Samsung’s Seoul patrol

If you want an idea of how prosperous South Koreans are, you could start by looking in their refrigerators.

There you would find kimchi, naturally. But if you’re visiting Seoul – as I did recently to experience Samsung’s Digital Roadshow – you would probably find this native dish stored in a separate ref from the other food. This, confides one Samsung marketing person, is "mostly because of the smell."

Separate refs for kimchi. It’s a brave new world for Koreans, and for Samsung.

Samsung makes a fine kimchi refrigerator, of course. But they also make several other high-tech refs as well. They are, indeed, on the cutting edge of refrigerator technology. Their latest "smart" fridge is called Quatro, and I was privileged to get an inside peek at it during the recent road trip to Seoul organized by Samsung Electronics Philippines Corporation (SEPCO).

Already a world leader in sales with its side-by-side refs, Samsung’s Quatro doubles this by offering four separate cooling compartments, each with temperature controls, to keep food fresher longer. The locked-in compartments and separate cooling systems mean no transfer of temperature – or smells. Also, you can rearrange and reset the quadrants, allowing up to 375 liters of freezer space, or 506 liters of refrigerating capacity. Its streamlined design earned Quatro US Consumer Reports accolades and an International Consumer Electronics Show Best Innovation Award in 2006.

The bottom line is, Samsung makes cool refrigerators. Earlier models already featured the Family Information Center – refs with wireless TVs and radios built into the doors, a food management system that lets you know when items are running low, a digital schedule and calendar, even a family messenger digital memo pad. All operated by remote control.

Clearly, such high-tech living does not come cheaply. Already a hit in Europe and the US with some of their smart appliances, Samsung wants a bigger bite of Asia, and they are targeting the high-end consumer who believes in the promise of a brave new home of the future.

Samsung takes its role as the reigning electronics giant of Asia seriously. It has marshaled all of its resources towards an annual $1 billion in Asian sales by 2010. More importantly, it regularly funnels some 10 percent ($5 to $6 billion) of its annual profits into research and development (R&D), resulting in technological advances that are driving what it cheerily refers to in its ad campaigns as "Purer Living."

The concept is called "convergence," and it promises to turn our homes and kitchens into the futuristic pads of The Jetsons within a decade or so through "integration and networking of technology." In its broadest terms, this means every gadget in your household would be operated from a central panel or via remote control. Look closer and you see that Samsung is busy thinking up ways to apply their R&D to a wide range of home appliances, some fanciful (like robot vacuum cleaners), some practical for health-conscious modern lifestyles.

Having grabbed 23 percent of the cell phone market in the Philippines (right behind Nokia), SEPCO is now looking to sell more refrigerators, washing machines and other advanced home appliances here, aimed squarely at the A-B market.

The Silver Nano frontload washing machine is one such device. Using Samsung’s patented Air Wash System, the Nano promises to make clothes cleaner, fresher-smelling and largely dust mite-free (a big concern among asthma-plagued Filipinos). The Silver Nano even removes bacteria and allergens from laundry for up to 30 days. The trick is hot air, which cycles through the wash, penetrating the molecules of the fabric and deodorizing at the same time; the hot air is pushed through a condenser, which separates and removes the dirty water; then the cycle repeats over and over. Also key is Samsung’s Vital Ion technology: a system that generates H and O2 ions during the wash to neutralize active oxygen molecules, which are harmful to skin and cause aging.

This same Vital Ion generator drives Samsung’s air conditioners, and you can see how the whole technological package ties in with a vision of a holistic home environment free of germs.

This is perhaps why Samsung’s ad copy for the Digital Roadshow seems so relentlessly cheery: the company truly believes it can change the world through technology, offering "a gift for a fruitful future" and "an abundant lifestyle for mankind."

Breathless prose aside, Samsung has a lot to be cheery about. Founded in 1938 by Lee Byung-Chull, the company has grown from a small exporter of dried fish and fruit with 36 employees to a mega-corporation with 128,000 workers worldwide. Since entering electronics in 1969, its product line has grown to digital media (AV, TVs, DVD players and such), mobile phones, IT technology (mostly semiconductors and flash memory) and digital home appliances – or the "White Group." To kick off the Roadshow, we took a three-hour bullet train ride on the KTX (Korean Train Express) to Samsung’s Gwangju factory, where some 60,000 refrigerators are manufactured daily. It was an impressive, if speedy, tour and though we didn’t get to watch big-screen TV highlights of the World Cup on the bullet train, we did get a sense of how integrated Samsung’s world is.

