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1998 SAMSUNG ELECTRONICS ANNUAL REPORT
What’s
it to you?
Samsung Digital...

Table of contents

  • Page 1
    Samsung Digital... What's it to you? 1998 SAM SUN G ELECTRON I CS AN N UAL REPORT

  • Page 2
    ...Advanced technology creating a more world. advanced SAMSUNG DIGITAL...1 FINANCIAL HIGHLIGHTS 4 TO OUR CUSTOMERS AND SHAREHOLDERS 5 1998 TIMELINE 6 MULTIMEDIA & HOME APPLIANCES 10 INFORMATION & COMMUNICATIONS 16 SEMICONDUCTORS 22 RESEARCH & DEVELOPMENT 28 1998 FINANCIAL REPORT 31 GLOBAL NETWORK 64

  • Page 3
    Samsung Digital... What's it to us? Leading the industry into the digital Age. Samsung's success, enables us to rapidly respond to global competition with advanced technology and quality products that will bring us closer to consumers everywhere. And lead the industry into the digital age.

  • Page 4
    ... people digitally improve their lives. property, value, and life-styles. By tapping our full creative potential, More than simply a purveyor of products, Samsung has a new vision of meeting the needs of the digital age through the creation of intellectual we seek to improve the quality of life for...

  • Page 5
    ... N A N C I A L H I G H L I G H T S Billions of Korean Won Millions of US Dollar For the years ended December 31, 1998 and 1997 1 9 9 8 1 9 9 7 1 9 9 8 1 9 9 7 Sales Gross profit Operating profit Net Income 20,084 6,108 3,100 313 18,465 5,764 2,856 124 16,640 5,061 2,568 260 15,299 4,776...

  • Page 6
    ... is your analysis of the business conditions in 1998 and Samsung Electronics' performance during the year? A In the wake of the IMF bailout, we faced the most difficult business conditions in our company history. Aside from the U.S. and parts of Europe, markets worldwide continue to remain stagnant...

  • Page 7
    ... 96 97 98 1998 TIMELINE speed pagers, trunked radio system terminals, and free calls home for athletes. Feb 20 Chonan TFT-LCD plant begins operations. Our third LCD production line in Korea mass 100g PCS phone developed. We unveiled a 98g (68g without battery) digital PCS phone with innovative...

  • Page 8
    ... the year. July 10 TFT-LCDs capture No. 1 global market share position. Our market share shot up 175% over 1997, giving us 18% of the world market. Aug 19 Flat-screen TV developed. A 2-year, US$8 million project resulted in a 29-inch TV that offers zero screen distortion and a computer-like pro-

  • Page 9
    ... of up to 4Gb in capacity in the near future. Sep 28 Third generation cellular/PCS "folder-type" phone developed. Our digital CDMA cellular and PCS technology continued to evolve, producing lighter and smaller hand sets. Oct 30 World's first mass production of digital TVs. Timed with the launch of...

  • Page 10
    ...-Yong Yun / President and CEO ucts, we conducted an Asia-wide and on-site promotional campaign that included opening exhibition halls and naming a Samsung MVP award. Dec 17 CDMA cellular system ordered by Hutchison Telecom Australia Ltd. This 10-year, US $210 million contract covers the equipment...

  • Page 11
    MULTIMEDIA & HOME APPLIANCES Samsung Digital... What's it toyou? Extreme freedom. Basic equipment for surfing used to be just a board and your body. But now my Samsung Digital TV allows me to check the Internet and get a clear picture of surf heights and weather conditions. Man, that's what I ...

  • Page 12

  • Page 13
    12 Sales Multimedia & Home Appliances 9,000 8,018 8.000 7,000 7,843 7,858 6,000 Billions of Korean Won Digital technology is revolutionizing the multimedia and home appliance fields, making life more convenient. Samsung Electronics' advanced multimedia products and user- and environmentally...

