Samsung is amongst one of the most common names we hear in the electronic market. Samsung is not just one of the largest consumer electronics manufacturers. But one of the largest components manufacturers as well. We often hear about the television sets, mobile phones, headphones, etc., Produced by Samsung. But today we’ll discuss and learn about other products and services by Samsung. Their business model and its performance over the years and how does Samsung earn money?
The Samsung Group is a multinational conglomerate that originated in South Korea. And is headquartered in Samsung Town, Seoul. It is the largest South Korean Chaebol and comprises various affiliated businesses. Under the Samsung brand. Samsung was established in the year 1938. By Lee Byung-Chul as a trading company. Finally, the company grew into fields such as textiles, securities, retail, food processing, and insurance. In the next few decades. In the late 60s, Samsung entered the electronic industries. And the shipbuilding and construction industries in the mid-70S. Adding to the subsequent growth of the company. After the death of Lee in the year 1987. Samsung got separated into four business groups. Namely Samsung Group, CJ Group, Hansol Group, and Shinsegae Group. Here we’ll see how does Samsung earns money?
Samsung has been progressively globalized its services and products. Especially their semiconductors and mobile phones. Samsung has the sixth-largest brand value (globally) as of 2017. As a result, Samsung also has its own medical extension- Samsung Medical Center. Which is a non-profit healthcare provider founded in the year 1994 by the group. Samsung Medical Center covers-Kangbook Samsung Hospital, Samsung Seoul Hospital, Samsung Cancer Center, and Samsung Life Research Center. The Samsung Cancer Center which is located in Seoul is the largest Cancer center in Asia.
Samsung is best known for its manufacturing- smartphones, television sets, and Computers. But not only that, but they also manufacture monitors, refrigerators, washer dryers, smart home products, etc. And after acquiring Harman Kardon, they’ve started making high-quality speakers as well. Surprisingly, Samsung also makes a lot of money from Apple. Since they sell parts for their i-phones. They sometimes produce RAM, SSD card,s and the Super AMOLED screen for their phones and Apple watches.
Samsung majorly has four operating segments
- Mobile and IT communication: Under this, Samsung deals in communication and information. Such as Telephones, mobile phones, smartphones, and telecommunications equipment for 5G/4G networks.
- Consumer Electronics: Under this, they manufacture and deal in Computers, Televisions, Air Conditioners, Refrigerators, Washing Machines, Microwave Ovens, etc., comes under Samsung electronics.
- Display panels: Samsung sells OLED displays and LCD displays. Used for TVs, smartphones, tablets, notebooks, monitors, laptops, etc., Under this category.
- Semiconductors: Under this, Samsung manufacturers and sells NAND and DRAM flash memory chips, application processors, image sensors, and system scale integrated circuit (LSI) products.
How does Samsung make money?
The Mobile and IT Communication Segment. Which primarily deals with networking equipment and mobile devices. Also, Contributes around $86 billion, i.e. Accounting for about 43% of the total revenue generated by the company. The sales and revenue generation of this segment is 3 times more than the display product division. And about 66% more than the semiconductor segment. The total revenue made by the company is around $203 billion.
Samsung competes with other multinational companies on the basis of the following aspects:
Range of products
Design and aesthetics
Some interesting points includes:
- Firstly, Samsung’s revenue has grown from $178 billion (2015) to $222 billion in the year 2018. However, Samsung’s revenue also declined to $200 billion in 2020. The decline in revenue is primarily driven by the semiconductor segment. Because it is being impacted by lower memory prices.
- Secondly, The revenue of the Mobile communications and IT segment. It grew from $82 billion in 2015 to $85 billion in 2018. Because of higher sales in mobile phones. Although there is an expectation of a slight decline in the revenue as we move forward.
- Thirdly, The revenues of the semiconductor segment grew from about $38 billion in the year 2015 to $73 billion in the year 2018. Because of strong NAND and DRAM pricing. Yet there are chances of the decline of revenues to under $50 billion by the year 2020. After the correction of memory prices.
- Finally, Revenues of the Consumer Electronics Segment. Although reduced from $37 billion in the year 2015 to $36 billion in the year 2018. Because of the low sales of TV sets. There are expectations of an increase in the revenues as we move forward.
- The display segment’s revenues grew from around $22 billion in the year 2015 to $27.5 in the year 2018. So because of the higher sales of LCD.
- There are chances of growth of the revenues to around $29 billion in the year 2020.
However, not just these but Samsung also makes money in the financial services and health care services as mentioned above.
The customer segment which includes corporate buyers and the mass market is also significant. In boosting the sales of the company consistently, which helps the company penetrate a profitable market. Finally, Samsung is also investing in Silicon Valley via various campuses. And helping them a kick-start in software as well. Samsung decided to penetrate many other industries. For example, investing in health care, clean energy, and biotechnology. In the industry, if commodities, Samsung has been winning hearts because of their;
- Appealing designs
- Reasonable prices
- State-of-the-art technology
- Green products
- Higher life expectancy
Possessing a powerful and huge global presence. Samsung succeeds to incorporate a large audience base. Which leads it to enjoy and optimized sales around the globe. Through years of perseverance, backbreaking work, and the ability to rise from the ground, Samsung has achieved extremely high positions. However, their marketing strategies such as socially affinitive advertisements. And business strategies such as diversification. And conglomerate business brought it to its success highs.
Hope you have liked this article, also read: How North Korea Makes Money- Poverty, Nuclear Threats, Sanctions?