Throughout the Gwangju factory, you will notice flow charts: complicated color diagrams posted everywhere, monitoring workflow and productivity. There are even charts featuring smiley faces – or frowning faces – posted at work stations to indicate who is, and isn’t, meeting production targets. Samsung takes this competition stuff very seriously.

Part of SEPCO’s job is to find out what Philippine consumers want. For years, they have taken their Digital Roadshow to target markets in Southeast Asia – Thailand, Vietnam, Malaysia, Indonesia, Philippines, Australia – to showcase the benefits of their leading-edge products. There, they hold focus-group discussions to learn what each country’s lifestyle needs are, and to elicit comments on every facet of their products.

We made the Roadshow trip with about a dozen Samsung distributors from the Philippines who have a better idea than most about what sells back home. Filipinos, as indicated, love their Samsung cell phones; expensive frontloading washers may be a somewhat tougher sell.

But that’s the purpose of the Roadshow: to increase awareness of what Samsung is going to do next. (Selectively, of course: cameras were banned on some portions of our trip, due to intellectual property right laws.)

The following day at their Samsung Showcase plant in Suwon, we strolled through a time capsule of TVs – all built by Samsung starting from 1969 (when they entered the electronics industry with vacuum-tube black and white sets), to the LCD flat-screen present. Each TV displayed a sample Korean TV program from the era. We saw mobile phones emerge from the barbell-sized models of the early ’80s to the current credit card-sized slim phones. It surely is a brave new world for Samsung.

We also saw an early attempt at convergence – an integrated appliance from 1983 that never quite caught on: a microwave with a five-inch TV display mounted on top, apparently for those who like to micro and catch up on their soap operas at the same time.

After the history tour, another showcase room gave us a better glimpse of the future. Samsung was proud to show off their latest gadgets, including cell phones with much higher memory capacity. One phone for next year includes a camera with up to 10 megapixels of memory, matching the resolution density of 35mm film (it even says "cheese" in Korean before taking your photo). For music lovers, MP3 necklaces with up to four gigabytes of storage will also make the rounds. And another 3G HD music phone coming soon holds up to eight gigs of MP3s. In the highly competitive world of cell phones, gadgets will be king.

Samsung’s flat-screen TVs are among the world’s top sellers, so it was nice to see what the company is now doing with large-screen entertainment centers with 5.1 surround stereo, as well as innovative flat computer terminals set up for our viewing.

We moved from consumer electronics to Samsung’s "White Group." Perhaps most intriguing among the home appliances was a Smart Microwave Oven that reads downloadable recipes with a barcode scanner, then programs the micro to cook your dish to perfection. The cardboard recipe disks are kept on a ring near the micro; you just pop in the dish, scan it and Samsung guarantees "better cooking performance." The Smart Oven is currently available in Korea and certain Asian markets with ties to registered suppliers.

Even more intriguing was our visit to the Kiheung semiconductor plant in Suwon. There, we were asked to remove our shoes to view through glass the "clean rooms" – large, sealed environments where semiconductors are manufactured by lab technicians (no cameras allowed, of course). Silicon is grown from crystals, spun to remove impurities until it resembles a shiny pizza dish, then cut into tiny chip surfaces that will hold a vast array of circuits and transistors. The white suits, masks and gloves can remind you of The Andromeda Strain, but it’s necessary to keep the area spotless: a single speck of dust, a piece of human skin, can ruin a chip.

And chips are what will continue to drive Samsung’s success. Flash memory is the backbone of most their gadgets, and exporting semiconductors forms a key corner of their business. From the original 64K chips made by the company in 1970, Samsung is now charting territory way past the gigabyte: the future will be in terabytes (about 1,000 gigabytes), capable of storing the entire US Library of Congress on a single 20TB memory card. And after that? Samsung’s semiconductor gurus are talking about a "fusion era" – where IT and chip technology will fuse with biotechnology, possibly for medical uses, though they’re not breathing a word yet.