  • Page 14
    ... and learn. And low-cost digital storage is making it a reality." FLAT-SCREEN MONITOR HANDHELD PC New 17- and 19-inch DynaFlat monitors with perfectly-flat screens and a maximum resolution of 1,600 x 1,200 raise the bar for graphics performance. The new iZZi Pro handheld PC offers a VGA-class...

  • Page 15
    ... digital broadcasts late in 1998, Samsung was ready with the world's first mass-produced digital TV. DVD PLAYER The DVD-907, a versatile player with the unique ability to play NTSC, PAL, or SECAM titles on any PAL or SECAM TV, debuts in Europe. MP3 PLAYER The new yepp portable players take near-CD...

  • Page 16
    ...with the yepp line of ultralight portable MP3-players. A new format for delivering near-CD quality music over the Internet, MP3 (MPEG Audio Layer 3) is getting popularity among the computer users. MICROWAVE OVEN Microwave shipments surpass the 50 million mark in only 19 years, making Samsung the No...

  • Page 17
    ... is critical in my business. That's why I use a high quality, dependable Samsung digital phone. Information is instant and communication is almost infallible. So no matter where I am _ at home with my kids or in Katmandu _ I'm never out of touch. The whole world is my digital office. Haley Johnson...

  • Page 18

  • Page 19
    ... From leadership in CDMA mobile phones to Olympic sponsorship, Billions of Korean Won Samsung Electronics' 20-plus years of accumulated technology and expertise are making us a world leader in every aspect of the information and communications sector _ from handsets to systems to networks. 1,000...

  • Page 20
    ... of information and communications more than any other industry. In 1998, we continued to raise the performance and value standards that have made Samsung CDMA (code division multiple access) phones international bestsellers. In addition to our ongoing PCS handset supply agreement with Sprint PCS in...

  • Page 21
    ... INTERNET PHONE The new Smart Phone offers the functionality of an electronic organizer with Internet access and e-mail. in a network of some 500 base stations in the Sydney and Melbourne regions, with commercial service SET-TOP BOX New FTTC set-top boxes bring high-speed Internet access, cable TV...

  • Page 22
    ...Nigeria, respectively. [wired systems and equipment] WEB VIDEO PHONE Based on the H.323 videoconferencing standard, the Web Video Phone combines the functionality of a phone with full Internet access, including e-mail and videoconferencing. TV, and telephony services into the living room. For cable...

  • Page 23
    ... of peacefully connecting this world. And maybe others. Samsung semiconductors have benefited every aspect of our lives _ from the way we work, to the way we learn, to the way we communicate. They are the digital souls of our computers, phones, TVs, stereos, satellites, and space vehicles. But...

  • Page 24

  • Page 25
    ...marking its sixth consecutive year as the world's largest memory Billions of Korean Won producer, Samsung Electronics is also a premier technical innovator with credits that include the world's first 256-megabit and 1-gigabit DRAM chips and 4-gigabit DRAM process technology, setting standards as it...

  • Page 26
    ...Rambus® DRAM chips, position- Nam-Hee Hwang line operator are the building blocks of digital technology that make all digital products possible. Samsung continued its leadership in the memory sector in 1998, capturing 18.5 percent of the DRAM (dynamic random access memory) market, 20.5 percent of...

  • Page 27
    ... part of the year. 1998 also saw the start of commercial production at our first overseas semiconductor fabrication plant in Austin, Texas (U.S.). Producing 8-inch wafers and 64megabit DRAM chips, the facility is a prime example of how our world-class process technology is making inroads in the...

  • Page 28
    ...-INCH TFT-LCD Only 4.5kg in weight and 4.5cm in thickness, this advanced monitor can display over 16.7 million colors, making the wall-hanging TV a reality. percent in market share, recording an amazing 175 percent yearon-year growth rate. With a solid lead in the 13- and 15inch display segment and...

  • Page 29
    ... card ICs), IDC (B-CDMA WLL), Cisco Systems (cable modems), Sun Microsystems (Java software, home networking), Thomson Multimedia (TVs, VCRs, DVD players), Toshiba (VCRs), Lexmark (printers), and others to create best-of-breed products in each of our business areas. [multimedia & home appliances...

