Samsung's high-end product strategy may have won it laurels, but it is no booster for its bottom line.

For Samsung, the high priest of high-end technology, which made a name for itself in the global electronics arena, these are tough times. The company, which has had rivals on their toes and has won consumers hearts across the globe, by being Koreas electronics major in bringing out innovative models, is slowly realizing that this very strategy may not always be rewarding, or so, its latest quarterly performance suggests. During the second quarter, the company recorded a fall in its operating and net profits on both sequential as well as year-on-year basis. On a segment-basis, except LCD, all the key segments saw a decline in operating profits, both sequentially and annually. The company was hit by lower sales in segments like telecom and appliances, which account for more than one-third of its overall sales. The companys lackluster performance during the quarter, however, cannot be brushed aside as a one-off event. In fact, a look at the fourth quarter results for the last fiscal, i.e., FY 2005, tells that the Korean innovation warrior is indeed feeling the heat as sales plateau and operating profits take a hit; the firm reported that FY05 reported 33% decline in the operating profits with flat sales.

Samsung Electronics emerged on the global scene only towards the beginning of the 1990s. It expanded its production capacity significantly to emerge as a major global player in diverse areas. It successfully developed a 64K DRAM VLSI chip which catapulted the brand "Samsung" to be in the global big league. The company's early venture on electronic products was focused on mass production by adopting low-cost technology backed by "follow-the-leader strategy". However, under the leadership of Jong-Yong Yun, the company underwent necessary restructuring and diversified into areas like CD players, semiconductors, and LCDs. Samsung's strong R&D focus has been paying rich dividends. By 2003, the company became known for Digital Media Business, Telecommunication, Digital Appliances, Semiconductors, and LCDs. By 2004, it became the world's second biggest seller of mobile handsets, next only to Nokia, displacing the US mobile giant Motorola. In 2003, it surpassed Intel as the leading producer of NAND flash memory. This helped in increasing its brand value ($5.2 bn) from 43^rd place in 2000 to 20^th place ($14.9 bn) by 2005, replacing the Japanese electronics and entertainment major, Sony, in the process. Focusing on high-end products, the company has enriched its portfolio with the world's first 82" LCD TV with LED backlight (model LN-S8297DE), Fully Buffered Dual In-line Memory Module (FB-DIMM) with 8GB density, the world's smallest and lightest desktop color laser printerCLP-300 weighing 30 pounds, and mega pixel slide-up camera phones.

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