Report: Distracted Samsung wary of Japan rivals’ progress

Jan. 17, 2008 – As it weathers softness in the memory markets and domestic allegations of executive mismanagement and slush-fund coverups, Samsung Electronics is increasingly worried about a future showdown with rapidly progressing Japanese rivals, according to a local press report.

Samsung did manage to eke out a profit in its overall memory business, but didn’t break out DRAM vs. NAND, and the former was probably a loss operation just like for everyone else, while the company’s fab-line fungibility to NAND kept overall numbers in the black, notes the Nikkei Business Daily.

But what “alarms” Samsung lately are the big strides being made by Toshiba, which is aiming to add two more facilities to the four plants at its Yokkaichi base in Mie Prefecture. Combined with the output of partner Sandisk, the two aim to overtake Samsung in worldwide NAND sales.

Big changes in Japanese LCD partnerships also mean more robust competition for Samsung, the paper notes — Toshiba is pulling out of its Hitachi-Matsushita JV to go with Sharp, while Matsushita aims to make the former JV into a subsidiary and go it alone. Samsung currently supplies LCD panels to Toshiba and Hitachi, and Sony-Samsung are in a LCD manufacturing JV. Sharp aims to supply 40% of the panels used by new partner Toshiba for >32in. LCD TVs by fiscal 2010, and that means Samsung’s business with Toshiba likely will suffer.

While these changes happen, Samsung finds itself in an unusual situation back in Korea, where it’s under piercing scrutiny by regulators for alleged operation of a slush fund to finance shady operations, and concerns are being raised whether the company can make quick & savvy business decisions while this is ongoing. Indeed, the paper noted, Samsung’s projections for FY08 capex revealed in its 4Q07 financial presentation were not finalized, due to an internal study analyzing investments of Toshiba and other rivals, as well as the probe by special prosecutors.


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