  • Page 30
    29 100g PCS phone. We are a member of the *cdmaOneTM group that is promoting CDMA cellular and PCS technology worldwide as well as the use of CDMA in IMT-2000 (international mobile telecommunication-2000), the next-generation mobile communications system. During the year, we developed an MMIC (...

  • Page 31
    ... for connection to digital TVs, set-top boxes, and other digital devices. 3-DOME DIGITAL CAMCORDER Designed to capture a 360-degree video panorama, the 3-Dome digital camcorder took the gold medal at the '98 U.S. Industrial Design Excellence Awards. CABLE MODEM Having passed all U.S. certification...

  • Page 32
    Samsung Electronics 1998 Financial Report

  • Page 33
    32 Report of Independent Accountants 33 Balance Sheets 34 Statements of Income 36 Statements of Appropriations of Retained Earnings 37 Statements of Cash Flows 38 Notes to Financial Statements 40 Five-year Financial Summary 62

  • Page 34
    ... 12 to the financial statements, as of December 31, 1998, Samsung Group is in the process of a business swap arrangement involving Samsung Motors Inc. and Daewoo Electronics Co. The operation of the Company may be affected by the results of the business swap, the terms and conditions of which have...

  • Page 35
    ...18,711 356,201 thousand in 1997 Guarantee deposits Other Total current assets Property, plant and equipment, including revalued portion, net of accumulated depreciation (Note 7) Investments in subsidiaries and affiliated companies, less valuation allowance of in 1998 and 1,645,488 thousand 199,486...

  • Page 36
    ... of US Dollars (Note 3) 1998 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts and notes payable (Note 19) Short-term borrowings (Note 9) Current maturities of long-termdebt (Notes 10 and 11) Accrued expenses Dividends payable Income taxes payable Other Total current liabilities...

  • Page 37
    ...STATEMENTS OF INCOME for the years ended December 31, 1998 and 1997 Thousands of Korean Won Thousands of US Dollars (Note 3) 1998 1997 1998 1997 Sales...Net income before income taxes Income taxes (Note 16) Net income Earnings per share (Note 17) (in Korean Won and U.S.Dollar...,895 259,500 2 628,...

  • Page 38
    ... for 1997 Thousands of Korean Won Thousands of US Dollars (Note 3) 1998 1997 1998 1997 Retained earnings before appropriations : Unappropriate retained earnings carried over from prior years Additional accrued severance benefits (Note 2) Net income 31,881 (4,225,455) 313,216,038 309,022,464...

  • Page 39
    ... years ended December 31, 1998 and 1997 Thousands of Korean Won Thousands of US Dollars (Note 3) 1998 1997 1998 1997 Cash flows from operating activities Net income Items not involving cash flows Depreciation and amortization Provision for severance benefits Loss on disposal of property, plant...

  • Page 40
    ...for the years ended December 31, 1998 and 1997 Thousands of Korean Won Thousands of US Dollars (Note 3) 1998 1997 1998 1997 Cash used in investing activities Proceeds form sale of marketable securities Acquisition of marketable securities Proceeds from disposal of property, plant and equipment...

  • Page 41
    ... the laws of the Republic of Korea to manufacture and sell electronic goods, communication facilities, semi-conductors, telecommunication equipment and other similar products. The Company's stock is publicly traded, and all issued and outstanding shares are listed on the Korean Stock Exchange. Under...

  • Page 42
    ... method of accounting for minority owned companies is applied in the primary financial statements of the Company. Equity investments in publicly traded companies excluding subsidiaries and affiliated companies, classified as noncurrent deposits and other assets, are reported at market value and...

  • Page 43
    ... declared non-voting preferred stock, using the weighted average number of common shares outstanding during the period. Product Warranties and Performance Guarantees In conformity with accounting practices prevailing in the Republic of Korea, costs related to repairs, service and other work required...

  • Page 44
    ... 2,341,451,639 Inventory is insured against fire and other casualty losses up to 1,806,432 million at December 31, 1998. At December 31, 1998. 473,269 million of land and construction in progress held by the Company for sale are included in merchandise account and related interest costs of 35,513...

