Session 4. Mr. Mr. BK Yoon, President and CEO of Consumer Electronics Division

Transcription

1 Session 4. Mr. Mr. BK Yoon, President and CEO of Consumer Electronics Division Hello, I am BK Yoon. I would like to thank you all for coming! It is an honor for me to stand before you today to speak about the Consumer Electronics Trend and the future of Samsung. The weather seems even nicer than yesterday and I believe that you have brought this cool air to us today. Before I begin, let's take some time to think together about Consumer Electronics, which I will refer to as 'CE'. CE products are closely tied to our everyday lives, fundamentally affecting our lifestyles. In the kitchen, we cook with food ingredients that has been kept fresh by the refrigerator. We use washing machine to wipe out all the stains in clothings. we use vacuum cleaner to keep the house dirt free. After we are done with all the house work, we turn to TV or listen to music to relax. Lastly, I don't need to describe the importance of having an air conditioner in the summer. Now, can you imagine how our lives would be without consumer electronics? Indeed, lasting a day without them would be a painful experience for all of us. There are a few more unique characteristics of CE products that I would like to point out. CE products have longer life cycles than IT products, so, brand reliability is a must-have. Products need to be made right in the first place, and always maintain high quality. There is a strong connection between every CE product as consumers wish to decorate home with seamless design and have similar user experience. Therefore, purchase of one product from certain brand can easily trigger the additional purchases of the exact same brand. So, CE products, that we can easily experience anywhere at home, play vital roles in determining Company's brand and image.

2 I believe there are two critical questions that need to be answered at this time. First, can TV business generate sustainable growth? Second, can Appliance business become Samsung Electronics' next driving force? The simple answer is Yes. There are numerous opportunities in the CE market. First, let's take a look at the TV market. In 2011 and 2012, most of developed regions implemented an Analog Switch-off, which created a huge pull in effect of demand. Therefore, starting 2014 we expect the market to climb up to more than 100 billion dollars once again. UHD TV in particular, is going to be the main growth driver. It will be offered at an affordable price, and consumers would be given a variety of choices from different line-ups. The market research- company expects UHD TV market to grow more than five times, but, we believe it could do even better. In addition, we expect the premium segment to grow at a faster pace not only in developed market, but also in emerging market as well. In fact, a tremendous opportunity lies in emerging market. Analog Switch-off will start to take off in year 2014, so we expect increase in demand from current forecast model. Now, let us take a look at the appliance market. Appliance market maintains a steady growth rate, as appliance is closely tied to people's basic needs. It's a 260 billion-dollar-market and we expect it to grow 5% every year. With the rising income level, consumer's quality of life increases. This leads to the consumer's growing desire for better products, which in turn, causes the price of appliance product to increase every year. If you take a look at the slide, you can clearly see that there is a growing demand for more luxurious, spacious and eco-friendly product. There is also a huge opportunity in terms of competitive landscape.

3 Since the appliance market is fragmented with regional strong players, there is no dominant player with global market share over 20%. Therefore, if we maximize our global business competency, we have a very good chance of becoming the Top global player beyond any other competitors. As we can all see, there remain many opportunities in the CE market. Along with huge addressable market, there are new areas that we can further expand into such as B2B, content, software, and solution. Next, I would like to talk about our strategy. Let's start with TV business. In the past, Japanese companies once dominated the TV market over 35 years. In the middle of 2000, we were able to take the lead by capitalizing on momentum shifts such as Flat Panel Transition, and Digital Transition. In order to seize the initiative and lead the TV industry trend, we launched innovative products every year. We introduced Bordeaux, LED TV, and Smart TV with convenient Smart Interaction. This year, we have launched the world's largest UHD TV named Timeless design with Evolution Kit, and the curved OLED TV. As a result, we have remained as the Global No.1 TV manufacturer for 7 consecutive years since 2006, and we are confident that this year will be our eighth as we have secured No.1 spot in the first half. Globally, we lead the market in over 60 countries, and we have over 30% market share in most major regions. In the premium segment, we have solidified our status as the market leader. In the 60" and above zone, we currently hold No.1 market share of 37%. In $2,000 and above zone, our market share has reached 48%, and exceeds the combined market share of other top 5 companies. Perhaps the most meaningful achievement for us is that we are now ranked as the most preferred TV brand surpassing once formidable rivals. However, many challenges are awaiting for us to tackle.

4 Our status as the market leader is being challenged by the major TV competitors that are striving to become next market leaders, the 2nd-tier brands that have cost advantage, and IT companies that are attempting to enter into the market with media playing devices. We will maintain our leadership through following strategies. First, we will lead the UHD market. Samsung's UHD TV will produce the highest picture quality while being the largest in size. It will also be differentiated by having multiple form factors such as the world's first curved design. Second, we will reinforce our core competencies. We will go beyond every competitor's reach by providing the best picture quality developed by our own picture engine, applying creative design, and offering various line-ups. Third, we will expand our Smart TV business. Samsung's Smart TV will be equipped with more convenient User Interface, and various content & services to bring new user experience. Lastly, we will strengthen experience marketing. As a part of innovative Shop Display, we are creating 'Smart TV Story Zone' where customers can gain first-hand experience of Samsung TV's all the features and benefits. Also, in order to deliver the premium value of our brand, we will expand our foot-prints into famous cultural spaces for TV exhibition. We will be fully prepared to respond to any changes in business environment and overcome any challenging obstacles, so that we can continue our leadership as the Industry's pioneer. Next, I would like to move onto our home appliance business. Technically, appliance is an analog business that has a long product life cycle, and local preference for its product varies greatly. It also has high barriers to entry since it requires heavy investment compared to the other digital products. Therefore, appliance is a slow moving industry that has not undergone a disruptive innovation in over a century. Now, the time has arrived for appliance industry to embrace the market-changing innovation, and Samsung will be the one to lead the change.

