Lee Soo Chul, Executive Vice President, Samsung Corporation

November 26, 2003

The Management Strategy of Samsung in East Asia

Provisional Translation

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Contents

Changes in the Global Economic Environment, and Economic Cooperation in East AsiaI

Issues on Korean Economic CooperationII

Samsung’s Global Management and Management Strategyin East AsiaIII

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I. Changes in the Global Economic Environment and Economic Cooperation in East Asia

Threats against global trade liberalization

Failure to reach consensus at the WTO Ministerial Conference in Cancun:

Multilateralism → Bilateralism, regionalism

Strengthening of regional economic cooperation regimes

Bilateral/regional trade agreements: 184 as of May 2003Expanding economic cooperation in the EU, NAFTA, and CIS regions

Emergence of China and the potential of ASEAN

China, the World’s Factory—Trade volume in 2002: $620.8 billion (6th in the

world)

ASEAN—Population: 570 million, total trade volume: $700 billion

Accelerated promotion of economic cooperation among ASEAN, Korea, China, and Japan

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Increasing necessity of regional trade expansion and sense of urgency

Reinforcement of economic blocs, relative disadvantages of countries outside the region, etc .

Expectations: modernization of industrial structure; market expansion

Concerns: trade imbalance; excessive dependence on Japanese technology

Consent to an FTA in principle, but harbor certain concerns.

Cooperation between Korean and Japanese entrepreneurs is important.

Korean businesses must strive to develop technologies and improve quality in order to enhance their competitiveness.

Korean Views on a Korea-Japan FTA

II. Issues on Korean Economic Cooperation

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Developing Korea into a Business Hub in Northeast Asia

Business hub in Northeast Asia

Logistics base Business center

- Ports, airports - Invite multinational corporations to locate their Asian headquarters in Korea

- Financial center in Northeast Asia

Improvement of core facilities

- Incheon International Airport

- Busan/Gwangyang ports

-> The Eurasian Silk Road

System modernization

- Improvement of laws and

systems- Customs-Free Zones, international logistics support centers

Area development- Designation of Incheon, Busan, and Gwangyang as Special Economic Zones, and development thereof- Expansion of IT infrastructure

Improvement of the environment

- Operating environment(Tax, foreign exchange,　labor/

　management relationships, etc.)- Living environment(Education, housing, culture, etc.)

Relaxed tensions on the peninsula and south-north economic cooperation

Favorable environment for foreign people and firms

II. Issues on Korean Economic Cooperation

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Export

Import

Trade balance

6

23

△17

91

74

17

238

174

64

1990 1995 2002

□ Korea’s trade with China ($100 million)

185

126

59

326

170

156

299

151

148

1990 1995 2002□ Japan’s trade with Korea ($100 million)

Export

Import

Trade balance

Trade structure of Korea, China, and Japan

II. Issues on Korean Economic Cooperation

120

61

59

359

219

140

618

400

218

1990 1995 2002□ China’s trade with Japan ($100 million)

Export

Import

Trade balance

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SECA(Electronics)

SAS,SEA,STA,SISA,SSI (Electronics)NY,LA (Corporation), San Jose corporation (Electro-mechanics)SDIA (SDI), SDSA (SDS), SOA (Techwin)NY corporation (Life Insurance, Securities)

SEM,SAMEX (Electronics)SDIM (SDI)SEMSA (Electro-mechanics)

SELA (Electronics)

SEASA (Electronics)

SEDA (Electronics)SDIB (SDI)

SEMUK,SEUK,SSEL (Electronics)STP (Corporation)

SEP (Electronics)SPEM (Electro-mechanics)

SESA (Electronics)

SHE (Electronics)SEF (Electronics), CorporationSHPOL (Electronics)

SEI (Electronics), Corporation

SENA (Electronics)

SEBN,ELS (Electronics)

SEG,SSEG (Electronics) FFT branch (Corporation)SDIG (SDI), SCD (Corning)Local corporation for Electro-Mechanics

Kazakhstan (Corporation)

SER (Electronics)

SGE (Electronics)

SSA (Electronics)

UNION (Techwin)

SEAU (Electronics)Sidney (Corporation)

SIEL (Electronics)

SAVINA (Electronics)TSE (Electronics)SEMTHAI (Electro-Mechanics)SECL SDMA,SEMA (Electronics)

SDIM (SDI)SCM (Corning), Corporation

SEMPHIL (Electro-Mechanics)SEPCO (Electronics)

SEIN (Electronics), Fire & Marine Insurance

SAPL (Electronics)Corporation/Electro-Mechanics

TSED,SSEC,TSEC,TTSEC,SST,SESS (Electronics)TSOE (Techwin), TSEM,DSEM (Electro-Mechanics)SSDI,TSDI (SDI), TSSC,SSG (Corning)SDSC (SDS)

SET (Electronics), CorporationSDIH(SDI)

III. Samsung’s Global Management and Management Strategy in East Asia

Samsung’s overseas operations 116 subsidiaries in 67 countriesSales from local subsidiaries in 2001: $29 billion

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(US$ Bil)

Sales Net Income

20021998

72.0 72.0

0.2 0.2

8.9 8.9

116.8 116.8

III. Samsung’s Global Management and Management Strategy in East Asia

Over 5 years (1998 to 2002) --Sales and net income increased 1.6 times and 45 times, respectively.

