Samsung: The Empire That Makes Everything

Open the device you are reading this on. There is a strong chance that somewhere inside it, the memory that holds your data, the screen you are looking at, perhaps the very processor, was made by a single South Korean company. That company began, in 1938, selling dried fish, vegetables, and noodles out of a small trading shop. Its name, Samsung, means three stars, and it was chosen to suggest something vast, powerful, and everlasting. The ambition, it turned out, was not a metaphor.

Samsung is the great counter-example in the modern story of chips. While the rest of the industry spent forty years splitting apart, with companies like ARM designing chips they never built and TSMC building chips they never designed, Samsung did the opposite. It tried to make everything. The memory, the displays, the processors, the phones, the appliances. It bet that owning the entire stack, from raw silicon to finished gadget, was a strength rather than a burden. This is the story of how a noodle trader became a technology empire, and of the one race, the most important one of the moment, that all its vast scale still cannot quite let it win.

From Dried Fish to Silicon

The founder, Lee Byung-chul, started Samsung in the city of Taegu in 1938 as an exporter of local produce. After the devastation of the Korean War, he rebuilt and expanded, into sugar, into textiles, opening the largest woolen mill in the country, tying the company’s fortunes to the rebuilding of South Korea itself. Samsung grew into a chaebol, one of the family-controlled conglomerates that would come to dominate the Korean economy.

The pivot that mattered came late. Samsung entered electronics only in 1969, making black-and-white televisions and home appliances. Then, in 1974, it took the step that would define its future, buying a struggling firm called Korea Semiconductor and entering the chip business. For years it was a follower, making simple, cheap products. But in 1983 Samsung developed its first DRAM memory chip, and it set out to become a force in the one corner of the industry it believed it could eventually dominate: memory.

Change Everything But Your Wife and Children

By the early 1990s, Samsung was big but mediocre, a maker of cheap, unremarkable goods. Then came the moment that became corporate legend. In 1993, the chairman, Lee Kun-hee, the founder’s son, summoned his executives to a hotel in Frankfurt and delivered a days-long tirade about the company’s complacency. His most famous line, repeated ever since, was a command to transform everything: change everything except your wife and children.

It was not just rhetoric. Lee launched what Samsung calls its New Management, a wholesale overhaul of culture, quality, and ambition. The most vivid symbol came in the mid-1990s, when Samsung gathered a huge stockpile of defective phones and other products, piled them in front of thousands of workers, and set them on fire. The message was brutal and clear: the era of quantity over quality was over. From that point, Samsung climbed relentlessly, becoming the world’s dominant maker of memory chips and a leader in displays, and then, from 2009, taking on Apple directly with its Galaxy line of smartphones.

The Strategy: Own the Whole Stack

Samsung’s defining bet was vertical integration on a scale almost no one else attempted. It made the memory chips. It made the displays. It made many of its own processors. It assembled the finished phones and televisions and sold them under its own brand. When it sold a Galaxy phone, it often captured margin at nearly every layer inside it, and when a rival like Apple sold a phone, Samsung frequently supplied the memory or the screen and earned money anyway.

This is the opposite philosophy to the rest of this part of our collection. Where ARM owns nothing but a blueprint and TSMC builds without designing, Samsung tries to own it all. The advantage is enormous in a deeply cyclical industry. When memory prices crash, weaker rivals cut investment and sometimes die. Samsung, backed by the resources of a vast conglomerate and a willingness to spend like a state, keeps building capacity through the downturn, and emerges from each bust owning even more of the next boom.

Decision Point

What Everyone Gets Wrong

Mistake #1: Thinking Samsung is mainly a phone company. The Galaxy is what people see. Reality: The profit engine is more often the component business, especially memory chips. Samsung frequently earns more from the parts inside everyone’s devices, including its rivals’, than from its own finished phones.

Mistake #2: Believing vertical integration is obviously smart. Samsung makes it look easy. Reality: Owning the whole stack is brutally capital-intensive and most companies that tried it failed. It works for Samsung because of scale, discipline, and a willingness to spend through downturns that would sink anyone smaller.

Mistake #3: Assuming the Note 7 recall nearly killed Samsung. The fires made global headlines. Reality: It was a costly, humiliating blow to the brand, but Samsung’s component business was so strong that the company posted rising profits even in the quarters around the recall. The empire absorbed the hit.