Throughout all this, you get the sense that Samsung – and perhaps Koreans in general – are reluctant to envision any negative side to technology. Seoul, of course, is one of the most Web-connected places on the planet. Everyone’s online, all the time, though ironically it’s often hard to get cell phone roaming service. While the Western media report a sharp rise in online gambling addiction, or the cloning data scandal that led to the resignation of key genetic researchers – and even as missiles lit up the skies over Pyongyang while we dined at Seoul’s chi-chi Top Cloud restaurant – Koreans continue to embrace technology, preferring to take great pride in their digital world, and leaving the moral querying to others. After all, you can’t overtake Sony without breaking a few eggs.

In his forecast on the future, The Next Century, veteran journalist David Halberstam commented on the power shift that was going on between Japan and Korea, even back in 1991. He had interviewed a former minister of education in Japan who noted: "There is a moment when a society explodes ahead, when its citizens are grateful for the improvement in their lives… Korea is just entering that stage, Japan is in the middle of it, and America is on the far side of it."

After all, Korea was long in the shadow of Japan, its identity almost extinguished during World War II. A hard-scrapping nation, it’s no wonder Korea takes pride in its ascendance, and has an almost mystical faith in technology. I asked SEPCO’s Consumer Electronics Team GM, Antonio Mauricio Jr., what his biggest surprise was about living and working with Koreans. "Their strong sense of national pride" was his unhesitating answer.

Part of Samsung’s rising success rests with its integrated structure, a conglomerate model based on Korea’s chaebol concept, allowing top-down command of dozens of product lines and industries. Though the chaebol was largely dismantled after the 1997 Asian currency crisis, Samsung still operates much the same way: from the basic chips to the largest big-ticket appliances, the company wants to be in charge of the whole process. Second best is never enough.

"We want to be the most admired company in the Philippines," explains Spencer Shim, SEPCO president and CEO. "That is our vision. Our strategy is to be the top-tier brand in all of our industries."

He agrees that Samsung’s advantages will continue to be aggressive R&D and a focus on convergence. "One of the strong points of Samsung Electronics is our company has all products, not like other companies. For example, Sony has only AV products, and Panasonic has AV and White Group, but they don’t have complete IT products and mobile phones; and Nokia has mobile phones but they don’t have AV and digital appliances. Our investment of total revenue is more than 10 percent, almost twice as much as other companies. The reason is because we have to keep introducing advanced products for our customers, to meet their consumer demands. It may not take such a long time, between even IT products and home appliance products, for the products to be merged. And our company is ready for this."

When I asked Shim about Samsung’s performance in the Philippines, he saw room for improvement: "Especially in terms of the mobile phone line, I’m happy about our sales revenue performance so far. Our market share is about 23 percent as of last year. This year, our target is 25, 26 percent. We’re after Nokia, they’re No. 1 and we’re No. 2."

Shim is an amiable man who spent several years as a country manager in the Philippines before heading up SEPCO. He’s not blind to the huge disparities in income. "I believe that the pricing of all the products should be affordable to the customer, so we are trying to match up affordable price positioning for all products.

"In the Philippine market, the purchasing power is quite okay, compared to other Southeast Asian countries. Of course, we can’t compare with advanced countries like the US, Europe, but among the Asian market, the Philippines is quite good. Even though the average annual income is only $1,100 year, classes A and B are our major target markets. So all of our product line are now focused on classes A, B, and even C."

Will Samsung be introducing cheaper products to meet all price points in the Philippines soon? "It depends on the market," says Shim. "Our company is ready to do it. We are capable of making those kinds of products that the market is demanding. The quality is the basic condition that every product should have. Even those (lower-priced) products should be accompanied with top-class quality.

"Unfortunately, at Samsung we don’t have enough product lineup for class D and E yet. But maybe sometime, why not?"

So for now, Samsung will focus on its target market: those with the disposable income to aspire for (as the ad copy goes) "leading-edge R&D for the happy and comfortable life of mankind." Readers of The Philippine STAR’s "Modern Living" section, for instance.

It really is a brave new world.