  • Page 45
    ...,185 million. Interest costs of 52,570 million have been capitalized for the year ended December 31, 1998. In accordance with the Asset Revaluation Law (see Note 2), effective January 1, 1980 and 1982, the Company revalued a substantial portion of its property, plant and equipment by 18,564 million...

  • Page 46
    ... South Africa(Pty) Ltd. Samsung Electronics Moscow Co., Ltd. Samsung Almaty Service Co., Ltd. Samsung Ukraine Service Co., Ltd. Samsung Electronics Overseas B.V. Samsung Electronics Mo Center, Ltd. Samsung Crosna Joint Stock Company Uzbekistan Samsung Electronics Samsung Electronics Australia...

  • Page 47
    ...Precision Corporation 51.00 Total investments in subsidiaries Affiliated companies Joong-Ang Daily News California Inc. Norpak Corporation Samsung Display Devices Do. Brasil. Samsung Portugal Productos Electro-mechanicos S.A. Samsung Electronics (UK), Ltd. Samsung Russia Service Center Dagesttankaya...

  • Page 48
    ... Co., Ltd. Samsung Aerospace Industries Ltd. Hotel Shilla Co., Ltd. Samsung Petrochemical Co., Ltd. Samsung General Chemical Co., Ltd. Affiliated companies, Continued : Hewlett Packard Korea Ltd. Texas Instruments Samsung Electronics Porluguesa., Ltd. Other affiliated companies Total investments in...

  • Page 49
    ...Annual Interest Rates(%) Thousands of Korean Won 1998 1998 1997 Hanil Bank Korea Development Bank Korea Long-Term Credit Bank Chohung Bank Korea Technology Banking Corporation Housing & Commercial Bank Korea Merchant Banking Corporation Korean French Banking Corporation Asian Banking Corporation...

  • Page 50
    49 NOTES TO FINANCIAL STATEMENTS (B) Long-term debt denominated in foreign currencies at December 31, 1998 and 1997 consists of the following Annual Interest Rates(%) Thousands of US Dollars 1998 ING Banque Paribas Citibank, N.A. Digital Equipment Co., Ltd. The Long Term Credit Bank of Japan, Ltd...

  • Page 51
    ... TO FINANCIAL STATEMENTS 10. Long-Term Debt, Continued : (C) Debentures outstanding at December 31, 1998 and 1997...1998. (B) US$ denominated floating rate notes On June 21, 1994, the Company issued US$200 million of floating rate notes. These notes are listed on the Luxembourg Stock Exchange, bear...

  • Page 52
    ... price of 72,784 per share. (L) Convertible bonds On June 26, 1997, the Company issued foreign currency convertible bonds of US$300 million for the expansion of manufacturing facilities. The bonds are listed on the London Stock Exchange and will mature on December 31, 2007. A summary of the term...

  • Page 53
    ...as follows: Millions of Korean Won Accounts Machinery and equipment Acquisition Cost 1,919,018 Depreciation Expense Charged to 1998 Operations 172,421 Scheduled future lease payments, net of interest, under these lease arrangements which are included with long-term debt (see Note 10) at December...

  • Page 54
    ... (April 27, 2007). • As of December 31, 1998, Samsung Group is in the process of a business swap arrangement involving Samsung Motors Inc. (the "SMI") and Daewoo Electronics Co., Ltd. At December 31, 1998, the Company holds 34,000,000 shares of common stock of SMI amounting to 170,000,000 thousand...

  • Page 55
    ...appropriate as a reserve for improvement of financial structure an amount equal to at least 50% of the net extraordinary gain on disposal of property, plant and equipment and 10% of net earnings for each year until the Company's net worth equals 30% of total assets. This reserve is not available for...

  • Page 56
    ...NOTES TO FINANCIAL STATEMENTS 17. Earnings Per Share Earnings per share in 1998 and 1997 were calculated as follows : Thousands of Korean Won 1998 Net income Adjustment Dividends for preferred stock Interest expense on convertible bonds which were converted into common stock during 1998 Net income...

