Understanding Samsung

August 15, 2015

Have you ever wondered why Samsung supports its competitors, or why Samsung parts are found in Apple devices?

To understand Samsung, you need to understand chaebol. A chaebol is a conglomerate, similar to a zaibatsu, the Japanese version of a chaebol.

But conglomerates and chaebols are not strictly the same. A conglomerate is a group of businesses under a holding company — think of Google’s recent reorganization into Alphabet — while a chaebol is a group of vertically integrated businesses owned by a family — for Americans, think of the Rockefellers, Vanderbilts, and Morgans, though their enterprises lacked the same verticality.

Food conglomerates

Where an American conglomerate seeks to spread out into as many cash flows as possible, a Korean chaebol vertically integrates multiple industries while still competing against itself.

And that competition is in their best interest. Each verticle owns the others. If one verticle makes a profit, the owners of other verticles make a profit too.

And each verticle does business with everyone, not just other verticles. If one verticle stagnates or fails, the chaebol stays afloat.

Samsung

Samsung Engineering constructs factories for Samsung Heavy Industries to manufacture equipment for Samsung Electro-Mechanics to machine tools for Samsung Electronics who import rare earth metals through Samsung C&T to fabricate computer chips for Samsung Mobile, Apple, and others.

To understand chaebol is to understand why Samsung sells everything from machine guns to life insurance.