LEE: Why do so many multi-nationals struggle to make money in China?
YUN: You cannot survive in China without becoming a Chinese company. That includes local technology development, product design, procurement, manufacturing and sales. If we try to sell products developed in Korea, we might fail because the same products can be developed in China much more cheaply. Our profitability in China varies according to the product. Semiconductor profitability is higher in other countries, but in other areas our productivity in China is OK.
How is Samsung’s strategy changing?
Until recently we did almost all product development and design at home and used China only for manufacturing, bringing our parts suppliers there. Gradually we are transferring development and design functions to China up to a certain level. We now also use Chinese parts. This is particularly true for some telecommunications and digital products, and is possible because of improving manpower, infrastructure and technology.
Reports say Samsung is considering closing a microwave-oven plant in China because of price competition. Is that true?
We cannot compete with China in low-end or labor-intensive sectors. Sticking to those sectors would be a strategic mistake.
Can Samsung win against 37 rivals in China’s mobile-phone market?
Competition is severe. When we first entered low-income countries like China and India, there were requests for price discounts or lower-end products. But we rejected those requests and stuck to the premium market to create a strong brand image even if it meant a lower market share. It was risky but proved to be right.
Will Samsung follow China’s call to “Go west” into its poorer regions?
According to high-ranking Chinese officials I met with, in the beginning Beijing wants to build basic infrastructure in the west rather than industries. But when industry develops in the west, we will definitely take part.
Can you comment on working with Beijing?
Chinese officials are perhaps the most accommodating in the world to foreign investors, because their job performance is evaluated on the amount of foreign capital they attract. There are unions in China, but they don’t pose serious problems.