Sales in 2010: 1.9 times that of 2002Pre-tax profit expected to increase 2.1 times

Samsung’s business performanceBrand value

$10.8 billion in 2003 (25th in the world)

($8.3 billion in 2002, 34th)$70 billion in 2010

(Source: INTERBRAND)

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III. Samsung’s Global Management and Management Strategy in East Asia

1980s: Globalization’s beginningsEstablished sales subsidiaries mainly in developed countries.Built production facilities in Southeast Asia and Eastern Europe for roundabout export.

Early 1990s: Acceleration of Global operationResponding to the international trend of regional trading blocs

→ entered local markets.Entered the Brazilian, Indian, and Chinese markets.Expansion into the U.K., Mexico, Malaysia, and other countries together with Samsung’s partners and affiliated companies.

Late 1990s: Restructuring stagnated businesses due to quantity-oriented overseas operations, and shifting the strategy to IT business

Established new subsidiaries in China, India, and other emerging markets.

2000s : Differentiation based on local characteristics Aspiring to enhance the synergy effect of the entire company.

Overseas investment strategy

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Korea

Global strategy controlheadquarters

- R&D - Develop and produce highvalue-added products

-Develop internationalmanagement resources

China

Second mostfundamental market-Second domestic demand market-Production site for theglobal market

-Utilize rich human resources

Mexico

Base forroundabout export

- Produce low-to-mediumclass products

- Produce and supply parts

U.S.A

Center for local marketing,and introduction of new

Technologies and information

- Local marketing center- R&D center

(product development, design)

SoutheastAsia

Production site formultiple purposes

-Production for roundaboutexport

- Supply parts to the U.S.A.and Europe

- Production for re-import to Korea-Establish procurement andregional control headquarters

Europe

Production facilities to secureentry into local markets

- Produce high-price-range products- R&D and design centers- Local marketing center- Establish regional controlheadquarters

Japan

New export marketCenter for Introducing

new technologies

-R&D center－Local marketing center

Parts/semimanufactures

Finished products

Technologies

III. Samsung’s Global Management and Management Strategy in East Asia

Management strategy by market

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III. Samsung’s Global Management and Management Strategy in East Asia

北京天津

威海

東莞深Ìã

香港

蘇州 上海中國

▣●

●

▣●●

●●▣

寧波

●

順德● 惠州

Operations in ChinaElectronics, Electro-Mechanics,SDI, Corning, etc.

Electronics

Electronics, SDI, Corning

Electro-Mechanics

68 locations nationwide26 production facilities

Sales in 2002: $7.7 billion Sales in 2003: $10 billion

R&D Center

Heavy Industry

Corporation

深圳

Beijing

China

Tianjin

Weihai

Dongguan

Souzhou

Shanghai

Ningbo

Shunde

Hong Kong

Huizhou

Shenzhen

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III. Samsung’s Global Management and Management Strategy in East Asia

Advance into the global market more aggressively utilizing China as a production center.Increase production facilities, operate R&D centers, and secure excellent human resources.

Increase production facilities: 19 in 1999 → 26 in 2002R&D: Establish related R&D centers (including communication research facilities),when building factories.Secure high-quality human resources under the initiative of the Head Office in Korea.

Implement a strategy that emphasizes brand (image) in order to differentiate the company’s products from others.Adopt a two-way sales strategy.

Export of products made in China directed by the Head Office in Korea.

Domestic sales in China conducted mainly by local sales subsidiaries.

Chinese market strategy

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III. Samsung’s Global Management and Management Strategy in East Asia

Electronics, SDI,Corning

Electronics, Electro-mechanics

Electronics-related corporations

21 locations in 6 countries

Sales in 2000: $3.1 billion Sales in 2002: $4.2 billion

(38% growth)Samsung Corporation, Dai-ichi Kikaku,Samsung Fire & Marine Insurance, Samsung Heavy Industry, etc.

Operations in Southeast Asia

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III. Samsung’s Global Management and Management Strategy in East Asia

Enhance brand value.Increase top market share products in each country and expand sales of high-end products.

Supply aspect (production costs) → Demand aspect (market and earning opportunities)

Enhance synergy effect of affiliated companies.Introduce innovative processes and implement bench marking among affiliated companies.

Conduct joint sales activities.

Secure high-quality human resources.

Southeast Asia market strategy

Lee Soo Chul, Executive Vice President, Samsung Corporation

Thank You