  • Page 57
    ...December 31, 1998 are as follows: Thousands of Korean Won, Thousand of US Dollar Company Samsung Corporation Samsung Display Devices Co., Ltd. Samsung Electro-Mechanics Co., Ltd. Samsung Data Systems Co., Ltd. Samsung Aerospace Industries Ltd. Kwangju Electronics Co., Ltd. Cheil Communications, Inc...

  • Page 58
    ...FINANCIAL STATEMENTS 21. Foreign Currency Translation At December 31, 1998, assets and liabilities denominated in foreign currencies and foreign exchange gain (loss) are as follows : Thousands of Korean Won Account (1) Assets Foreign currency deposits... Accrued income Guarantee deposits 351,491,...

  • Page 59
    ...1998, assets and liabilities denominated in foreign currencies and foreign exchange gain (loss) are as follows : Thousands of Korean Won Account Foreign Currencies Korean Won (translated) Translation Loss Translation Gain Long-term loans Other INR USD JPY DEM UAK COP HKD RUR INR CNY CLP...,300)...

  • Page 60
    ... TO FINANCIAL STATEMENTS Thousands of Korean Won Account Foreign Currencies Korean Won (translated) Translation Loss Translation Gain Short-term borrowings...00 2,710,340,540 300,948,249 3,011,288,789 (5,912,923) (5,912,923) 461,210,430 7,563,870 468,774,300 Foreign currency notes and bonds...

  • Page 61
    ...-off to 18 separate companies including Samsung Electronics Service Co., Ltd. during the year ended December 31, 1998. 23. Environmental Standards and Policies Building on its philosophy of "Green Management," the Company continues to seek contribution to promoting an abundant human life and global...

  • Page 62
    ... bonds bear interest at 5% per annum, payable annually, maturing on February, 1, 2004. On December 14, 1998, per resolution of the Company's board of directors' meeting, the Company transferred manufacturing facilities of its Kwangju plant's refrigerator manufacturing division to Kwanju Electronics...

  • Page 63
    62 FIVE-YEAR FINANCIAL SUMMARY As of December 31, 1994 ~1998 Thousands of US Dollars Year 1998 1997 1996 1995 1994 Sales Domestic Export Cost of sales Gross profit Selling, general and administrative expenses Operating profit Non-operating income Interest and dividend income Gain on foreign...

  • Page 64
    63 Thousands of Korean Won 1998 1997 1996 1995 1994 6,494,496,605 13,589,679,922 20,084,176,527 13,975,748,868... 1,232 405,838,831 769,966,975 535,642,340 1,711,488,146 223,630,084 10,674,208 25,780,500 208,523,792 44,368,311 164,155,481 1,784 374,802,357 683,958,106 675,748,406 1,734,508,869...

  • Page 65
    ..., Thailand Tel: 66-2-681-0501 Sales Bases Samsung Asia Private Ltd.(Semiconductor Division), (SAPL) UE square, singapore Tel: 65-833-3200 Samsung Electronics Australia PTY. Ltd.(SEAU) NSW, Australia Tel: 61-2-9638-5200 Samsung Electronics Philippines Co.(SEPCO) Manila, Philippines Tel: 63-2-526-3796...

  • Page 66
    ... Tel:55-11-541-8500 Samsung Austin Semiconductor(SAS) TX, USA Tel: 1-512-672-1000 Sales Bases * Samsung Electronics America, Inc. (SEA) NJ, USA Tel: 1-201-229-4000 Samsung Telecommunications America, Inc.(STA) TX, USA Tel: 1-972-761-7005 Samsung Semiconductor Inc.(SSI) CA, USA Tel:1-408-544-4000...

  • Page 67
    What's next? Visit us at http:// samsungelectronics.com SAMSUNG ELECTRONICS CO., LTD. Samsung Main Bldg. 250-2 ga, Taepyung-ro, Chung-gu, Seoul, Korea 100-742 Tel: 82-2-727-7114 Fax: 82-2-727-7985