samsung's move as a signal for a modification of Samsung Group's management strategy, as the group has stayed away from the M&A market since its failure with AST in 1994. The group had been following a strategy of hiring talented people and developing its own technologies for its continued growth.
But, with growth stalling in the past three years, the group set up a task force to find new growth engines and M&A targets and other Samsung affiliates are likely to follow the lead of the electronics maker.
Samsung Electronics Vice President Choo Woo-shik announced the company's target to reach annual sales of $150 billion and pre-tax operating profit of $20 billion by 2012, something that no other company has yet accomplished. The company's sales totaled $87.9 billion last year with a pre-tax profit of about $10 billion.
In order to achieve the goal, he said the company will increase the number of its core products such as printers, system LSI, and Wibro (mobile internet), in addition to the existing core products including chips, LCD, mobile phones and electronic home appliances.
Samsung Electronics aims to continue to keep expanding its lead in such products as chips, mobile phones and LCD with rival makers, along with the development of new growth engines in order to sustain its growth. He said the company will pay from 30 to 50 percent of its profit as dividends and buy its own shares to boost the price of its shares within a flexible range every year. nw

Samsung Electronics Vice Chairman Yun Jong-yong.