Mistake #4: Thinking Samsung leads everywhere in chips. It dominates memory. Reality: In the foundry business, making logic chips to other companies’ designs, Samsung is a distant second to TSMC, with a small and recently shrinking share. Being the biggest in one kind of chip does not mean leading in all of them.

The Crisis That Tested the Empire

The most public wound came in 2016. Samsung’s flagship Galaxy Note 7, launched to challenge the iPhone, began catching fire because of a battery flaw. Samsung recalled it, issued replacements, and then the replacements caught fire too. In October 2016 it pulled the phone from the market entirely and stopped making it, an extraordinary and expensive humiliation for the world’s largest smartphone maker.

What the episode revealed, though, was the strength of Samsung’s model. Even as the Note 7 disaster unfolded, the company’s memory and display businesses were so profitable that Samsung’s overall earnings rose. The thing that looked like it might define the company turned out to be survivable precisely because Samsung was not just a phone company. The breadth that makes vertical integration so expensive is also what makes it so resilient.

The Honest Present

Today Samsung remains the largest maker of memory chips in the world, a position it has held for decades, and the memory business has roared back in the artificial-intelligence era, as the high-bandwidth memory that feeds AI data centers has become some of the most valuable silicon on Earth. But Samsung’s present carries a sharp frustration. In the foundry business, the contract manufacturing of logic chips that TSMC dominates, Samsung has fallen badly behind, its market share a fraction of its Taiwanese rival’s, and its leadership has publicly acknowledged missteps in advanced manufacturing and AI memory.

So Samsung does what Samsung has always done. It spends. It has committed tens of billions of dollars to semiconductor capacity and research, among the largest such investments any company has ever made, in a bid to close the gap in advanced chipmaking and to lead in AI memory. The empire that makes everything is betting, once again, that overwhelming scale and the nerve to keep investing will eventually win. Whether even Samsung’s resources can overtake TSMC’s lead in the most advanced manufacturing is the open question of its next decade.

Why This Matters to Investors

Samsung is the great case study in the power, and the price, of vertical integration. It shows that owning the whole stack can be an extraordinary moat, capturing margin at every layer and providing the resilience to survive a disaster like the Note 7. And it shows the limit of that strategy, that breadth does not guarantee leadership in every race, and that a company can be the biggest in the world and still trail a focused specialist where it matters most. The Greatest Companies thesis is that durable competitive advantage builds lasting wealth, and Samsung’s advantage is scale and integration so deep that few can match it. The investor’s lesson is twofold: respect the counter-cyclical power of the deepest pockets, the player who can buy and build when everyone else is forced to retreat; and never assume that size in one arena means dominance in all, because focus, as TSMC proves against Samsung, can beat sheer breadth. None of this is investment advice; it is a way of reading history.

Lessons in Order of Depth

Method: own the whole stack, capture every margin

Samsung’s method is to integrate vertically until it makes nearly every important piece itself, from the memory to the display to the finished device. That lets it earn margin at every layer and supply even its competitors. The method is to understand where the value in a chain actually accrues, and to consider whether owning more of that chain, rather than specializing in one link, is the stronger position for your particular advantages. It is not the right answer for everyone, but for a player with the scale to fund it, it can be formidable.

Money: in a cyclical business, the deepest pockets win

Memory chips are a brutally cyclical commodity, prices soaring and crashing in waves that bankrupt the weak. Samsung’s financial edge is not cleverness but endurance: the willingness and the resources to keep investing through the busts, so that it owns ever more of each boom. The trader’s parallel is exact. The player who is never forced to sell at the bottom, who has the capital and the nerve to keep buying when others capitulate, captures the recovery that the panicked seller misses.

Mind: the discipline to burn what is not good enough

The defining image of Samsung’s transformation is a bonfire of its own defective products, lit to force a culture of quality on a complacent company. That act of deliberate, painful self-criticism, destroying your own sub-standard work rather than shipping it, is the mindset that lifted Samsung from cheap imitator to global leader. The lesson is that real improvement often requires the harsh honesty to reject your own mediocre output, and the discipline to refuse the easy path of good enough.

The deepest question: can breadth beat focus?

