Earlier this year it deposed Hewlett-Packard as the world’s largest tech
company by sales. In terms of net profit, it is on course to make more this
fiscal year than the top 19 Japanese technology and consumer electronics
groups put together.
All this obscures the fact that the flagship company of South Korea’s largest
chaebol is increasingly a tale of two units: one very good (semiconductors),
the other fair to middling (panels, phones and digital media).
The first is a largely commoditised market in which Intel, Samsung and TSMC
are emerging as industry titans, selling vast amounts of components to plug
into other people’s gadgets. It should account for just over half of
operating profits this year, from less than a quarter of sales.
But the other unit is showing signs of suffering from years of prioritising
speed over innovation; reacting rather than acting. This is more than mere
cyclicality. Five years ago, for every dollar Samsung spent on selling and
marketing, it spent 58 cents on research and development. Last year, that
ratio fell to 1:0.48. At Apple, a far more aggressive spender on marketing,
relative R&D spending has actually risen slightly over the same period.
Perhaps as a consequence, Samsung is not setting consumers’ pulses racing.
Lacklustre sales of TVs and appliances meant that digital media probably
posted falling operating margins in the second quarter. The handset
division, too, is officially “rebuilding”.
Samsung’s new tablet computer, the Galaxy Tab, bears an uncanny resemblance to
the iPad; the one difference of note is a 7-inch screen, to Apple’s 10-inch.
Those me-too qualities are reflected in one key metric that really matters:
Apple’s $226bn market capitalisation is almost 2.5 times Samsung’s.
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