Samsung’s winning way

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Samsung’s winning way

Samsung Electronics Co., the world’s largest computer memory chip producer, set another record operating profit of over 5 trillion won in the second quarter. Together with 4.3 trillion won profit from operation in the first three months, the company has earned that same amount it did in 2009 in just the first six months of this year.

Samsung Electronics owes its stellar first-half performance to a recovery in the global consumer electronics market that led to strong demand for memory chips. More than half of its operating profit came from memory chips. Prices for dynamic random access memory chips and NAND flash memory chips have soared thanks to the popularity of smartphones and other new digital gadgets. The foreign exchange rate also helped.

The ability to earn 5 trillion won in operating profit is restricted to a select number of companies around the world. Samsung Electronics’ performance also stands when compared to other technology companies barely muddling through a sluggish global market. Samsung Electronics’ aggressive, pre-emptive investments amid the risks presented by a global financial crisis paid off.

But it is too soon to pop the champagne corks. In the corporate world, what goes up also goes down. Just a year ago, Samsung Electronics incurred a loss due to a supply glut in memory chips and plummeting chip prices. The memory chip market is that volatile. Samsung Electronics is an old hand in knowing the precariousness of its markets by now.

In addition, Samsung Electronics, which is the world’s second largest mobile phone maker, faces a strong headwind from Apple Inc.’s iPhone. That’s why the stock market reacted to its better-than-expected second-quarter numbers with little enthusiasm. And the company’s prospects for the remaining year remain foggy because of the slump in the debt-ridden euro zone. Fortunately, Samsung Electronics pledges not to be indulgent and promises to move forward.

The company announced that it will double capital investment in memory chip lines from its initial budget to 11 trillion won and invest in new lines of business. Samsung Group Chairman Lee Kun-hee announced a new path for the conglomerate’s favorite company on returning to his post in March.

“In 10 years’ time, the products and business Samsung is known for will be gone,” he said. “We will have to start from scratch. We cannot afford to dillydally. We must march forward.”
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