Samsung owns more of the chip stack than almost anyone, and yet in the single most advanced and lucrative manufacturing race, it trails TSMC, a company that does only one thing. This is the deepest question Samsung poses. Is it better to be vast and integrated, capturing many layers and surviving any storm, or focused and singular, doing one thing better than anyone alive? Samsung’s resilience argues for breadth; TSMC’s dominance in leading-edge logic argues for focus. The answer may be that each wins in its own domain, and that the rarest companies, like Samsung, are powerful enough to play both games at once, even if they cannot always win both.

The Legendary Scorecard

Founder Vision	8
Innovation	8
Execution	9
Moat	8
Capital Allocation	8
Wealth Creation	8
Durability	9
Historical Importance	9
Overall	8.5

The overall figure is an editorial verdict, not a weighted average. Samsung earns high marks for durability and historical importance, because it has survived every cycle for decades and reshaped both the global electronics industry and the South Korean economy. It scores a touch lower on innovation and moat, because in the most advanced logic manufacturing it follows rather than leads, and because its vast breadth, while a strength, has not let it win the single race that now matters most.

At a Glance

Timeline

• 1938: Lee Byung-chul founds Samsung as a trading company in Korea
• 1969: Samsung enters the electronics business
• 1974: Samsung enters semiconductors by buying Korea Semiconductor
• 1983: Samsung develops its first DRAM memory chip
• 1993: Lee Kun-hee launches the New Management overhaul with the Frankfurt declaration
• 1995: Lee orders defective products burned in front of workers to enforce quality
• 2009: Samsung launches the Galaxy smartphone line to rival the iPhone
• 2016: the Galaxy Note 7 catches fire and is recalled worldwide
• 2025: Samsung is the world’s largest memory chipmaker but trails TSMC badly in foundry and races to lead in AI memory

Key Numbers

Related Reading

Samsung is one half of a great contrast in how to win in silicon, and the other players sit alongside it. Read how ARM took the opposite path, owning no factory at all and simply licensing the blueprint inside nearly every phone. See how TSMC built the focused, build-only foundry model that now out-competes Samsung in the most advanced manufacturing. And study how Apple, both a giant customer and a rival, designs the chips that Samsung and TSMC fight to build. For the full collection, see our Greatest Companies of All Time hub.

Go Deeper

Samsung is a study in vertical integration, counter-cyclical investment, and the discipline to reject your own mediocre work. Those are the same forces that separate investors who build through downturns and compound from those who panic and sell at the bottom, and the book teaches you the discipline to keep investing in your edge when others retreat, and to hold the honest standards that turn good enough into great.

This article is part of the Greatest Companies series, adapted from the book Greatest Companies, now available on Kindle.

Frequently Asked Questions

When was Samsung founded, and what did it originally do?

Samsung was founded in 1938 by Lee Byung-chul in Taegu, Korea, as a small trading company exporting local produce such as dried fish, vegetables, and noodles. Its name means three stars. It entered electronics only in 1969 and semiconductors in 1974, and was transformed into a technology giant under the founder’s son, Lee Kun-hee.

What was Lee Kun-hee’s famous 1993 declaration?

In 1993, chairman Lee Kun-hee summoned Samsung’s executives to Frankfurt and delivered a days-long demand for total transformation, famously telling them to change everything except their wife and children. It launched Samsung’s New Management overhaul, a wholesale shift from cheap quantity to world-class quality.

What is Samsung’s main business?

Although it is famous for Galaxy smartphones, Samsung’s largest profit engine is often its component business, especially memory chips. Samsung is the world’s largest maker of memory, and also makes displays, processors, appliances, and finished devices. Its strategy is deep vertical integration, making nearly every important piece itself.

What happened with the Galaxy Note 7?

In 2016, Samsung’s flagship Galaxy Note 7 began catching fire due to a battery defect. After a recall, the replacement units also caught fire, and in October 2016 Samsung withdrew the phone entirely and stopped production. It was a costly, humiliating blow, though the company’s strong memory and display businesses kept overall profits rising.

How does Samsung compare to TSMC?

Samsung is the world’s largest memory chipmaker and also runs a foundry that makes logic chips for other companies. In that foundry business, however, Samsung trails TSMC badly, holding only a small single-digit share against TSMC’s roughly seventy percent. Samsung is investing tens of billions of dollars to try to close the gap in advanced manufacturing.