5 Samsung's innovative products will spark the consumers' desire for better products, which in turn will reduce the product life cycle drastically. As a result, appliance market will grow bigger than what we expect. By bringing disruptive innovation, Samsung will lead the market, and make a quantum leap that surpasses all the competitors beyond the point of comparison. Here are Samsung's strategies on innovative products that will bring life-changing experiences. For refrigerator, we will create a new premium category and continue to secure our Top position. We have brought capacity innovation that maximizes the space within the same frame, Smart storage solution that makes organization so much easier, and new embedded solution like sparkling feature that offers luxurious taste. Samsung will continue to reinvent and deliver the best value to consumers. For washing machine, we will lead the market paradigm with green technologies, which can significantly reduce energy and water usage while enhancing the washing performance at the same time. So far, we have introduced the eco bubble, which saves energy usage up to 70%, and the air speed dry feature that dramatically reduces water usage from 52 Liters to zero. Next year, we are developing washing machines with enhanced green technology. For air conditioner, we are establishing total air solutions by expanding from residential to commercial area, and from cooling to improving Indoor Air Quality. With residential air conditioner, we are completely changing the product usage pattern by introducing the product that can be used all year long rather than just during the summer season. We have also introduced slimmed product, which occupies less space than the conventional models. With commercial air conditioner, we will continue to develop differentiated products that have more capacity while being smaller and lighter. With those in place, we will provide unlimited solutions from small to large sized buildings. For vacuum cleaner, we will lead the premium market with cutting-edge technology. We are already redefining consumer's cleaning experience

6 by Motion Sync cleaner that significantly improved the mobility with the scientific design of racing wheelchair, and by robot cleaner that dramatically enhanced the cleaning performance with the integration of several digital technologies like sensor and mechanics. Kitchen presents a big opportunity for us. It's a large market with size nearing 70 billion dollars, and its premium segment has a huge growth potential. Therefore, we plan to drive our kitchen business in full-scale. We are preparing differentiated-packaged products that range from microwaves to dishwashers, which can ultimately transform the traditional ways of cooking. Along with product innovation, we are investing heavily in building the global infrastructure. The number of our manufacturing sites has increased from seven in 2008 to twelve in 2013, and we will continue to add more. We have also established 5 Lifestyle Research Labs to focus our study on each region's culture and lifestyle. They are being used to discover new product concepts, and we will further expand them globally. We are performing various-marketing activities to deliver the premium value of our products. We are collaborating with famous chefs, renowned-furniture companies, and high-end retailers. In fact, Harrods has opened a new brand showcase that provides dedicated-premium home space using Samsung's White Goods ONLY. Market has begun recognizing our continuous efforts towards the innovation. We received favorable reviews from all the famous press and magazines across the world. Consumer Report rated our refrigerators and dryers as the best product of the year in 2013, and JD Power named our washing machine as the top product for five consecutive-years. Samsung has now taken its first step in disruptive innovation, and there is much more to come.

7 Eventually, we hope to become the industry's gold standard and the unquestionable leader by developing innovative products. Now, before I get into the final chapter of explaining Samsung CE Vision, I would like to share a short highlight video. Let's take a look. [ Video Clip - 1:00 ] As Samsung reinvents itself as the industry's disruptive innovator, we expect TV business to generate sustainable growth, and Appliance business to become the Global No.1. Our ultimate goal is to create happier homes through innovative products that can influence the world and people's lifestyle. We have a vision to take a step further and become a brand that lives and breathes with consumers. Thank you for your attention. Q&A Session Question 1. How do you think about concerns in the market that TV industry becoming more lowgrowth business due to the market saturation? Answer 1. Starting next year, TV market demand will grow continuously. In addition, UHD TV and Smart TV will bring a new growth momentum in the premium market, which Samsung excels in. Especially, Smart TV market will grow at a much faster rate in the very near future as the entire ecosystem such as network, content and service is getting fully prepared. With much improved User Interface and killer content, Smart TV will ultimately lead a new paradigm shift in TV industry. Question 2. There are various product portfolios in your HA business. What do you consider to be the most important factor for your strategy in terms of growth? Also, can you tell us more about 'Smart Appliance'? Answer 2.

8 Samsung will introduce the most innovative products that elevate consumers' quality of life. In this sense, Samsung will be able to bring a market changing-innovation, and take the quantum leap. For Smart Appliances, the market is shifting towards convergence, not only within Appliance products, but also with other devices like TV, Mobile, etc. Since Samsung is one of the very few companies with the ability to provide total solution, it will be able to seize a momentous opportunity in this market. Questions 3. Today, the competition seems to have intensified in TV market. Chinese brands are gaining momentum backed by strong cost competitiveness, Japanese brands are aggressively trying to regain the past success. What are your thoughts about the current competitive landscape in TV market? Answer 3. We will be able to respond to any challenges by reinforcing our core competencies, such as world's best picture quality and innovative design. Also, we are well prepared to lead UHD TV market, delivering immersive UHD experience to consumers. In addition, as shown by our world's first curved UHD TV in IFA 2013, we will continue to seize initiative in design. By maintaining our unparalleled superiority, I am confident that we will be able to solidify our No.1 status.