Samsung 2006 Annual Report Download - page 40

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Enriched lifestyles from products delivering emotional appeal
We produce premium refrigerators, air conditioners, washing machines, ovens,
vacuum cleaners and other appliances that play essential roles in the modern home.
The evolution of these items continues to enrich life and add new value. In the future,
we aim to lead the appliance market by offering products with the standout designs
and innovative technologies to satisfy customer needs.
Premium products to change the appliance paradigm
We are applying unique technologies to win customers the world over to premium
appliances. We are hiring more R&D people, expanding the premium product line
and reorganizing the production network to bolster competitiveness steadily.
Our competencies are being focused on boosting sales and developing
innovative products.
Massive growth in the premium segment
Western Europe, North America, Japan and China represent 75% of the global
appliance market. The advanced countries represent highly mature markets, where
90% of demand is in replacement, while new demand from first-time buyers is
rapidly rising in China, India, Eastern Europe and the former CIS. This demand for
appliances is being driven by higher income levels and increasing urban populations
in Asia and other emerging markets.
Appliance manufacturers’ production costs are rising along with the prices for
oil and other raw materials, while intensive market competition is lowering the profit
margin. Countering these trends is now a top priority in the appliance business,
and companies are relocating their plants to Eastern Europe, Mexico, China and
other regions where labor costs are still low. At the same time, every effort is
being made to raise operational efficiency, develop value-added products and cut
operating costs.
Demand, meanwhile, has clearly segmented into the high and low ends.
Replacement buyers are mainly looking at the larger and more elegant premium
models, and demand in this segment is rising fast.
Products featuring innovative technologies to lead the premium market
In 2006, the Digital Appliance business introduced innovative products under
the “lifestyle innovator” banner. The superior quality of Samsung air conditioners was
confirmed by domestic customers, who ranked them first on the Korea Customer
Satisfaction Index. In the US, meanwhile, J.D. Power and Associates gave
Samsung’s side-by-side refrigerators its “Highest Customer Satisfaction” rating for
the second straight year in 2006.
Only 20,000 Samsung side-by-side refrigerators were sold—all in Korea—
during 1997, but annual global sales broke the one million mark in 2006, a fifty-fold
increase in 10 years. Aggregate sales have now reached five million units.
In April 2006, we set a new industry trend by introducing the novel Quatro
Cooling Refrigerator, featuring four separate compartments that are controlled
and cooled independently. The Quatro has received tremendous global praise and
recognition, including the “Best of Innovations” award at the 2006 International CES
and Time magazine’s “Cool Must-have Gadgets” designation. Good Housekeeping
magazine conferred its “Good Buy Award” on the Quatro as well.
In the first half of 2006, we broke into the electric range segment, which
represents 15% of the world appliance market. We also introduced a unique line of
robot vacuum cleaners to lead the Korean market.
We apply distinctive designs
and innovative technologies
to create products that
customers crave, and we
are making noteworthy
progress in the premium
appliance segment.
Net Sales (in trillions of KRW)
Operating Profit
(in hundreds of billions of KRW)
06
5.5
5.6
05
-0.3
-1.1
0605