[REPORTER'S DIARY] Can-do Samsung Electronics paying the price of haste
Once Samsung Electronics sets a target, it moves swiftly to achieve it. The company took only 9 years to become the world's largest maker of dynamic random access memory (DRAM) chips after it entered the business in 1983.
With a can-do spirit and fast, successful execution, Samsung Electronics has become Korea's largest company and a technological leader globally. The company's speed may also at times be its undoing, as transparency may have been sacrificed and corners may at times have been cut in the rush to be No. 1.
A recent flurry of haste-related shortfalls in chips and smartphones suggests it may be time for the company to err on the side of the basics. It now risks failure reminiscent of the Galaxy Note 7 fires or the Galaxy Fold rollout.
The company seems to recognize as much given the dramatic mea culpa at the shareholders meeting last week, where management apologized — with a deep bow — for low chip yield rates and an app on smartphones that intentionally slows performance.
The game optimizing service (GOS) app that the manufacturer installed by default on smartphones reduces the performance of processors by almost half when users play data-heavy apps.
The manufacturer made matters worse by programing the GOS shut off when users were testing device performance using benchmarking software tools, an act deemed as a form of manipulation by developers.
It was double deception and dented the reputation of the world's largest smartphone maker, a company facing issues related to the overheating of the Galaxy S21.
Samsung Electronics is also struggling with the production of advanced chips in its foundry, or contract chipmaking, business. Kyung Kye-hyun, head of the company's semiconductor business, conceded during the shareholders meeting that "it took some time to ramp up production in the beginning stage."
The acknowledgement follows media reports that Samsung has failed to meet the targeted yield rate it set with its clients in producing 4-nanometer chips.
An internal probe was started last month into the foundry division to verify the cause of the subpar performance.
Samsung Electronics has invested tens of billion dollars every year to become the top player in foundry and system chips.
What Samsung calls "non-memory business," which covers system chips, like processors and sensors, and the foundry business, has long been considered the last remaining area in semiconductors to be conquered by the tech company.
Samsung Electronics has been talking big and throwing out some big numbers.
In 2018, Vice Chairman Lee Jae-yong announced the goal of becoming the largest player in non-memory by 2030, committing 133 trillion won into the business from 2018 through 2020. Last year, it announced a more outsized investment plan totaling 240 trillion won over three years, although it didn't specify how much will go towards semiconductors.
A significant portion of the investment will be aimed at pushing the technology and introducing 3-nanometer products in the first half of the year, ahead of TSMC. TSMC had 52.1 percent of foundry market and Samsung held 18.3 percent in the fourth quarter last year.
Hoping that the planned 3-nanaometer chips become a game changer, the chipmaker is pushing parts suppliers to meet tight deadlines and ambitious targets.
The all-hands-on-deck approach has worked for the company in the past. It went from having no presence in the memory business in 1983 to producing 64-kilobyte DRAMs that same year, making it the third to manufacture that product following Micron and Toshiba.
Samsung Electronics built its first chip factory in only six months, an outstanding pace given that a chip plant typically requires an average of 18 months for construction. Company founder Lee Byung-chul and son Lee Kun-hee pioneered the semiconductor business and demanded tight deadlines to seize on the opportunities in chip cycles.
Newspapers at the time reported that the company's workers were "working around the clock."
The strategy has limits, and that has been evident in recent years.
The Galaxy Note 7 recall for battery fires is a case in point. Follow-up reports in 2016 found that high-level executives at the company pushed up the introduction date of the model, potentially missing an opportunity to further test and evaluate the smartphone model.
Six years after the recall, Samsung Electronics appears to be getting ahead of itself again, and it could be a good time to shift the focus back to quality assurance.
Being ahead of everyone else only matters when the work is done properly.
BY PARK EUN-JEE [email@example.com]