Samsung’s Lee Urges Shift Beyond Hardware in Apple Battle

Photographer: SeongJoon Cho/Bloomberg

Billionaire Lee Kun Hee, chairman of Samsung Electronics Co., center, and daughter Lee Boo Jin, chief executive officer of Hotel Shilla Co., right, arrive for a company meeting at the Shilla Hotel in Seoul on Jan. 2, 2014. Close

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Photographer: SeongJoon Cho/Bloomberg

Billionaire Lee Kun Hee, chairman of Samsung Electronics Co., center, and daughter Lee Boo Jin, chief executive officer of Hotel Shilla Co., right, arrive for a company meeting at the Shilla Hotel in Seoul on Jan. 2, 2014.

Samsung Electronics Co. (005930) Chairman Lee Kun Hee urged workers to adopt new ways of thinking and move beyond their focus on hardware as the world’s biggest maker of smartphones and televisions seeks to maintain growth.

“We have to change once again,” Lee said today, according to e-mailed notes from the company. “We must give a bigger push for innovations, including in business structure, so that we can lead industry trends.”

Samsung shipped a record number of handsets in 2013 and posted its highest quarterly earnings, yet its shares had their first annual decline in five years amid signs of slowing growth in high-end handsets and competition from Apple Inc. (AAPL)’s new iPhones. The Suwon, South Korea-based company, the biggest maker of memory chips and flat-panel displays, is focusing on cheaper devices in emerging markets as prices for handsets drop.

Samsung fell 4.6 percent to 1,309,000 won in Seoul today, its biggest decline since June 7, after LIG Investment & Securities Co. cut its share price forecast by 7.9 percent and lowered earnings estimates, citing a maturing of smartphone markets. The benchmark Kospi index fell 2.2 percent.

Lee’s speech comes a day after Google Inc.’s Motorola Mobility unit reduced the price of its Moto X flagship handset to $399 on any U.S. carrier without a contract. That’s about 25 percent less than the previous price at AT&T Inc.’s online store and about 38 percent less than the Samsung S4’s $640 price on the same website.

Higher Currency

Samsung is starting the year with the South Korean won near a 29-month high as the currency’s gains crimp the value of overseas revenue. Samsung got 85 percent of sales from outside its home market in 2012.

Samsung should create new businesses by integrating technologies from different industries, Lee said today.

The company faced patent battles with Apple on four continents and competition in TVs from Japanese and Chinese makers and in chips from smaller Korean maker SK Hynix Inc. (000660)

“Our leading businesses are constantly being chased by competitors, while time is running out for our less-competitive businesses,” said Lee, South Korea’s richest man. “Last year, we engaged in do-or-die battles with companies around the world and endured patent wars in light of market slowdown and prolonged, weak global economic growth.”

Record Earnings

Samsung Electronics will release preliminary earnings on Jan. 7. Full-year operating income will rise to a record 38.7 trillion won ($37 billion) in 2013, according to the average of 40 analyst estimates compiled by Bloomberg. Sales are projected to reach 231 trillion won.

Lee, 71, also leads Samsung Group, which has about 80 affiliated companies globally, including the electronics business. He has a net worth of $11.2 billion, according to the Bloomberg Billionaires Index.

Samsung shipped almost 29 percent of the world’s mobile phones in the third quarter, researcher Strategy Analytics said in an Oct. 29 report.

Global industry smartphone shipments will more than double to 1.7 billion units by 2017, IDC said in a Nov. 26 report. During the same period, the average price will fall to $265 from $337.

Samsung added new models last year, including smartphones with a curved screen and a clamshell design, as it sells products from less than $150 to more than $900.

To contact the reporter on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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